Senate Majority Leader Bill Frist said Monday he had no insider information when he sold stock this summer in HCA Inc., the hospital company founded by his father and brother. The Justice Department and Securities and Exchange Commission are looking into the sales.
Also Monday, the chairman of the SEC, former Rep. Christopher Cox, said that to avoid a potential conflict he would take no part in the agency's investigation.
Questions have been raised about whether Frist had special information before the sale because insiders in HCA also sold stock during the first half of the year — and the stock price dipped soon after Frist sold his stock.
"I had no information about HCA or its performance that was not publicly available when I directed the trustees to sell the stock," Frist said, referring to the sale by administrators of his blind trusts.
CBS News correspondent Gloria Borger reports that Frist's stocks are handled by a blind trust that manages his portfolio without his full knowledge. Frist can request that his stocks in a corporation be sold in their entirety, but never know the actual value — he would only know the
Frist, R-Tenn., said his only objective in divesting his blind trusts of the stock was to avoid any appearance of a conflict of interest. Some critics have contended for years that Frist's holdings led to conflicts with his positions on health care legislation.
On Monday, he promised full cooperation with investigations by the SEC and federal attorneys. He declined to take questions and didn't address the timing of the sale.
It was the first time since the stock sale was publicized a week ago that Frist had spoken publicly on the issue.
"Despite not being required to do so, I sought and obtained two Ethics Committee opinions acknowledging that my ownership of HCA stock complied with Senate rules and did not present a conflict of interest with my Senate duties," Frist said.
"Despite not being required to do so, I later chose to place many of my investments in blind trusts, including my HCA stock. With these efforts, I have sought to guarantee that no conflict of interest existed. Review after review has found nothing wrong."
Frist's sale this year of stock in Hospital Corp. of America Inc., about two weeks before its price plummeted amid massive stock sales by company insiders, has prompted federal investigations.
"Because of my service in the congressional leadership for the last 10 years, I have recused myself in this matter," Cox said in a statement. "The purpose of the recusal is to avoid any appearance of impropriety in the (SEC's) consideration of this case."
Cox's congressional campaign fund donated $1,000 to Frist in 2000, according to Federal Election Commission records. That donation was not mentioned in the statement issued by Cox and was not given as a reason for his recusal from the SEC's investigation.
Frist has hired two private attorneys who specialize in securities litigation and insider trading cases: William McLucas, a former SEC enforcement director, and Harry Weiss, a former SEC attorney who was a co-author of a text titled "Preventing Insider Trading." Their representation of Frist was confirmed by their law firm, Wilmer Cutler Pickering Hale and Dorr. The involvement of the firm was first reported in Monday's editions of The Wall Street Journal.
Also Monday, Citizens for Responsibility and Ethics in Washington, a liberal-leaning watchdog group, said it had had filed a complaint against Frist with the Senate Ethics Committee alleging that he engaged in "apparent insider trading" and then tried to cover it up.
The Tennessee Republican's sale of the stock from several blind trusts this summer came about two weeks before the company issued a disappointing earnings forecast that drove its share price down almost 16 percent by mid-July.
Frist sold the stock at a time when top executives and directors of HCA — including the chief executive and the treasurer — also were selling off shares worth a total $112 million.
Documents show that Frist was updated several times about his investments in HCA and other transactions even though they were held in blind trusts. Despite the updates, Frist has said he didn't know what was in the trusts, specifically denying knowledge of his HCA holdings.
Frist's brother, Thomas Frist Jr., is a former chief executive of HCA and is now a director and the largest individual shareholder in the company.
President Bush chose Cox, a free-market conservative and former securities lawyer, in June to lead the SEC after the surprise resignation of then-chairman William Donaldson.