SEC Opens Formal Investigation of Senate Majority Leader Frist into Allegations of Insider Trading

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The SEC has given subpoena power to investigators looking into potential insider trading by Senate Majority leader Dr. Bill Frist (R–TN) of shares of his family’s corporation–the Hospital Corporation of America. We speak with independent journalist Doug Ireland. [includes rush transcript]

DeLay’s indictment is the latest in a recent spate if ethical high-raking Republicans or Bush administration officials. Last week, it was disclosed that Senate Majority leader, Dr. Bill Frist, was under federal investigation for a stock sale.

The Wall Street Journal is now reporting that the U.S. Securities and Exchange Commission has given subpoena power to investigators looking into potential insider trading by Frist of shares of his family’s corporation, HCA–the Hospital Corporation of America. The SEC has officially changed the investigation’s status from informal to formal. The nonpartisan Foundation for Taxpayer and Consumer Rights estimates that Frist made between $2 million and $6 million by selling his HCA holdings just before stock values plummeted in the face of a bad earnings report.

  • Doug Ireland, a longtime radical political journalist and media critic. He has been a columnist for The Nation magazine, Village Voice, the New York Observer and the Paris daily Liberation. He is also a contributing editor of POZ, the monthly for the HIV-positive community and writes a blog, “Direland”

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: Let’s turn now from the House Majority Leader, who is now under indictment, to the, well, it turns out, scandal-ridden Senate Majority Leader, Dr. Bill Frist. Juan?

JUAN GONZALEZ: Yes, DeLay’s indictment is the latest in a recent spate of ethical high-ranking Republicans or Bush administration officials having problems. Last week, it was disclosed that Senate Majority Leader, Dr. Bill Frist, was under federal investigation for a stock sale. The Wall Street Journal is now reporting that the U.S. Securities and Exchange Commission has given subpoena power to investigators looking into potential insider trading by Frist of shares in his family’s corporation, H.C.A., the Hospital Corporation of America. The S.E.C. has officially changed the investigation status from informal to formal. The non-partisan Foundation for Taxpayer and Consumer Rights estimates that Frist made between $2 million and $6 million by selling his H.C.A. holdings just before stock values plummeted in the face of a bad earnings report.

AMY GOODMAN: Doug Ireland, you are writing about — well, your headline in your blog, Direland, says “the bad doctor.” Talk about Frist. You have been following him for years.

DOUG IRELAND: Well, the interesting thing that we’re not reading in the mainstream corporate media is just what the Frist family company, H.C.A., Hospital Corporation of America, was all about. When the Bush administration came into office, H.C.A. was, had been for nearly a decade, the target of one of the most extensive federal investigations of any corporation in the history of the United States. And H.C.A. was, in fact, one of the largest corporate swindles in American history.

The company that provided the family money that Bill Frist used to buy himself a Senate seat from the State of Tennessee was obtained by fraud, and fraud on the government. H.C.A. defrauded for years and years the programs designed to help poor Americans get healthcare. H.C.A. defrauded Medicaid. It defrauded Medicare. And it defrauded Tricare, which is of course, the federal program that covers the military and their families. The government case against H.C.A. was basically that the Frist family company kept two sets of books and fraudulently overbilled the government. It inflated its expenses. It billed the government for inflated overrun.

It violated both law and medical ethics when the company increased its Medicare billings by exaggerating the seriousness of illnesses they were treating. It bribed doctors in a whole scale bribery operation. It gives them partnerships in H.C.A. hospitals as a kickback for the doctors referring patients to H.C.A. It gave them free gifts, loans that were never expected to be paid back, gave them free rent, free office furniture, free drugs from hospital pharmacies. All of this to bribe the doctors into referring patients to H.C.A. companies.

When the Bushies came in at a time when this investigation, which the deputy F.B.I. director said was one of the most important the F.B.I. had ever conducted into corporate America, it was expected that Bill Frist’s brother, Thomas, who was one of the richest men in America — Fortune estimated he had over $2 billion — was going to be indicted, along with a raft of H.C.A. executives.

But the Bushies and John Ashcroft decided otherwise. And they arranged a little sweetheart deal with the Frist family, with Bill Frist’s brother, Tom, and the executives of the Frist family business, H.C.A., that let them get off the hook without any jail time. They did have to pay a fine, and the size of the fine tells you just how massive the fraud was, because the fine was for $1.7 billion, with a “b”, $1.7 billion that H.C.A. had to pay the government for the fraud that it had committed.

JUAN GONZALEZ: Now, Doug, that was one of the largest fines in U.S. history, wasn’t it?

