GWEN IFILL: The Justice Department and the Securities & Exchange Commission are investigating the timing of stock sales made by Sen. Frist this summer. The senator told his portfolio managers in June to sell all of his shares in HCA, a healthcare company founded by his family but since sold. Frist's order to sell the stock came one month before HCA issued a weak earnings report and lost significant value. The senator has denied any wrongdoing. Eamon Javers, who covers Capitol Hill for BusinessWeek, has been covering this story.
So Eamon, I read somewhere today that there are 45 members of the Senate who are millionaires. Many of them have blind trusts. What happened in this case that made this different?
EAMON JAVERS: Well, what critics are saying, Gwen, is that what we found out here is that Senate blind trusts are really sort of nearsighted trusts. These aren't totally blind. There are a couple of loopholes in there -- one being that senators who think they have an upcoming conflict of interest in legislation, things that are moving, their political ambitions maybe, can tell trustees to sell a stock that might trigger that conflict. And that's what Sen. Frist did here. He told his trustees on June 13 to sell HCA. That process was complete by July 8. And then on July 13, we have this weak earnings report. The stock declines by about 9 percent. That sale -- it turns out -- saved Sen. Frist a lot of money; how much we don't quite know. There's a lot we still don't know about this.
GWEN IFILL: What is the senator's connection, other than having been a big stock owner in this company?
EAMON JAVERS: Well, the company was founded by his father and his brother. It is a publicly traded company. And he has never worked there but he owns quite a bit of stock in the company. And when he set up the original blind trust in the Senate years ago, he put something on the order of about $10 million of HCA stock into that blind trust.
The way these trusts work he doesn't know exactly how much of that stock remains, but he does know that he had some. And what he told his trustees was sell any amount of HCA that still remains in this account.
GWEN IFILL: Is that the typical arrangement on Capitol Hill for politicians or for anybody in public life, that they, the money is put in a blind trust but they can know actually what's there?
EAMON JAVERS: Well, they can know bits and pieces of what's there. They can know, for example, if a stock has been liquidated from their blind trust. There's a $1,000 trigger; if the amount of stock goes below that trigger, they're notified that that stock has been liquidated. So they'll know if they don't own it anymore but they don't know how much of that $10 million, for example, in Frist's case, has been divested into other stocks. His trustees may have all along been selling some of that stock in order to diversify him as any financial manager might do. But typically in the Senate this is something that we see a lot. These are Senate Ethics Committee-approved blind trusts. But, as we're learning as this process unfolds, the senators can see some of the details there.
GWEN IFILL: Is there anyway to know -- he's been a member of the Senate since --
EAMON JAVERS: 1994 he was elected.
GWEN IFILL: Just now he's divested himself of this stock. If it was a conflict now, why wasn't it a conflict before?
EAMON JAVERS: Well, that's what his critics are asking. They say he's made major health care votes - HCA being a big health care company -- over the years while still knowing that he owned this HCA stock. So one of the things that we're going to get into now is the question of what exactly was it that Sen. Frist thought was a conflict of interest upcoming on the Senate's agenda if all these major votes didn't constitute in his mind a conflict of interest.
GWEN IFILL: Well, as those questions have been mounting this week Sen. Frist finally came before the cameras yesterday. And this is what he had to say:
SEN. BILL FRIST: In April, I asked my staff to determine if Senate rules and relevant laws would allow me to direct the trustees to sell any remaining HCA stock. After my staff reviewed the relevant statutes and Senate rules and consulted with outside counsel and Senate Ethics Committee staff, I learned that the rules allowed me to direct the trustees to sell any remaining HCA stock in my blind trust.
Now, I'm being asked to explain this decision. I understand that and I welcome it. An examination of the facts will demonstrate that I acted properly. I will cooperate with the Securities & Exchange Commission and the U.S. Attorney for the Southern District of New York to provide the information they need as quickly as possible.
My only objective in selling the stock was to eliminate the appearance of a conflict of interest. I had no information about HCA or its performance that was not publicly available when I directed the trustees to sell the stock.
GWEN IFILL: There are two things that he said which caught my ear. One is he said he consulted with the Senate Ethics Committee.
EAMON JAVERS: Right.
GWEN IFILL: Does that mean he got a clearance from them, a written okay that he could sell this stock, or does it mean that he just talked to them or advised them?
EAMON JAVERS: He may very well have gotten something on paper in which case we'd like to see that as the story unfolds. The other thing there he said, the very first two words: He said in April he started this process. That is a very clear attempt by Frist to say, hey, wait a second. I started this months before I could have had any indication that there were any problems with HCA that were going to trigger this weak earnings report as late as July. So that's Frist expanding the time line a little bit and giving us a sense of when these decisions actually took place.
