Senate Majority Leader Bill Frist, a potential presidential candidate in 2008, sold all his stock in his family's hospital corporation about two weeks before it issued a disappointing earnings report and the price fell nearly 15 percent.
Jail? Meet Senator Frist. Senator Frist? Meet jail.
UPDATE
This gets more and more blatant as the day wears on. In newsspeak, this story has legs.
On June 13, Frist asked his trustees to sell his HCA holdings, as well as those of his wife and children. Letters from his trustees on July 1 and July 8 confirmed the sales, said Frist spokeswoman Amy Call.
The value of his stock at the time of the sale was not disclosed. Earlier this year, he reported holding blind trusts valued at $7 million to $35 million.
Frist, R-Tenn., widely considered a potential presidential candidate in 2008, ordered the stock sold to avoid the appearance of a conflict of interest, Call said. The senator declined to comment Thursday.
His office has consistently deflected criticism by noting that his assets were in a blind trust and not under his active control.
Note that: Blind trust. Not under his active control. Why? Because as a U.S. Senator, it is beneficial to avoid the appearance of favoring/disfavoring companies. Therefore, most politicians move their portfolio to "blind", and leave its management to their investment analysts.
For a Senator to step in, order the sale of stock of his family's corporation from within the confines of a blind trust... just before an extra-poor earnings report comes out...
Well, this beats Martha Stewart's boo-boo by an order of magnitude.
I've never understood why so many people make this mistake. It's so easy to grasp: If you receive information about a company that is not available to the general investing public, and you act on that information via stocks or other investments, you are breaking the law. Period. The SEC (Securities and Exchance Commission) doesn't even have to prove intent... just the likelihood of causality. Dr. Sen. Frist's example, I am afraid to say, is about as good an example of insider trading as you will ever see. If Martha Stewart couldn't avoid jail with three people acting as buffers between her and the sale of her stock, Dr. Frist (with only one person — his portfolio manager — apparently) is headed up the river for sure.
SUPER DOUBLE EXTRA I-TOLD-YOU-SO UPDATE
NEW YORK (MarketWatch) -- HCA Inc. (HCA) said Friday it has received a Subpoena from the U.S. Attorney's office for the Southern District of New York. The Nashville, Tenn., hospital operator said the subpoena calls for the production of documents, and HCA believes it relates to the sale of HCA stock by Sen. William H. Frist. It plans to cooperate fully with the subpoena. The stock closed Thursday at $45.90, down 3.2%.
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