DOUG IRELAND: It was the largest. It broke the record. The previous old record had been set by Drexel Burnham.

JUAN GONZALEZ: But there were no indictments in the case, no criminal charges?

DOUG IRELAND: Nope, no. They were huge crimes, but no criminals went to jail, not Tom Frist, Bill Frist’s brother, not a single H.C.A. executive went to the can.

AMY GOODMAN: Now, the Senate Majority Leader, Bill Frist, has always said his money is in a blind trust so, you know, it doesn’t compromise him. What about this news, the Wall Street Journal reporting that the S.E.C. has opened a formal investigation into selling off this stock? So, he was directing the person in charge of the trust.

DOUG IRELAND: Well, I mean, it’s quite clear that Frist got rid of the stock for two reasons: Number one, he wants to be President, and having stock in a company that was one of the biggest corporate criminals in American history, when it was a family-owned company, is not exactly a credential you want to present to the American public if you are asking for their votes to become their president.

But more than that, I would say that if Bill Frist was really a patriot first, he would have sold his H.C.A. stock a long time ago, because this company was built on criminal activity. The company was a giant criminal conspiracy that defrauded the programs of the federal government designed to give poor people healthcare.

AMY GOODMAN: We’re talking to Doug Ireland. He runs the blog Direland, long-time political journalist and media critic. As we wrap up this section, yes, we have talked about Dr. Bill Frist, the Senate Majority Leader, Tom DeLay, under indictment right now, the House Majority Leader.

Then there’s Jack Abramoff, there’s David Safavian, the President’s chief procurement officer, stepped down two weeks ago, arrested last week, on charges of lying to investigators and obstructing a separate federal investigation into Jack Abramoff’s dealings in Washington. Jake Bernstein, Executive Editor of The Texas Observer, what about Jack Abramoff, the Republican super-lobbyist, as describes him, known to have bragged about his contacts with Karl Rove, indicted in Florida last month along with his business partner on wire fraud and conspiracy fraud charges related to their purchase of a fleet of gambling boats? This week, three men were arrested, including two who received payments from Abramoff’s business partner in a mafia-style killing of the man from whom Abramoff and his partner purchased the gambling boats, and Jack Abramoff’s ties to, well, Tom DeLay.

JAKE BERNSTEIN: Well, it’s interesting, Amy, we always thought here in Austin that Tom DeLay was in more trouble because of Jack Abramoff than he would be because of TRMPAC. Abramoff received $82 million from six Indian tribes. And he spent that money in all kinds of places, including for sniper training on the West Bank, which clearly had nothing to do with what the Indians were expecting it was going to be spent on. He paid for DeLay to go to a trip to Scotland. DeLay called Abramoff “my very good friend, Jack Abramoff.” Abramoff was clearly trading on his friendship with Tom DeLay in all kinds of places. The Abramoff scandal implicates Grover Norquist. It also touches on —

AMY GOODMAN: Why Grover Norquist?

JAKE BERNSTEIN: Well, Grover Norquist actually received money, this Indian tribe money. He was selling visits to the White House with the President. So, the Indian tribes would give $25,000 through Abramoff to Norquist’s organization, and then they would get a meeting with the President and a visit to the White House. It also implicates Ralph Reed, who was taking money from Abramoff, this Indian money, to campaign against Indian tribes here in Texas, which would then benefit other Indian casinos in other states.

AMY GOODMAN: And, of course, Ralph Reed, also former head of the Christian Coalition. And then you have the — you have Timothy Flanagan, the President’s nominee to serve as Deputy Attorney General under Alberto Gonzales. The eight Democrats on the Senate Judiciary Committee Wednesday called for a new round of questioning of the nominee for the number two job at Justice, seeking more information about his links with indicted lobbyist, Jack Abramoff. Now, Flanagan has said he will have to recuse himself from the Abramoff investigation if he is confirmed, because he hired Abramoff to help the company where he works, scandal-ridden Tyco International, lobby DeLay and Rove on tax issues. Jake.

JAKE BERNSTEIN: Now, certainly if Abramoff decides to sing to save his skin, he is very, very conversant with the whole Republican fundraising network, with all kinds of details that could implicate a number of Republicans throughout the administration and Congress. And so, certainly, I think people have been nervous about that. Abramoff sort of intonated months ago that he was not willing to go down alone, which is why there was so much speculation that testimony from Abramoff could be very damaging to Tom DeLay.

AMY GOODMAN: Well, I want to thank you, Jake Bernstein, Executive Editor of The Texas Observer, for joining us in Austin. And Doug Ireland, long-time political journalist, media critic, writes the blog Direland.

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