Company run by Frist's brother made $630m deal two days before he announced he would be leader

http://www.informationclearinghouse.info/article10452.htm

September 29, 2005
by John Byrne

Bill Frist, it seems, needs a doctor.

The Senate's plaintive Southern physician -- envisioned as the Republicans’ antidote to a seemingly racist Trent Lott -- is hemorrhaging political capital. The doctor who so memorably assuaged a terrified nation in the wake of the 2001 anthrax attacks is now dancing to a dangerous duet of swirling stock probes.

Today, a RAW STORY investigation has turned up more intrigue surrounding Senate Majority Leader Bill Frist's affiliation with his family's booming for-profit hospital chain, HCA.

Just two days before Sen. Trent Lott (R-MS) stepped down as Majority Leader in 2002, the company Frist's father started quietly settled a massive Medicare fraud lawsuit for $630 million. The eleventh-hour deal -- brokered with Justice Department attorneys after a seven-year court battle -- was made as Frist (R-TN) secured the necessary votes to assume the Senate's top post.

Those close to the case tell RAW STORY that top HCA executives were scheduled to be deposed the following month. Frist's brother, Thomas Jr., would have been forced to go on the record during the opening days of the senator's tenure as leader.

The timing of the agreement could raise further questions about Frist's ties to the company. Given that the Justice Department had been investigating HCA since 1993 -- some 120 months -- the coincidence of a settlement date so close to Frist's leadership election is striking.

Whether Tennessee's most renowned cardiac surgeon is telling the truth about his ties to the company his brother steered through a massive federal fraud investigation could have bearing on an investigation into whether he had inside information when he sold his shares in June.

Frist spokewoman Amy Call vehemently denied that the senator had been in any way involved.

"Senator Frist has never worked for HCA," she told RAW STORY. "He never worked for a HCA hospital."

HCA did not return a call seeking comment.

A troubled company's money funds a senator

It was the nation's largest for-profit hospital conglomerate -- started by Frist's father and until recently run by Frist's brother -- that paved the ambitious Senator's way from Vanderbilt University's operating room to Capitol Hill. The company's stock made up most of the doctor's wealth; he spent $3.4 million of his own money in his 1994 Senate campaign.

That wealth, however, has become a thorn in the senator's side.

Frist sold his HCA shares alongside company insiders this July, two weeks before the firm issued a disappointing earnings forecast. Last week, the U.S. Attorney for the Southern District of New York subpoenaed the company with regard to Frist's sales. On Wednesday, the Securities and Exchange Commission upgraded its probe of Frist's possible insider trading to a formal investigation.

All in the family

HCA was founded by Frist's father, Thomas, in 1968. His brother, Thomas Jr., ran the company through troubled waters in the 1990s and after a short stint as vice-chairman following a merger, returned to become chairman. In the late nineties, the 300-hospital company was the seventh largest employer in the United States.

But the company was plagued by allegations of fraud, which dated from a whistleblower claim in 1993. Shortly after Thomas Jr. became CEO again in 1997, federal agents raided the company's El Paso operations. The following year, the Securities and Exchange Commission began investigating whether executives gave investors accurate figures. Shareholders and insurers then began suing the company, suspecting they had been overcharged.

By 1999, eleven states were involved in litigation. Faced with the threat of a massive settlement, Thomas shed assets and amassed a legal war chest, buying back $1 billion in shares.

After an internecine legal battle, HCA settled with the Justice Department in 2001 for $840 million. The charges included bilking Medicare, Medicaid and the military’s healthcare system by intentionally misidentifying marketing expenses as reimbursable "community education," striking illegal deals with home care agencies, and claiming reimbursement that idle space in a hospital was being used for patient care.

The fraud investigation involved 30 U.S. attorneys' offices, 22 FBI field offices, inspectors general from the Health and Human Service Department and the Office of Personnel Management, Defense Department investigators and state fraud units.

More money and more litigation

But it wasn't over.

Under a 2002 settlement – announced just before Frist took his leadership post – HCA settled with the Justice Department for allegedly filing false claims and paying kickbacks to doctors so they would refer Medicare and Medicaid patients to its facilities. The settlement was $630 million -- bringing the company’s payouts for fraud to $1.7 billion, the largest in history.

