Will Bill Frist be jailed ala Martha Stewart?

I was just getting ready to ask how he even knew to tell them to sell HCA if it was a blind trust.

Think he'll get to bunk with Delay?

SEC Issues Subpoena To Frist On Sale of Stock
washingtonpost.com
SEC Issues Subpoena To Frist, Sources Say
Records Sought On Sale of Stock
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.
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Staff writer Charles Babington contributed to this report.

What's Ailing Dr. Frist
What's Ailing Dr. Frist
by Robert Schlesinger
10.13.2005

Senate Majority Leader Bill Frist seems to be the latest to succumb to a dread and sometimes fatal condition. No, I'm not talking about avian bird flu, but rather an ailment that tends to focus on the political classes, worsens in the presence of power and can occasionally be politically fatal.

I call it "rectitudinal hubris." Its symptoms include a politician's being so certain of their own moral rectitude - so sure that their cause is morally justified - that they stop worrying about the ethics constraints that were enacted to keep mere mortals from abusing their positions.

The condition has already send Tom DeLay into political quarantine. And Patrick Fitzgerald is investigating a potential outbreak at the White House. (The Harriet Miers nomination seems less a case of rectitudinal hubris and more one of plain old hubris.)

How else to explain Frist? Today's Washington Post reports that Frist has been subpoenaed by the Securities and Exchange Commission over his potential insider trading and other potentially unethical business dealings with his family (and while acknowledging contacts with the SEC, Frist's flaks didn't bother mentioning that documents had been requested - not a lie of commission, perhaps, but almost certainly one of omission). Frist reportedly held a great deal of stock in his family's hospital chain independent of his blind trust - the same one he said protected him from ethical conflicts, but which he cleared out (conveniently, weeks before the stock in the trust took a tumble) so as to avoid those same ethical problems that he said he didn't have.

"This shows Senator Frist's capacity for clumsiness and bad timing," GOP ethics lawyer Jan Baran understated to the Post.

So it seems that either the Senate majority leader is an idiot … or suffering from a worsening case of rectitudinal hubris. Is there a cure? Top scientists are still looking.

Frist is toast!
Bill Frist is toast! ---BBB

Frist accumulated stock in family company
Questions of conflict of interest raised
WASHINGTON (AP)

Over a period of four years, Senate Majority Leader Bill Frist accumulated stock in a family founded hospital chain that produced tens of thousands of dollars in income -- all outside the blind trusts he created to avoid a conflict of interest, documents show.

The stock was held in a family partnership largely controlled by Frist's brother, Thomas, who founded HCA Inc. along with the senator's late father.

Frist, R-Tennessee, has long maintained that he could vote on health care legislation and still own HCA stock because he placed his shares in Senate-approved blind trusts.

However, ethics experts say a partnership arrangement shown in documents obtained by The Associated Press raises serious doubts about whether the senator truly avoided a conflict.

While there have been no allegations of impropriety in Frist's having shares outside the voluntary blind trusts, federal prosecutors and the Securities and Exchange Commission are investigating Frist's sale of HCA stock from his blind trusts.

Frist ordered the stock sold June 13, and all sales were completed by July 1. The value of HCA stock peaked on June 22 and then gradually declined. On July 13, it dropped 9 percent.

Reports to the SEC showed insiders sold about 2.3 million shares of HCA stock worth at least $112 million from January through June 2005.

Frist has denied that he had any insider information before the stock sale and pointed out that he has not held any position in the company.

Stocks bought outside of trust

The stock outside Frist's Senate blind trust was accumulated by a family investment partnership started by the senator's late parents and later overseen by his brother. Thomas Frist served as president of the partnership's management company and as a top officer of HCA.

The senator's share of the partnership was placed in a Tennessee blind trust between 1998 and 2002 that was separate from those governed by Senate ethics rules. Frist reported that Bowling Avenue Partners, made up mostly of nonpublic HCA stock, earned him $265,495 in dividends and other income over the four years.

Edmond M. Ianni, a former Wilmington, Del., bank executive who established blind trusts for corporate executives, questioned why the senator's brother was able to manage assets "when the whole purpose of a blind trust is to ensure lack of not only conflict of interest but appearance of conflict of interest?"

