Saturday, September 24, 2005

GOP Corruption Update: Part Two

The SEC and the Justice Department are looking into Senate Majority Leader Bill Frist's stock dealings. Here are the details from The Washington Post:

Senate Majority Leader Bill Frist is facing questions from the Justice Department and the Securities and Exchange Commission about his sale of stock in his family's hospital company one month before its price fell sharply.

The Tennessee lawmaker, who is the Senate's top Republican and a likely candidate for president in 2008, ordered his portfolio managers in June to sell his family's shares in HCA Inc., the nation's largest hospital chain, which was founded by Frist's father and brother.

A month later, the stock's price dropped 9 percent in a single day because of a warning from the company about weakening earnings. Stockholders are not permitted to trade stock based on inside information; whether Frist possessed any appears to be at the heart of the probes.

A spokesman said Frist's office has been contacted by both the SEC and the U.S. attorney's office in Manhattan about his divestiture of the stock. HCA disclosed separately that it was subpoenaed by the same U.S. attorney's office for documents that were related to Frist's sale. Frist and HCA said they are cooperating.

Historians said they cannot recall any other congressional leaders who have faced federal inquiries into stock sales. Frist has denied any wrongdoing.

On Thursday, a Frist spokeswoman said the senator had not discussed the stock sale in advance with any HCA executives. On Friday, in a statement from Frist's office, the issue was couched a little differently. It said the senator "had no information about the company or its performance that was not available to the public when he directed the trustees to sell the HCA stock. His only objective in selling the stock was to eliminate the appearance of a conflict of interest."

According to Frist's office, the senator decided to sell all his HCA stock -- held in blind trusts managed by two companies for him, his wife and his children -- on June 13. Under the rules of the trusteeships, Frist had no control over the timing of the sale, Frist spokeswoman Amy Call said.

When the company disclosed that its second-quarter earnings would fall short of Wall Street expectations a month later, the stock price slid steeply. By that time, Frist's shares had been divested. The managers of one of the trusts told the senator on July 1 that his holdings had all been sold; the other trust managers said the shares were gone on July 8.

Frist's financial disclosure statement earlier this year placed the value of his blind trusts at between $7 million and $25 million.

Separately, documents unearthed yesterday by the Associated Press showed that Frist was told about stock trades in his blind trust. In documents filed with the Senate, trustee M. Kirk Scobey Jr. told Frist in 2002 that HCA stock had been transferred to his trust. Scobey, reached by phone last night, declined to comment.

The AP said that the documents disclosed that HCA stock worth hundreds of thousands of dollars was placed into Frist's blind trusts several other times in 2002 as well. Frist maintained in a television interview in 2003 that he did not know how much HCA stock he owned, if any. Spokesmen for Frist did not return phone messages last night.

The Associated Press notes that both GOP congressional leaders are fighting ethics probes and some people in Washington are beginning to connect the current Republican Party with the Tammany Hall machine of old:

Heading into a midterm election year, Republicans find themselves with not one, but two congressional leaders — Bill Frist in the Senate and Tom DeLay in the House — fending off questions of ethical improprieties.

The news that federal prosecutors and the Securities and Exchange Commission are looking into Frist's sale of stock in HCA Inc., the hospital operating company founded by his family, comes as a criminal investigation continues of Jack Abramoff, a high-powered Republican lobbyist, and his ties to DeLay of Texas.

Less than a week ago, a former White House official was arrested in the Abramoff investigation.

For Republicans, the timing couldn't be worse.

"The last thing you needed was a Martha Stewart problem," Marshall Wittman, a one-time conservative activist who now works for the centrist Democratic Leadership Council, said of Frist. "He doesn't even have a good clothing line or a popular television show."

Stewart, the homemaking doyenne, served five months in federal prison for lying to authorities about a stock deal and nearly six months more in home confinement.

The midterm elections occur in just over 13 months and Republicans face the historic reality that the party controlling the White House typically loses seats in non-presidential years.

Shadowing the GOP outlook is President Bush's diminishing approval ratings as the war in Iraq, rising oil prices and the need for billions in federal spending after devastating hurricanes threaten to overwhelm a second-term agenda.

"It may not cost the Republicans any seats directly, but it's something they don't need right now," said John J. Pitney, a professor at Claremont McKenna College in California who once worked as a research analyst for House Republicans. "They've got plenty of problems as it is."

Still, in the Republican-controlled Congress, Democrats have more Senate seats to defend — 17 to the GOP's 15 — and redistricting has made fewer House seats competitive.

Charlie Black, a Republican consultant with close ties to the White House, expects Frist to be cleared by next year and any whiff of scandal to be gone.

