Sen. Bill Frist, being a man of ethics and integrity, decided to divest himself of all holdings in Hospital Corporation of America, his family business, in order to avoid any real or perceived conflicts of interest. The holdings were already in a blind trust, a system whereby somebody else was managing the money without telling the senator where the money was invested, so that Sen. Frist couldn't have known that he had any interest in the family business -- but he got out of it anyway.
Actually, as The New York Times reported on Sept. 26, these trusts aren't particularly blind. Among other considerations, ethics rules give the beneficiaries the right to order the sale of any assets of the trust in order to avoid a conflict of interest. Sen. Frist might simply have said, "Just in case I have any shares in Hospital Corporation of America, get rid of them, and while you're at it, sell all my shares in ImClone, General Motors and Murray's Pizza & Pasta, on the off-chance I have any of those."
From the viewpoint of guilt or innocence, insider trading only counts when the seller has access to information that's not available to the general public -- and there was plenty of public information that would have indicated that this was a good time to get out of HCA. The stock had been rising in price, indicating that this might be a suitable time to take a profit. In October 2004, HCA was selling as low as $34.70 a share. In June 2005, the shares reached a high of $58.60. It doesn't require any special information to know that this is a good time to take the money and run.
Similarly, the insiders themselves were selling -- this information was freely available to anybody with a copy of the Wall Street Journal (it is taken for granted that any well placed Republican reads the WSJ every morning over orange juice). For those actually following the stock, posters to the Yahoo message board have made it clear that Sen. Frist ordered the stock sale only after the Wall Street Journal reported on sales by corporate insiders -- and these insiders themselves may have been motivated by the rise in prices rather than any secret information (we know, from no less an authority than Kenny-boy Lay, that being chairman or CEO of a company doesn't have to mean that you know what's going on). It's not impossible that the senator had access to inside information, but hardly necessary -- anybody with holdings in HCA might have done the same thing.
What may be more relevant -- not new, just relevant -- is that anybody could see that HCA was heading for a fall in any event, largely as a result of Republican policies. A quick look at the map of locations where HCA has hospitals shows, for the most part, the Mason-Dixon Line. The Frist Family Fortune and Republican politics have both followed a Southern Strategy. While the red states have experienced fast population growth, the rates of people covered by health insurance, which is essential to hospital income, has declined. HCA is heavily invested in Louisiana and Texas, where over 25% of the population lacks any form of health insurance. It has facilities in most of the states with the largest percentage of uninsured, and managed to miss those states with the lowest percentages of uninsured.
To Sen. Frist's credit, his home state of Tennessee ranks with Minnesota, Michigan, Iowa, Wisconsin and a few others in having less than 15% of the population without insurance -- but it's the only state in the top tier that HCA has invested in.
In 1974, Congress passed the Employee Retirement Income Security Act (ERISA), a well-intentioned law which was to protect employee rights to benefits. Unfortunately, ERISA put employee benefits under federal rather than state control. Under the current administration, there has been little pressure for employers to offer benefits. The Republican hegemony has been marked by a steady decline in the well-being of the individual citizen if it might impact on the profitability of (most) corporations.
Unions have been, if not eviscerated, then at least emasculated. The minimum wage has failed to keep up with inflation. The percentage of companies offering health insurance to their employees has dropped from 69% to 60% over the past 5 years, and 20% of those that offer insurance provide a high deductible plan which may put everyday health costs out of reach of many employees. While the poverty rate has increased, the rate of growth of Medicaid programs has slowed -- a tribute to state programs designed to reduce costs by keeping people out of public assistance programs.
When HCA stock dropped, it wasn't because of declining sales -- revenues had actually increased by about 12% -- but because of a charge of $106 million, or 13 cents per share for "doubtful accounts": people who had no insurance and couldn't be counted on to pay their bills, with a particular concentration in the red states where HCA and the Republicans have focused their attention.
Sen. Frist may not have had inside information about the financial state of Hospital Corporation of America, so on that score perhaps he's innocent. But he did have inside information about what his party's policies are doing to the well-being of millions of American citizens -- and for that, he's guilty as hell.
Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.