Kathleen Clark, a government ethics expert at the Washington University in St. Louis School of Law, said she doesn't believe the Senate trusts or the Tennessee trust insulated Frist from a conflict because the senator or his brother was advised of transactions and could influence decisions.

"What I find most appalling is the Senate calls it a qualified blind trust when it's not blind," Clark said. "Since the Senate says it's OK, the Senate has made it a political question. It's up to the voter. But there's no doubt it's a conflict of interest."

Purchase disclosed to Senate

Frist's interest in Bowling Avenue Partners and the Tennessee blind trust were listed on the annual disclosure reports he filed with the Senate. Thomas Frist's ability to influence HCA stock decisions in the partnership was detailed in separate trust and partnership documents obtained by the AP.

Those documents show Thomas Frist was listed as the "general partner" and "registered agent" of Bowling Avenue Partners. He also was listed as president of the partnership's management company.

HCA is the nation's largest for-profit hospital chain. Thomas Frist is its chairman emeritus.

Frist advisers confirmed that the senator's brother could influence investment decisions in the Bowling Avenue partnership. They said the partnership was placed in a Tennessee trust because Senate ethics rules didn't allow the nonpublic HCA shares to be included in Senate-approved trusts.

"His interests in the family partnership were not held by his Senate blind trusts because Senate rules did not permit it. Senator Frist did not control the assets in this partnership and he annually disclosed his interests to the public as required," Frist spokesman Bob Stevenson said.

Thomas Frist did not return repeated phone calls to his office at HCA seeking comment.

Bowling Avenue Partners' HCA shares became marketable securities when the estate of Frist's mother was settled in probate. Frist then began transferring those shares in stages from the Tennessee blind trust to the Senate-approved trusts in 2001 and 2002.

The value of all the transferred shares, calculated on the dates they went into the Senate trusts, was between $775,000 and $1.57 million, according to letters the trustees sent to Frist and the Senate. That stock was on top of millions of dollars in various investments Frist already owned in the Senate blind trusts.

With his background as a heart surgeon as well as his position as majority leader, Frist has been at the forefront of legislation that would affect the hospital chain. Among the issues: a Medicare prescription drug benefit and limits on medical malpractice lawsuits.

Frist kept HCA stock in Bowling Avenue Partners and the Tennessee blind trust -- but outside the Senate-approved trusts -- between 1998 and 2002.

His investments in Nashville-based HCA are being investigated by federal prosecutors and the Securities and Exchange Commission after an AP report that the senator had asked administrators of his Senate blind trusts to sell his HCA holdings.

The Bowling Avenue name came from the street of the Frist family home in Nashville.

Copyright 2005 The Associated Press. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed.
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Find this article at:
http://www.cnn.com/2005/POLITICS/10/12/friststock.ap/index.html

Letters Show Frist Notified Of Stocks in 'Blind' Trusts
Bill Frist is toast! ---BBB

Letters Show Frist Notified Of Stocks in 'Blind' Trusts
Documents Contradict Comments on Holdings
By Jeffrey H. Birnbaum
Washington Post Staff Writer
Monday, October 24, 2005; A01

Senate Majority Leader Bill Frist (R-Tenn.) was given considerable information about his stake in his family's hospital company, according to records that are at odds with his past statements that he did not know what was in his stock holdings.

Managers of the trusts that Frist once described as "totally blind," regularly informed him when they added new shares of HCA Inc. or other assets to his holdings, according to the documents.

Since 2001, the trustees have written to Frist and the Senate 15 times detailing the sale of assets from or the contribution of assets to trusts of Frist and his family. The letters included notice of the addition of HCA shares worth $500,000 to $1 million in 2001 and HCA stock worth $750,000 to $1.5 million in 2002. The trust agreements require the trustees to inform Frist and the Senate whenever assets are added or sold.

The letters seem to undermine one of the major arguments the senator has used throughout his political career to rebut criticism of his ownership in HCA: that the stock was held in blind trusts beyond his control and that he had little idea of the extent of those holdings.

