Sunday, October 02, 2005

Frist Fraud worth Over 6 Million!

Happy Schadenfreude Day!

While Tommy the Hammer is staring down the wrong side of a criminal indictment, new and damaging information  continues to dribble  out about the Republican Leader of the other chamber, and friends it looks like  he is in deep shit.

It seems that Bill "I play a doctor on videotape" Frist's little "Martha problem"

ain't so little after all:  

A new analysis by [the] Foundation for Taxpayer and Consumer Rights has found that Senator Frist made between $2 and $6 million by selling his HCA holdings just before stocks plummeted in the face of a bad earnings report.

Martha, as you may recall went to the slammer for a mere $50,000 in ill-gotten profits.  And all she did was sell the stock based on insider knowledge,   Dr. Bill May have done a whole lot more:

In addition, overly rosy earnings projections made by HCA executives just as Frist and HCA insiders were disposing of the stock en masse, point to a cover-up by insiders intent on keeping stock prices high until a disappointing earnings report surfaced.

And that, dear friends points to MUCH more serious crimes like  Market manipulation, and fraud which will get you into a whole lot more trouble than simple insider information charges.    

Put, simply the Boys in  HCA boardroom  were running a multi-billion dollar version of the famous Pump and Dump scam that lowlife boiler room operators use to pump up the value of obscure penny stocks.   They put out an incredibly optimistic earnings report to attract investors and drive the stock price up, just as they were all planning to dump their own holdings, thus netting them millions of extra dollars.   The fact that Frist chose to sell his portfolio at the very same time, and himself snagged an extra $2-6 mil on the sale now becomes highly suspicious.  

Especially because as his earlier trust documents reveal (there's a direct link to them in the article but my work filter is blocking access to the site);  Bill Frist used to LOVE him some HCA stock:

Frist trust agreements made public today by also show that since the founding of his trust, 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

This is HUGE.  First, it shows that until the sudden decision to sell all of his  HCA stock Frist hadn't allowed his trustees to part with so much as a single share.   Secondly, it proves his trust wasn't really blind at all.

A blind trust is supposed to work like this:  you put your assets into the trust, and the trustee are supposed to manage those asets according to the normal rules of investments.  They can buy whatever they think is appropriate, and sell off whatever is prudently necessary to keep a nice, safe, balanced portfolio for their client.   The beneficiary of the trust is not supposed to know anything about these transactions, or his specific holdings, just a general idea of his total worth.

But that is NOT what happened here.   Here Frist told his  trustees that they were to ignore the basic rules and duties of a Trustee and not sell ANY of his major asset, the HCA stock.  This meant that Frist not only had a massively unbalanced and undiversified portfolio (a cardinal sin to most financial planners), but he could easily track his holdings since his trustees weren't allowed to dispose of them.

This makes his sudden attack of conscience about conflicts of interest, and decision to sell the stock HIGHLY suspicious.

Update [2005-9-28 15:32:37 by Magorn]:
HOW suspicious? Well, Look at >this stock chart

(thanks to Devin for finding it, and hosting it)

Note the strange rise that occurs in June after a general decline in April and May. Now keep in mind that the date of Frist massive sell off is somewhere between July 1-9, After the mysterious increase

Now click this chart

Less than a week after Frist has completed his stock dump, on July 15th, HCA stock loses 9% of its Value in One Day.

When you factor this into the timing of the dump, suddenly  it seems like  the Frist probe could be sailing him into  very deep and troubled waters indeed.

Update [2005-9-28 14:58:36 by Magorn]:
Best one liner of the Scandal now goes to Rep. Rahm Emmanuel of Ill: "Bill Frist has this all upside down, he thought Terri Schiavo could see and his trust was blind."


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