Formal Investigation into Frist matter
SEC Opens Full Probe Into Frist Stock
Securities Exchange Commission Opens Formal Probe Into Sen. Bill Frist's
of HCA Stock Sale
By JONATHAN M. KATZ Associated Press Writer
The Associated Press
Sep. 29, 2005 - While insiders at HCA Inc. were selling millions of dollars of their own stock this year, they were also painting a sunny picture of the company's outlook for investors. Federal prosecutors and the Securities and Exchange Commission are investigating the sale of HCA stock by Senate Majority Leader Bill Frist, R-Tenn., whose family founded the company that grew into the nation's largest for-profit health care chain.
The SEC turned its initial inquiry into a formal investigation of the company, HCA announced Thursday. The company said it is cooperating with investigators.
Frist's office said Wednesday that he had gotten notice of a formal investigation, which grants subpoena powers to investigators to obtain information and documents.
On June 14, the day after Frist ordered his shares sold, HCA officers at a Goldman Sachs health care conference in
Victor Campbell, HCA's senior vice president of corporate communications and government relations, soothed investor concerns about unpaid patient debts and worries about patient volumes. He also advocated for a still-pending Senate bill that would limit the establishment of physician-owned specialty hospitals and called
In the month before the speech,
Those sales were disclosed publicly through filings with the SEC.
HCA shares peaked about a week later, closing at $58.40 on June 22. On July 13, they tumbled 9 percent following the company's announcement that it would not meet earnings expectations.
Citigroup said the drop was "a clear disappointment versus recently heightened investor expectations."
In his remarks,
"We look smarter than we probably really are, but it was good timing,"
The speech helped feed optimism surrounding HCA stock, said Oksanna Butler, a senior health care industry analyst with Citigroup Investment Research.
"I talked to investors that had been at that conference and what I hear was that they were coming away with a positive view,"
In April, analysts with Oppenheimer & Co. cited the increasing volume and improving prospects of unpaid patient debt and rated the stock a "buy," calling its raised earnings expectations "conservative." Analysts at Morgan Stanley and Jeffries & Co. Inc. gave similar advice the next day. On May 5, Morgan Stanley analysts reported that HCA executives led an "upbeat" and confident discussion of the hospital company's prospects at a conference on health care issues.
"The mere fact that someone says, 'we're optimistic' and then a month later the stock price goes down doesn't mean that people have tried to mislead anybody else," said David Becker, a former general counsel at the SEC. "If you purport to tell people what you know about the future but you mislead them by leaving important things out, that can well be the sin of omission. But you have to look at what, precisely, people say and what, precisely, is left out."
Frist's staff discussed selling all remaining HCA stock in April, as well as that of his wife and children, Frist said. The sales, ordered on June 13, were completed by July 1.
Frist said he sold the shares to eliminate the appearance of a conflict of interest, using only information that was publicly available.
HCA shares were down 40 cents to $47.55 in early trading Thursday on the New York Stock Exchange.
On the Net:
Hospital Corp. of America Inc.: http://www.hcahealthcare.com/