The extent of Frist's knowledge of the inner workings of his trusts and his family's health care company is related to a recently launched federal investigation of possible insider trading involving the liquidation this summer of Frist's HCA stock. Within weeks of Frist's decision to sell his holdings in June, HCA shares fell sharply because of a weak earnings report. Frist has said he possessed only publicly available and not "insider" information about the company when he directed the sale and, therefore, did nothing wrong.

Last week, Frist told reporters that he is "absolutely confident in the outcome" of the inquiries by the Justice Department and the Securities and Exchange Commission because he "acted properly at every point." He declined to address specifics about the investigations but said he is providing information as quickly and fully as possible.

Frist, a heart-surgeon-turned-politician, has been actively involved in shaping national health care legislation, including passage of the Medicare prescription drug benefit, while maintaining a major financial interest in his family-founded health care business.

Two watchdog organizations -- Citizens for Responsibility and Ethics in Washington and the Foundation for Taxpayer and Consumer Rights -- filed complaints with the Senate Select Committee on Ethics this yearcharging Frist with having a conflict of interest and questioning why he sold his shares after a decade of saying he did not need to.

Frist and his family have a dozen federal trust accounts, which are essentially piles of stock controlled by professional money managers. Under the terms of his "qualified" trust agreements set up in 2000, Frist is barred from contacting the managers except under specific circumstances. The managers, however, are required to contact him when the funds they control undergo certain changes -- an arrangement similar to those of several other senators.

In January 2003, after winning election as majority leader, Frist was asked on CNBC whether his HCA holdings made it difficult for him to push for changes in Medicare, a federal health program for seniors that added to the hospital company's revenue.

"I think really for our viewers it should be understood that I put this into a blind trust," Frist replied. "So as far as I know, I own no HCA stock." He added that the trust was "totally blind. I have no control."

Two weeks before that interview, M. Kirk Scobey Jr., a Frist trustee, informed the senator in writing that one of his trusts had received HCA stock valued at between $15,000 and $50,000.

"He [Frist] could have been more exact in his comments," said Bob Stevenson, spokesman for Frist. Stevenson added that Frist might better have said he did not know to what extent he owned HCA shares.

Kathleen Clark, a law professor at Washington University in St. Louis, said she was surprised that Frist had ever claimed before this summer's liquidation that he might have owned no HCA stock. "Did he say that? What was he thinking of?" she asked. "How did he know to tell the trustee to sell it [his HCA stake] if he didn't know that he had it in the first place?"

Disclosures by the trustees to the Senate and to Frist indicate that Frist and his family probably owned a great deal of HCA stock at the time. When Frist's federal trusts were created in late 2000, the trustees disclosed that one trust alone contained between $5 million and $25 million in HCA shares and that each of seven other trusts held more than $1 million of the stock.

Frist was notified in November 2002 that 14,781 HCA shares had been sold from one of his trusts. But he was not told that all of his HCA shares had been disposed of until this summer -- after he had directed his trustees to sell them all, the documents show.

Questions about his HCA holdings have been a staple of Frist's public life. The Nashville-based company, the country's largest chain of for-profit hospitals, was founded in 1968 by Frist's father, Thomas F. Frist, his brother, Thomas F. Frist Jr., and Jack C. Massey, the former owner of Kentucky Fried Chicken. Its stock made up the majority of Frist's wealth and was used to help him secure some of the financing for his first Senate campaign.

During his first run for the Senate in 1994, Frist was accused of having a "mammoth conflict of interest" by his Democratic opponent, then-Sen. Jim Sasser. Frist promised to put his HCA stock in a blind trust to avoid the problem.

This year, as he contemplated a bid for the White House in 2008 and worried about the appearance of conflicts, Frist abruptly changed tactics, aides said. Rather than defend his stock held in trust, he asked his trustees to sell all his HCA shares.

Stevenson said Frist's concerns involved the perception of a conflict rather than any real conflict of interest. In 1997 and 1999, the ethics committee cleared Frist to participate in Senate debates involving Medicare and health maintenance organizations despite his "substantial" holdings in HCA. The committee did not take into account whether Frist's holdings were in blind trusts in reaching its decisions.

