Frist - Timing Is Everything (But Not To The AP)

Sen. Bill Frist, addressing the questions about his sale of HCA stock, expands the timeline.  Although he gave instructions to sell the stock in June 2005, one month prior to a 9% drop, he claims to have begun the process in April.  If so, that should make an insider-trading charge more difficult (but not impossible!).

Here is Frist's statement, from which the NY Times extracted this headline and lead:

Stock Sale Was Planned Months Before Plunge, Frist Says

WASHINGTON, Sept. 26 - Senator Bill Frist on Monday defended his sale of stock in his family's hospital company at the June peak in its price, saying he had first sought legal and ethical advice about divesting the shares two months earlier.

Mr. Frist, a Tennessee Republican who is considered a likely presidential candidate in 2008, also alluded to future considerations that played into the sale of the shares in the company, the hospital giant HCA.

"Looking ahead at my final years in the Senate and what might come next," Mr. Frist said, "I have for some time wanted to eliminate even the possibility of an appearance of a conflict by totally divesting."

Reuters notes Frist's claim about the timing in their first sentence; the WaPo gets to it at the start of their second paragraph.

But how about the AP?  Their reporter Joe Katz seems to have led the way with this story on Sept 20 (Yahoo, Boston Globe, Moderate Voice - Yahoo shows 9:37 PM Sept 20, which would make the Sept 21 editions.  Per the Times, the initial impetus was an interview with one of Frist's aides in the Congressional Quarterly released on Monday).

One might wonder whether Joe is willing to let go - his coverage of the Frist statement fails to mention Frist's claim to have begun the process in April - the closest we get is this, from paragraph twelve:

Frist said his aides worked with outside lawyers and ethics committee staff in May to draft a letter to trustees instructing the sale of stock.

The PowerGuys have an extensive AP file, so maybe they will add this to it.

MORE:  Excellent round-up of the Frist situation by a securities lawyer turned Baseball Crank.
 

Comments

[kim]

Information didn't mean what it means now back when insider trading rules were devised. Nor were the means of acquiring and disseminating it the same either.

New rules needed. Maybe we can blend this discussion with the privacy vs public order one.
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[spencer]

Frist may not be guilty of anything more then Martha Steward was

But, boy he sure does act like it.

[kim]

He was dumping it to prevent a guilty conscience. Like I say, doing well by doing good.
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[Geek, Esq.]

Something doesn't add up.

From CNN:

"Asked in a television interview in January 2003 whether he should sell his HCA stock, responded, "Well, I think really for our viewers it should be understood that I put this into a blind trust. So as far as I know, I own no HCA stock"

Frist, referring to his trust and those of his family, also said in the interview, "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea."

From his statement:

"“When deciding how to handle my family’s personal investments, I always sought expert advice and Senate Ethics Committee review and approval. 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."

He seemed awfully keen on knowing the status of stock he purportedly had no idea whether he owned.

[Robert Crawford]

Funny, isn't it, how a three-month-old stock sale broke into the news right after we heard about Schumer's staff illegally obtaining credit reports. Almost like this story was being held in reserve until it was needed to distract the press from something particularly damaging.

Nah. That couldn't be it.

[kim]

Ah, c'mon now, that was just a little private data-mining between friends. Like sniffing each others' pie evacuators wasn't the sociable thing to do.
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[Geek, Esq.]

I posted this over at Crank's, but I'll post it here too.

Frist's alleged plan to sell the stock in April is of no consequence to the SEC. The standard is whether the person was aware of material nonpublic information when he made the sale.

There is an exception for prior-arranged sales, but Frist's 'plan' doesn't qualify. It is an affirmative defense to trading with material nonpublic information that the defendant had entered into a binding contract that specifically set forth terms including the amount and price of the sale. Frist had entered into no such contract, and thus may not avail himself of this defense.

[kim]

You forget. He didn't make the sale, the trustees did. Just when he requested that they do so may be important, but that was not your point, now, was it?
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[Geek, Esq.]

If he retained the authority to make such a decision, he is liable.

[kim]

He was required by law to be aware of what was in his 'blind' trust, and empowered to make trading decisions to avoid 'conflicts of interests'. He was not empowered to trade. When and why he made the trading decision may be pertinent, and it probably predated the date when even insiders came into possession of material non-public information.

Liable for what? Be specific. I agree he's politically liable for making stupid statements dependent on the ignorance of his listeners. Blind, forsooth.
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[Geek, Esq.]

Simply put, if he traded securities while aware of material nonpublic information regarding that security, he's dead meat.

[kim]

He didn't trade securities. And he asked the trustees to trade his securities before the earnings existed let alone be reported.
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