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SEC Issues Subpoena To Frist
Wasington Post
By Carrie Johnson and Jeffrey H. Birnbaum
Washington Post Staff Writers
Thursday, October 13, 2005; A01

Senate Majority Leader Bill Frist (R-Tenn.) has been subpoenaed to turn over personal records and documents as federal authorities step up a probe of his July sales of HCA Inc. stock, according to sources familiar with the investigation.

The Securities and Exchange Commission issued the subpoena within the past two weeks, after initial reports that Frist, the Senate's top Republican official, was under scrutiny by the agency and the Justice Department for possible violations of insider trading laws.

Frist aides previously said he had been contacted by regulators but did not mention that the lawmaker had received a formal request for documents. The sources, who spoke on condition of anonymity because of the investigation, said Frist is expected to testify under oath about what he knew about the company's health in the weeks before he sold stock. Frist has told reporters that he did nothing wrong and that he directed the sale to eliminate potential conflicts as he considered a 2008 presidential bid.

The formal request for documents usually presages an acceleration of a federal probe. In Frist's case, regulators had to proceed with caution due to his status in Congress and their mutual desire to avoid triggering constitutional objections to the release of documents. The disclosure of the subpoena comes as Democrats blasted Frist anew for his financial and personal ties to Hospital Corporation of America, a Nashville chain founded in 1968 by his father and his brother, Thomas Frist Jr. Critics yesterday seized on a report that Frist held a substantial amount of his family's hospital stock outside of blind trusts between 1998 and 2002 -- a time when he asserted he did not know how much of the stock he owned.

The Associated Press reported on Tuesday that Frist earned tens of thousands of dollars from HCA stock in a partnership controlled by his brother, outside of the blind trusts he created to avoid a conflict of interest.

"It seems that for years, Frist may have misled his constituents and the American people about his health care industry stock holdings and the conflict of interest they created as he drafted our nation's health care policy," said Democratic National Committee Communications Director Karen Finney. "This deal raises even more questions about the Republican culture of corruption in Washington, D.C."

During his decade in the Senate, Frist has been active in shaping health care policy, including creation of a Medicare prescription drug benefit.

Republican ethics lawyer Jan W. Baran also scored Frist for his handling of his trusts. "This shows Senator Frist's capacity for clumsiness and bad timing," Baran said. "He was trying to insulate himself from political charges and now finds himself trying to defend himself because of the transparency of his holdings."

The subpoena for documents related to the July stock sales was written carefully to avoid asking for documents related directly to Frist's legislative actions, according to sources. By keeping the request focused on his personal activities, experts said, the SEC avoided raising objections from Senate lawyers who might otherwise have fought the request on the grounds of constitutional separation of powers.

The wording in the subpoena also ensured that Frist did not have to tell colleagues about the document request or to otherwise involve them in the investigation, congressional aides said.

The executive branch is prohibited from seeking documents or testimony that relate to "legislative acts and the motivation for the performance of legislative acts," said Kenneth Gross of Skadden Arps, an ethics law expert. The ban is part of what is called the Constitution's "speech and debate" clause, which insulates Congress from unwarranted intrusions by the executive branch of government. Writing a subpoena that does not run afoul of the clause -- and also possibly trigger a public disclosure of the subpoena -- required careful work.

"There are some gray areas, clearly, and it could be tricky," said Baran, of Wiley Rein & Fielding. Members of the House of Representatives must disclose to the full House when they are subpoenaed. The Senate has its own rules that sometimes require the body to deal with subpoenas, experts say, but the Frist subpoena apparently has not triggered any of them.

A spokesman for Frist said yesterday: "As we have indicated, Senator Frist has been fully cooperating with the authorities conducting the inquiries and will continue to do so, including keeping our public comments to a minimum. The issuance of a subpoena would be an expected and normal part of that process."

Within days of Frist's July stock sale, HCA warned investors about weaker-than-expected financial performance, which sent the stock price spiraling downward by 9 percent in one day. Frist may have begun the process of selling the stock April 29, months before the company's troubles were clear, according to e-mail messages between the Tennessee Republican, his chief counsel and his personal accountant that were reviewed by The Washington Post.

Former SEC enforcement chief and retired federal judge Stanley Sporkin said the agency has a "rich history" of probing officials at the highest level -- from Supreme Court Justice William O. Douglas to Carter administration budget chief Bert Lance.

SEC Chairman Christopher Cox, a former House GOP member from California, has removed himself from hearing evidence on or voting on the case, citing his ties to Frist.

Staff writer Charles Babington contributed to this report.
© 2005 The Washington Post Company

What's different? When Bush was accused of doing the same thing the SEC (under his dad) didn't even question him. Bush made over $800,000 when he sold his stock after learning Harkin was losing money.

Why does the press think Bush is above investigation? If it was wrong for Frist (and it was) and wrong for Martha Stewart (and it was) then it was wrong for Bush? So, why the sweetheart deal for Bush?