Frist said last week he was not required to set up a blind trust after he went to the Senate, but he wanted to "apply the highest ethical standards I possibly could. I thought, why not raise the bar, why not do a good deed . . . and avoid any appearance of a conflict of interest."

Senate rules prohibit any lawmaker with a blind trust from contacting his trustees unless the ownership of an asset poses a potential conflict of interest "due to the subsequent assumption of duties" by the lawmaker. The lawmaker can then ask the trustees to dispose of the asset.

Frist did not take on any new duties this year. But a Frist adviser said the senator had been thinking about selling his HCA stake from the time he was elected majority leader in 2002. Frist had not known that he could sell his shares until this spring, the adviser asserted, and so went ahead -with the sale based on his nearly three-year-old wish.
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Staff writer Charles Babington and research editor Lucy Shackelford contributed to this report.

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Frist votes aid HCA's business interests
Sunday, 12/04/05
Frist votes aid HCA's business interests
Review of 10 years in Senate shows pattern of favoring firm
By TODD PACK
The Tennessean Staff Writer

Senate Majority Leader Bill Frist is pushing a "healthy America" plan that includes tax breaks to help the poor buy insurance and legal limits on excessive jury awards that Frist says hurt access to care.

Frist's plan would do something else besides help the poor and reduce what he says are frivolous lawsuits.

It would help make money for HCA Inc., the Nashville-based hospital company that's been the foundation of the Frist family's wealth.

Frist, considered a possible presidential candidate in 2008, was dogged for years by complaints that his financial stake in HCA created a conflict of interest.

This summer, he sold his stock in the company, which his father and brother helped start, but did so one month before the price took a sharp dive, raising new questions about his intentions.

Frist's office said the Tennessee Republican wasn't available to comment directly for this story, but he has said in the past that his connections to HCA have not influenced his actions in the Senate.

Still, an examination of Frist's voting record over his nearly 11 years in the Senate shows a pattern of supporting bills friendly to HCA and to hospitals in general. His votes typically have followed the Republican Party line.

One example is the bill Frist introduced in July to help insure the uninsured and limit jury awards.

Uninsured patients hurt HCA, which loses billions of dollars when they don't pay their bills. The company set aside $2.7 billion in 2004 for such doubtful accounts.

And HCA owns an insurance company that would benefit from limits on hefty jury awards. Health Care Indemnity Inc. is one of the country's largest providers of medical malpractice insurance, with gross premiums of $382.3 million a year.

Frist's supporters note that he hasn't always voted for bills in HCA's interest and say he has followed all Senate ethics rules. Barring his vote on health-care issues, one said, would not be fair to voters he represents.

Other bills supported by Frist have given hospitals more money for treating seniors and curbed development of physician-owned specialty hospitals that compete with HCA.

He's also helped HCA in less obvious ways. Several years ago, the Tennessee Republican fought a Democratic-sponsored version of a "patients' bill of rights" that would have allowed patients to sue their HMOs and collect unlimited damages.

Physician groups such as the American Medical Association supported the bill, but Frist, a former heart-lung transplant surgeon at Vanderbilt University Medical Center, opposed it.

Frist argued that it would do more to help trial lawyers than it would to help patients. President Bush also opposed the bill.

Had the bill become law, the added cost of the jury awards could have put financial pressure on health plans to pay hospitals and other providers less money for services they provide. HMOs and other insurance plans accounted for 42% of HCA's revenue in 2001, the year the patients' bill of rights came up for a vote.

Stock sale brings questions

Until this summer, Frist owned shares in HCA in so-called "blind trusts", which are intended to keep the holder at arms length to avoid conflicts of interest. However, this summer he gave the order to sell all his HCA stock, saying he wanted to settle the conflict-of-interest issue.

But the order to sell caused its own problems. After trading at near-record prices, the company issued an earnings warning a month after Frist's order to sell, and the stock dropped 9%, raising questions of whether Frist was tipped off.

Company insiders also exercised their options and sold large amounts of HCA stock in the months and weeks before the profit warning.