GWEN IFILL: And he also said there at the end of that particular piece of sound that he did not have access to any information that was not publicly available.
EAMON JAVERS: Right.
GWEN IFILL: Do we know what that means?
EAMON JAVERS: Well, notice what he didn't say. He didn't say there that he didn't talk to his brother, for example, who still remains involved with the company. He didn't say that he didn't have any contact --
GWEN IFILL: The chairman emeritus, I believe.
EAMON JAVERS: That's right. He didn't say that he didn't have any contact with anybody affiliated with the company. What he said is he didn't know anything that Joe Six-Pack stock investor didn't know. That's an important distinction.
GWEN IFILL: It sounds like a fairly subjective distinction as well. What is public and what does Joe Six-pack know to ask?
EAMON JAVERS: These are dicey situations for politicians. I mean, what Bill Frist is facing here is the possibility of becoming the Martha Stewart of American politics, and how this investigation proceeds is going to be very important to him.
GWEN IFILL: Well, you mentioned Martha Stewart but how different are the facts of this case as far as we know them so far and other insider trading accusations, allegations we have heard with other high- profile people?
EAMON JAVERS: Well, remember insider trading itself can be tricky to prosecute. You need a lot of evidence. They're going to be wanting to go after Frist's e-mails, his schedule, other documents that show who was he meeting with, who did he talk to, his phone records and all of that.
But the challenge for a lot of folks in this kind of situation can be not necessarily what did you do before the investigation started but what do you do after the investigation is going on? Lying to investigators has tripped up people in the past.
GWEN IFILL: Have there been complaints before about -- from good government groups or whatever about Sen. Frist's continuing to hold an interest in HCA?
EAMON JAVERS: Yeah, HCA has been an issue for Frist over the years. People have pointed to it and say, wait a second. You're a big investor. How can you possibly make independent decisions? And in the past Frist has always said, you know, I don't have any conflict of interest here.
One thing that might be worth pointing out that we haven't seen, I don't think publicly before, is that at the same timeframe that Frist was selling this HCA stock he was also closing down something called Frist 2000 which was his 2000 campaign arm that had gone through all sorts of tumult of its own. That was invested in the stock market and Frist actually lost a lot of money in those funds. And I'm told by sources close to Frist's political operation that he actually shut that down on July 6. And people close to Frist point to that and say, well, what this was, was a broader effort by Frist to do some political and financial house cleaning, not an effort to game the stock market.
GWEN IFILL: Well, let's talk about political and financial house cleaning because he also indicated yesterday that he was setting these things straight because of issues to come when he leaves the Senate. What are these issues to come? As if we don't know.
EAMON JAVERS: He raised the curtain just a little bit on a potential Frist 2008 presidential bid here. And that's one of the questions behind all this. Was Frist behind the scenes setting the table really for a presidential bid and did somebody in his political organization say, hey, wait a second, these things have been long criticized over the years; you might want to get those off the table before we even get into the idea of a presidential campaign, so the irony here for Frist is there could be nothing wrong entirely. And he could have been trying to be even more above board than he ever was and that's what has caused the current flap.
GWEN IFILL: Well, as the current flap continues, it's about a week old today probably roughly, what has been the reaction among members of his own party and members of the other party on the Hill.
EAMON JAVERS: Democrats are proceeding very cautiously. They're not jumping up and down screaming for Frist's resignation just yet. I think they're going to want to see how the details unfold. And I talked to a lot of Senate Republicans today all of whom very, very strongly defended Sen. Frist.
I talked to Sen. McCain today. He was very aggressively pointing out to me, he said, look, this man has done a lot for veterans. He's done a lot for health care in Africa. He's a good and decent man. I don't think he did anything wrong.
So I think Frist has built up a lot of goodwill by being a medical doctor, by being the type of personality that he is. And I don't think Senate Republicans are ready to jump ship on him just yet.
GWEN IFILL: But there has been some nervousness among other conservatives outside of the Senate - not members of the club - about Sen. Frist on different issues.
EAMON JAVERS: Sure.
GWEN IFILL: Has any of that been boiling up over this?
EAMON JAVERS: Well, there are those who say that Sen. Frist's embryonic presidential campaign was already fairly dead because of what happened earlier in this year with Terri Schiavo and Frist very publicly getting involved in that, which caused him a bit of a political black eye as the politics of it played out.
So it might have been the case that Frist was a non-starter as a presidential candidate anyway. But clearly based on his comment that we just saw he doesn't think so and clearly a lot of support from other Senate Republicans.
GWEN IFILL: Eamon Javers, thanks a lot.
EAMON JAVERS: Thank you.