Frist says he had no inside information before stock sale

Speaking publicly Monday for the first time about his sale of Hospital Corp. of America Inc. stock, Frist told reporters he had received Senate Ethics Committee approval before authorizing the sale of shares. The sale was completed just before HCA’s stock price dipped.

The Justice Department and Securities and Exchange Commission are looking into Frist’s actions, as well as circumstances inside the Nashville, Tenn.-based hospital chain. On Monday, the SEC chairman, former Rep. Christopher Cox, said he would remove himself from the agency’s investigation to avoid a potential conflict.

Questions were raised as to whether Frist, R-Tenn., had special information before the sale because insiders in HCA also sold stock during the same period — and the stock price dipped soon after Frist sold his stock.

Insider sales by corporate managers are disclosed publicly under federal securities regulations. Insider buying and selling are closely watched by stock market professionals as a possible indication of future stock performance.

Reports to the Securities and Exchange Commission showed insiders sold about 2.3 million shares, worth about $112 million, from January through June, said Mark LoPresti of Thomson Financial.

“I had no information about HCA or its performance that was not publicly available when I directed the trustees to sell the stock,” Frist said, referring to the sale by administrators of his blind trusts.

Frist, widely considered to be a potential 2008 presidential candidate, said his only objective in divesting his blind trusts of the stock was to avoid any appearance of a conflict of interest. Some critics have contended that Frist’s holdings led to conflicts with his positions on health care legislation.

He promised full cooperation with investigations by the SEC and federal attorneys. He declined to take questions and didn’t address the timing of the sale.

“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,” Frist said.

“Despite not being required to do so, I later chose to place many of my investments in blind trusts, including my HCA stock. With these efforts, I have sought to guarantee that no conflict of interest existed. Review after review has found nothing wrong.”

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 sale coincided with a $112 million sell-off of shares by HCA insiders — including the chief executive and the treasurer — that began in January 2005, with the largest insider sales taking place in April, May and June.

The senator’s brother, Thomas Frist Jr., is a former chief executive of HCA and is now a director and the largest individual shareholder in the company.

Cox, a California Republican who was in Congress for 16 years before he left the House to assume the SEC job last month, had been a member of the GOP leadership in Congress.

“Because of my service in the congressional leadership for the last 10 years, I have recused myself in this matter,” Cox said in a statement. “The purpose of the recusal is to avoid any appearance of impropriety in the (SEC’s) consideration of this case.”

Cox’s congressional campaign fund donated $1,000 to Frist in 2000, according to Federal Election Commission records. That donation was not mentioned in the statement issued by Cox and was not given as a reason for his recusal.

Frist has hired two private attorneys who specialize in securities litigation and insider trading cases: William McLucas, a former SEC enforcement director, and Harry Weiss, a former SEC attorney who was a co-author of a text titled “Preventing Insider Trading.” Their representation of Frist was confirmed by their law firm, Wilmer Cutler Pickering Hale and Dorr. The involvement of the firm was first reported in Monday’s editions of The Wall Street Journal.

Also Monday, Citizens for Responsibility and Ethics in Washington, a liberal-leaning watchdog group, said it had had filed a complaint against Frist with the Senate Ethics Committee alleging that he engaged in “apparent insider trading” and then tried to cover it up.