Soon after Frist's sale was disclosed in September, the Securities and Exchange Commission and a U.S. attorney in New York began investigations. Frist has denied selling his shares based on illegal tips from company insiders.

And as to conflict of interest on his voting record, he has been backed up by the Senate Ethics Committee twice, in 1997 and again in 1999, when it said that Frist's financial interest in HCA didn't present a conflict of interest when it came to voting on health-care issues.

"Throughout his tenure in the Senate, Bill Frist has been extremely careful to meticulously comply with all Senate Ethics rules," spokesman Bob Stevenson said Friday.

"He has made certain his actions are consistent with the Senate's official code of conduct," the spokesman said. "He has repeatedly sought and received approval from the (Senate) ethics committee before participating in debates on health-care legislation."

HCA executives declined to comment. Spokesman Jeff Prescott said HCA doesn't lobby Frist and tries to keep him at arm's length from the company.

Still, given the lawmaker's connections to the country's largest hospital company, questions of possible conflicts of interest may be inevitable, said Craig Becker, president of the Tennessee Hospital Association.

"It's an impossible position that he's in," Becker said. "He knows when hospitals are being hurt, and he can tell his peers that," Becker said, but "there's nothing he can't do for health care that couldn't be used against him."

HCA ties cause political woes

There are some examples of Frist voting in a way that has not been in HCA's interest.

He voted with a majority of Republicans, and Democrats, to cut Medicare reimbursements for hospitals as part of the Balanced Budget Act of 1997.

Still, government watchdog groups say that Frist's ties to HCA pose a conflict of interest.

"Because he owned so much stock in HCA ... there is the appearance that any legislation that could help the company would have helped him financially," said Mike Surrusco, ethics director for Common Cause, a nonpartisan watchdog group, based in Washington, which has called on the Senate ethics committee to reconsider whether Frist should be prohibited from voting on bills that could affect the fortunes of his family.

Lately, much of the focus has been on questions about whether Frist's trusts were truly blind.

Before unloading the stock, Frist told interviewers he didn't know whether he held shares in the company. "As far as I know, I own no HCA stock," he said on the cable news channel CNBC in 2003.

Recent news reports seem to contradict those statements, however, showing that records filed with the Senate show he received a number of letters over the years informing him about shares in the company held in his blind trusts.

Predictably, all this attention on his links to HCA has caused some political problems for Frist.

"I think the issue is whether he was looking out for the interests of the American people or looking out for his own interests," said Amaya Smith, a Democratic National Committee spokeswoman in Washington.

Frist's role as majority leader, which requires him to promote the interests of the Republican Party, gives him "an even greater influence on legislation that comes before the Senate and on how it's shepherded through the Senate, and that puts him more under the microscope," Smith said.

Republican ethics lawyer Jan Baran disagrees that Frist's ownership of HCA stock creates a real problem. "He was in compliance with the ethics rules," said Baran, a Washington attorney who often represents Republicans in ethics and campaign finance cases.

Prohibiting the senator from voting on health-care proposals simply isn't practical, Baran said. Each state has only two senators, each one representing 50% of that state's votes.

"It's not like judges or Cabinet officials who could recuse themselves and let someone vote in his stead," the lawyer said.

Votes on party line

Over the years, Frist has followed the Republican Party line, even on bills that could directly or indirectly affect HCA.

For example, Frist and Tennessee's other senator at the time, Fred Thompson, were among the 35 Republicans and one independent who voted against the Democratic-supported patients' bill of rights bill in 2001. Nine Republicans voted for it.

The bill didn't become law because the Senate version of the plan couldn't be reconciled with the House version.

Likewise, Thompson's Republican successor in the Senate, Lamar Alexander, joined Frist in 2003 in voting in favor of the Medicare Modernization Act. All but nine of the Senate's 51 Republicans at the time voted in favor of the bill, which President Bush signed into law two years ago this month.

Perhaps the best-known part of the Medicare act is the part expanding the government's health plan to include prescription-drug benefits for seniors and younger people with disabilities. Drug benefits begin on Jan. 1.

