New Details On HCA Insider Knowledge Emerge

Santa Monica, California — Senator Bill Frist, now subject to a formal investigation by the SEC for insider trading, 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, according to an analysis released today by the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR).

“The amount of money involved makes Frist’s motive for insider trading clear,” said Carmen Balber.

FTCR also pointed today to overly rosy earnings projections made by HCA executives at a conference with investors just as Frist and HCA insiders were dumping HCA stock en masse. The evidence shows insiders were deceiving the public and suggests a conspiracy within the company to defraud investors which Frist could well have been a part of. A transcript of HCA Sr. Vice President Vic Campbell’s misleading statements to investors, which FTCR is forwarding to the SEC today, can be viewed here.

The key factors stock analysts look to in judging hospital chain profitability are patient admissions and whether it is insured or uninsured patients who are being treated, since uninsured patients are not profitable. The company’s interims statements about both indicators were overblown.

FTCR also uncovered information showing Senator Frist directed trustees not to sell his HCA stock. Each of the Senator’s trust agreements acknowledged their high concentration in HCA stock, and specifically relieved trustees “from any obligation the Trustee might otherwise have to diversify the investments.” Click here to read a Frist trust agreement.

FTCR’s analysis of Frist’s financial disclosures follows:

“Disclosure letters filed with the Senate Office of Public Records report eight contributions of HCA stock to Frist trusts, worth between $1,125,000 and $2,320,000, and one sale of 14,781 shares worth just under $625,000. The letters contain no indication that these contributions were singled out for special disclosure. Click here to read the letters.

“Therefore, Frist trusts held between $10,825,002 – $31,670,000 in HCA stock, or 248,132 – 721,315 HCA shares, when he directed its sale in June 2005. Assuming the shares were sold on the day the sale was reported, Frist sold 130,455 – 602,212 shares on July 1 for $7,360,271 – $33,976,801. If he had held the shares until last Friday (September 23), they would be worth between $6,209,658 – $28,665,291. Frist collected $1,150,613 – $5,311,510 by selling early.

On July 8, Frist was notified that the HCA stock in his wife and childrens’ trusts had been eliminated. The trusts’ 117,677 – 119,103 shares sold for $6,413,396.5 – $6,491,113. (Family members’ holdings could in fact be much greater because they are not required to report income over $1 million.) If the Frists had kept those shares until September 23, they would be valued at $5,601,425 – $5,669,302. Frist’s family trusts saved $811,971 – $821,811 by selling early.

“By selling early when the stock was near its peak, and just before a sharp downturn in value, Senator Frist made, in all, $1,962,584 – $6,133,321,” said Balber.

The Numbers:
WHF 2000 Qualified Blind Trust:
Value of Shares July 1, 2005: $5,765,001 – $26,550,000
# of Shares Held July 1, 2005: 130,455 – 602,212
Stock Price July 1, 2005: $56.42 per share
July 1, 2005 Stock Sale Worth: $7,360,271 – $33,976,801
Stock Price September 23, 2005: $47.6 per share
If Retained, Value of Frist Shares September 23, 2005: $6,209,658 – $28,665,291
Frist collected $1,150,613 – $5,311,510 by selling on July 1 and not September 23.

Family Trusts [KMF 2000 Qualified Blind Trust, WHF Jr. 2000 Qualified Blind Trust, W. Harrison Frist Jr. 1991 Vested Trust, Bryan E. Frist 1991 Vested Trust, Jonathan M. Frist 1992 Generation Skipping Trust, Jonathan M. Frist 1991 Vested Trust]:
Value of Shares July 8, 2005: $5,060,001 – $5,120,000+ (or more)
# of Shares Held July 8, 2005: 117,677 – 119,103
Stock Price July 8, 2005: $54.50 per share
July 8, 2005 Stock Sale Worth: $6,413,396 – $6,491,113
Stock Price September 23, 2005: $47.6 per share
If Retained, Value of Family Shares September 23, 2005: $5,601,425 – $5,669,302
Family collected $811,971 – $821,811 by selling on July 8 and not September 23.

In all, Frist, his wife, and their children collected an extra $1,962,584 to $6,133,321 by selling early.

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