"I suspect the DeLay matter and this matter will be resolved long before November '06," Black said.

Frist cultivated a political outsider image when he ran for the Senate in 1994. "I don't want a career in Washington. I want change," said the Tennessee heart surgeon, who didn't register to vote until 1988 and didn't vote until he was 36.

The year 1994 marked the Republican revolution, when the GOP seized control of Congress after decades of Democratic rule in the House and years in the Senate. The GOP portrayed their rivals as beholden to special interests and corrupt after years of entrenchment.

More than a decade later, Republicans are trying to avoid the perception that they resemble the Democrats they replaced.

"The overall problem the Republican Party has is it is increasingly looking like Tammany Hall," Wittman said. "An odor of sleaziness is enveloping the Republicans and seeping into the administration."

Democrats seized on the latest development, with party chairman Howard Dean criticizing Frist and arguing that Republicans "have made their culture of corruption the norm."

The challenge for Frist is to clear his name in a federal investigation while trying to maintain his hold on the post of Senate majority leader.

Frist came to power in 2002 when Republicans forced out Sen. Trent Lott (news, bio, voting record), R-Miss., after he made racially tinged remarks in support of former Sen. Strom Thurmond, R-S.C., a one-time segregationist.

If Republicans see Frist and the probes as a drag, he could suffer the same fate as Lott. Frist also is a lame-duck leader who has indicated he won't seek another term.

Chris Lehane, a Democratic consultant who has managed scandals, said Frist's political strategy would be to get information out, but that approach is hardly what a lawyer would advise his client.

An insider trading investigation also raises the possibility of civil action by shareholders and a discovery process that "disgorges all kinds of documents," Lehane said.

"Even information benign in another type of environment — what about this phone message from your brother" — has added significance, Lehane said.

Frist has been mentioned as a potential presidential candidate in 2008 — a prospect that looks less likely with the federal probe and his break with conservatives on embryonic stem-cell research.

"That romance was over before it started," Wittman said.

And let me note again the connections made in the Washington Post yesterday between GOP uber-lobbyist Jack Abramoff, Preznit Bush's deputy chief of staff Karl Rove and Timothy Flanigan, Preznit Bush's current nominee for deputy attorney general and former general counsel for scandal-plagued Tyco. The Post reports that Abramoff, who is the focus of a federal investigation involving the Justice Department, the Internal Revenue Service, the Interior Department, and the General Services Administration in various fraud cases, bragged to Flanigan that he could help Tyco on a tax matter because he had "good relationships with members of Congress," including House Majority Leader Tom Delay, and "had contact with Mr. Karl Rove" on the issue.

And let me note the CIA leak grand jury case, in which Karl Rove and Vice Preznit Cheney's chief of staff Scotter Libby are embroiled in possible obstruction, perjury and/or conspiracy charges.

And of course let me note that the head procurement officer for the Office of Management and Budget in the Bush administration was arrested on Monday for making false statements to investigators and obstructing justice in the Jack Abramoff/Tom Delay Scotland Golf Trip scandal. The Washington Post also reports that Safavian failed to disclose lobbying work he had done for two African regimes with ties to terrorism when he went before a Senate panel last year to be confirmed as head of the White House's procurement office. Josh Marshall at says that Safavian's lobbying ties to possible terrorists were shady enough that the Secret Service had reservations about giving Safavian a badge to work at the White House.

Safavian also worked with Jack Abramoff in the Mariana Islands mininum wage lobbying matter that has drawn the scrutiny of investigators and Pakistan on military sales matters. Safavian's wife, Jennifer, is the chief counsel for oversight and investigations at the House Committee of Government Reform, which oversees federal procurement policy matters, and is working on the Hurricane Katrina aftermath investigation.

There is some conjecture that Safavian's wife helped engineer Safavian's employment at the White House. if you remember, the White House was quite upset at allegations (since proven untrue) that Ambassador Joseph Wilson was hired for the Niger uranium trip by his CIA operative wife, Valerie.

In fact, they were so upset at those allegations that they leaked Valerie Plame's name to reporters in an attempt to discredit Wilson and his trip to Niger as nothing more than nepotism.

So far the same White House officials don't seem to be too upset about allegations that Safavian got his White House job at the behest of his wife, Jennifer. But I'm sure we'll hear more about this as the investigation and revelations in the case continue.

In the meanwhile, I need a scorecard to keep all of these Republican scandals straight.

I mean, I didn't even mention the Randy Cunningham case, the Bob Taft/Bob Ney Ohio Coingate case, the various Arnold Schwarzenneger sex and special interest scandals, or the Ernie Fletcher/Kentucky GOP patronagage scandal and I'm already starting to get the names and bag money amounts confused.

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