But there was more to the measure than prescription drugs. The legislation gave hospitals an extra $25 billion in Medicare and Medicaid payments over 10 years, according to the American Hospital Association, which supported it.

Last year, Medicare and Medicaid accounted for about 35% of HCA's total revenue.

The act also placed an 18-month moratorium on new physician-owned specialty hospitals that would compete directly with full-service community hospitals such as those operated by HCA.

HCA, like other hospital companies, oppose the physician-owned facilities on grounds they "cherry pick" patients with the best insurance, leaving traditional hospitals with an unfair share of uninsured and underinsured patients.

Doctors' referrals limited

The moratorium on new physician-owned specialty hospitals expired on June 8. Last month, however, the Senate essentially extended the moratorium in its version of the federal budget bill. The bill would save $22 million over five years by barring doctors from referring Medicare and Medicaid patients to specialty hospitals in which the doctors have a financial stake.

Frist was among the 50 Republicans, including Alexander, who voted in favor of the budget bill. Two Democrats also voted for it. Four Republicans voted against it.

The limits on specialty hospitals were added to the budget bill in October by the Senate finance committee, which is chaired by Chuck Grassley, an Iowa Republican who opposes them. Frist is a member of Grassley's committee.

James Grant, president of the American Surgical Hospital Association, said the limits were "politically motivated." The group represents physician-owned specialty hospitals.

"There's no justification for having this thing in the bill," other than to squelch competition, said Grant, who lives in Nashville.

HCA executives wouldn't comment for this story, but Senior Vice President Victor Campbell told The Tennessean in March that the company believes the question of whether to let doctors refer patients to limited-service hospitals in which the doctors have a financial interest was "a hugely important issue.

"We think it's an inherent conflict of interest," he said.

Expertise appreciated

Senate rules say lawmakers can't introduce or "aid the progress" of legislation with "a principal purpose" of furthering their or their families' financial interests.

Under these rules, Frist would be allowed to vote on measures affecting hospitals and health care in general, but he couldn't vote on a bill crafted to help HCA alone.

Frist's supporters say that his background makes him invaluable on Capitol Hill, where he is the only physician in the Senate.

"No one has changed the health-care debate in America in the last 20 years like Bill Frist," Sen. Phil Gramm, R-Texas, said in 1999 about the debate over the patients' bill of rights. "He's very smart, and he knows what he's talking about."

Frist has said he gave the order this summer to sell his shares in HCA to avoid the appearance of a conflict of interest, but Carmen Balber, a consumer advocate with the California-based Foundation for Taxpayer & Consumer Rights, said Frist's decision failed to ease her concerns.

She said, "The senator is incapable of totally erasing his ties to that company because his father and brother founded it and because the family fortune is tied up in HCA stock."

Frist's AIDS Charity Paid Consultants
Frist's AIDS Charity Paid Consultants
By Jonathan M. Katz and John Solomon
The Associated Press
Saturday 17 December 2005

Washington - Senate Majority Leader Bill Frist's AIDS charity paid nearly a half-million dollars in consulting fees to members of his political inner circle, according to tax returns providing the first financial accounting of the presidential hopeful's nonprofit.

The returns for World of Hope Inc., obtained by The Associated Press, also show the charity raised the lion's share of its $4.4 million from just 18 sources. They gave between $97,950 and $267,735 each to help fund Frist's efforts to fight AIDS.

The tax forms, filed nine months after they were first due, do not identify the 18 major donors by name.

Frist's lawyer, Alex Vogel, said Friday that he would not give their names because tax law does not require their public disclosure. Frist's office provided a list of 96 donors who were supportive of the charity, but did not say how much each contributed.

The donors included several corporations with frequent business before Congress, such as insurer Blue Cross/Blue Shield, manufacturer 3M, drug maker Eli Lilly and the Goldman Sachs investment firm.

World of Hope gave $3 million it raised to charitable AIDS causes, such as Africare and evangelical Christian groups with ties to Republicans - Franklin Graham's Samaritan Purse and the Rev. Luis Cortes' Esperanza USA, for example.

