For Immediate Release Senate Ethics Committee Must Investigate Frist?s Stock Transaction

Posted on September 27, 2005

Common Cause on Tuesday asked the Senate Ethics Committee to investigate whether Senate Majority Leader Bill Frist (R-TN) violated the chamber's ethics rules by directing trustees to sell stock held in a blind trust.

Additionally, Common Cause asked the Committee to clarify how the reported numerous communications between the senator and trustees of his blind trust during a period when the senator was working on legislation of interest to HCA did not qualify as a conflict of interest.

"There is an obvious conflict of interest that exists when a member of Congress has a large, personal financial stake in a specific company or industry that would be affected by pending legislation," Common Cause President Chellie Pingree wrote in a letter to the Ethics Committee. "For years, Senator Frist held a large stake in HCA while working closely on legislation in which HCA had a clear legislative interest. This was allowed, presumably, because of the "arm's length" separation provided by a qualified blind trust. However, it appears that Senator Frist had more information and control of the trust than seems appropriate."

Federal investigators and the Securities and Exchange Commission are investigating Senator Frist's stock sale because it occurred shortly before a poor earnings report, which caused the stock price to fall by 9 percent. However, it is the Senate Ethics Committee's responsibility to investigate whether Senator Frist's stock sale from a qualified blind trust violated Senate ethics rules.

Senate rules require senators who set up blind trusts to surrender control of securities in those accounts to private trustees, except under extraordinary circumstances. But Senator Frist appears to have had regular contact with trustees concerning the contents of the qualified blind trust and exercised an unusual level of control over the assets in the trust.

"The question is why?" Pingree said.

The model blind trust agreement available on the Ethics Committee's website states that there shall be no "direct or indirect communication" between senators and trustees unless the senator is directing the trustee "to sell all of an asset . . . [which] creates a conflict of interest or the appearance thereof due to the subsequent assumption of duties" by the senator.

First, Senator Frist appears to have had regular contact with trustees concerning the contents of the qualified blind trust and exercised an unusual level of control over the assets in the trust.

Secondly, it is difficult to identify what Senator Frist's "subsequent assumption of duties" will be or how they might differ from his current duties. A spokesperson for Senator Frist has indicated that the sale was initiated to avoid a conflict of interest because the senator is preparing to promote health care legislation in the 109th Congress. However, the stated intention of promoting legislation does not appear to meet a reasonable definition of a "subsequent assumption of duties." Especially since Senator Frist has made countless decisions affecting the health care industry during the last three years as Senate Majority Leader, such as decisions on committee appointments, executive branch appointments, budget and appropriations measures, etc.

Click here to read the full text of the letter:{FB3C17E2-CDD1-4DF6-92BE-BD4429893665}/FRIST--ETHICSCOMMITTEE_9_27_2005.PDF

Office: Common Cause National

Issues: Ethics

Tags: Congressional Ethics

Common Cause is a nonpartisan grassroots organization dedicated to upholding the core values of American democracy. We work to create open, honest, and accountable government that serves the public interest; promote equal rights, opportunity, and representation for all; and empower all people to make their voices heard in the political process.

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