The rest of the money went to overhead. That included $456,125 in consulting fees to two firms run by Frist's longtime political fundraiser, Linus Catignani. One is jointly run by Linda Bond, the wife of Sen. Christopher "Kit" Bond, R-Mo.

The charity also hired the law firm of Vogel's wife, Jill Holtzman Vogel, and Frist's Tennessee accountant, Deborah Kolarich.

Kolarich's name recently surfaced in an e-mail involving Frist's controversial sale of stock in his family founded health care company. That transaction is now under federal investigation.

Jill Holtzman Vogel, who is raising money for a run for the state Senate in Virginia in 2007, has received thousands in contributions this year from Catignani & Bond and from her husband, among numerous other sources, according to data released by the Virginia Public Access Project.

Alex Vogel said Frist picked people to work on his charity whom he trusted and knew, such as Vogel's wife, and was proud that overhead costs amounted to less than $1 of every $5 raised. "It's leaner than the average charity," Vogel said.

Frist is listed as the charity's president and his wife was listed as secretary. Neither was compensated.

Political experts said both the size of charity's big donations and its consulting fees raise questions about whether the tax-exempt group benefited Frist's political ambitions.

"One of the things people who are running for president try to do is keep their fundraising staff and political people close at hand. And one of the ways you can do that is by putting them in some sort of organization you run," said Larry Noble, the government's former chief election lawyer who now runs the nonpartisan Center for Responsive Politics that studies fundraising.

Kent Cooper, the Federal Election Commission's former public disclosure chief, said the big donors' motives are also suspect.

"These tax deductible gifts were earmarked through Senator Frist," Cooper said. "They were raised in the political arena at the 2004 Republican Convention and the natural question is were they given to the Senate majority leader to gain favor or were they given for true charitable purposes?"

Cooper said the consulting fees were "excessively high" and the fact that they were "paid to primarily political consultants also raises questions about the long-range strategic benefits for the 2008 presidential race."

A charity could lose its tax-exempt status if it is found to be involved with political activity, said Marcus S. Owens, a former director of the Internal Revenue Service's Exempt Organizations Division.

"If the IRS were to conduct an examination, what they would look for would be the relationship between the organization and any incumbent politician or candidate," Owens said. "They'd be particularly interested in transactions of money or assistance of any kind being provided."

Frist formed the charity in 2003. It drew attention in August 2004 when it held a benefit concert in New York during the Republican National Convention at which President Bush was nominated for re-election.

The group's 2004 tax return was due April 15, 2005, but it filed for two extensions and only reported its activity to the IRS last month.

The tax forms show at least 11 of the charity's 18 biggest donors gave $97,950 each, that one gave $100,000 and that the rest gave more than $245,000 each.

Vogel said Catignani was paid the fees because he helped arrange the New York concert that featured country stars Brooks & Dunn, handling both the event arrangements and fundraising.

The tax forms show Catignani's fundraising firm, Catignani & Bond, was paid a total of $276,125 and his event-planning arm, Consulting Services Group, was paid $180,000.

The amount Catignani was paid by Frist's charity in 2004 is roughly the same as what his firms received over the past three years for work for Frist's political action committee, Volunteer PAC. The firm collected $523,666 in fees from the PAC since 2003, FEC records show.

World of Hope's beneficiaries include evangelical Christian groups with Republican connections.

Cortes, Esperanza USA's president, is an influential evangelical leader who hosted Bush at this year's National Hispanic Prayer Breakfast.

Frist has worked and traveled extensively with Samaritan's Purse in Africa as well as during the immediate aftermath of Hurricane Katrina. Franklin Graham is the son of the Rev. Billy Graham.

Weeks before Frist's convention fundraiser, the senate leader traveled to Chad, Sudan and Kenya on a trip underwritten by Samaritan's Purse, Senate records show.

Samaritan's Purse spokesman Jeremy Blume said the $490,000 that World of Hope donated to Samaritan's Purse in 2004 was spent on AIDS programs in sub-Saharan Africa.

The recipients of the charity's money were Africare, Samaritan's Purse, Esperanza USA, Nashville's Meharry Medical College, Taso-Uganda and Save the Children.