This didn't, however, stop Frist from investing more in the company.

Just weeks after his election to Majority Leader, the man overseeing the senator’s "blind trust" wrote Frist to inform him that more HCA stock had been added to his trust, valued at between $15,000 and $50,000.

Two weeks later, the Tennessee senator told a television audience, "Well, I think really for our viewers it should be understood that I put this into a blind trust. So as far as I know, I own no HCA stock."

Referring to his "blind trust," valued at between $5 million and $25 million according to campaign disclosure forms, he added, "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea."

At the end of the day, when the settlement was finally approved, Republican senator Chuck Grassley (R-IA), asserted that the $1.7 billion deal hardly covered the awesome fraud perpetuated by HCA.

"I had to badger the Justice Department to see the math in this case,” Grassley remarked. "At the last minute, the Justice Department agreed to show my investigators why this settlement was the best the government could do. There's no way to know exactly how much HCA pocketed. This case is so complicated, and so huge, that no one will ever know exactly how much HCA took. This case is troubling because it shows how one company, with unbridled greed, systematically defrauded the government's health care programs."

HCA has given $83,450 to Frist's campaigns since 1989. The company's chief executive donated $11,000 to Frist's political action in the last two years -- some $5,000 of it this April.

Contract Killers

by Matthew Continetti
October 1, 2005
New York Times

Washington “This is a political witch hunt," Representative Tom DeLay told reporters on Wednesday, shortly after a Texas grand jury indicted him on conspiracy charges, forcing him to step down as House majority leader. Later he called Ronnie Earle, the district attorney who has investigated Mr. DeLay's Texans for a Republican Majority political action committee for two years, a "partisan fanatic." He said the inquiry into his political fundraising was "a sham," and that "Mr. Earle knows it." And he notified his enemies that the indictment would not slow down the Republican agenda, such as it is.

At this, Washingtonians with long memories were barely able to suppress their grins. If Mr. DeLay and his supporters grasped the irony of the occasion, they gave no clue. Eleven years ago this past week, Republican congressmen and candidates unveiled their "Contract With America." Their proposals came just in time for the 1994 midterm elections, which brought the Republicans to power after a 40-year stint in the minority. Back then, Mr. DeLay and other Republicans promised "a new order." They pledged to drain the swamp that was Washington. Just over a decade later, they find themselves up to their necks in the muck.

In the week before Mr. DeLay's indictment, David Safavian, a White House official in the Office of Management and Budget, was arrested in connection with the Justice Department investigation into the lobbying practices of Jack Abramoff, the conservative activist and Republican Party fundraiser. It was the first arrest in the 18-month inquiry, but it is probably not the last. Grease from the Abramoff scandal has rubbed off on conservative stalwarts like the antitax activist Grover Norquist;Ralph Reed, the former executive director of the Christian Coalition; and Republican lawmakers like Representative Bob Ney of

Ohio, Senator Conrad Burns of Montana and - here's that name again - Tom DeLay.

Meanwhile the Securities and Exchange Commission is preparing to issue subpoenas in its inquiry into the finances of the Senate majority leader, Bill Frist. And a grand jury investigation into who in the White House leaked the identity of a C.I.A. officer to the press two years ago lumbers toward completion.

It's quite a fall, no doubt about it: from agile insurgency to bloated establishment in just over a decade. So what went wrong? The 1994 Republicans understood that power in Washington was not simply a matter of who controlled the White House and Congress. Passing legislation also required the support of powerful unelected business interests and their representatives on K Street, the historic home of the lobbying trade.

Led by Mr. DeLay in the House, Rick Santorum in the Senate and Grover Norquist downtown, Republicans worked not just toward the partisan realignment of the country, but of the influence industry, too. They tracked which lobbyists were Democrats and which Republicans, refused to meet with the Democrats and pressured business groups and law firms to hire the conservatives. Their strenuous efforts to blur the boundaries between corporate America and the Republican Party came to be known as the K Street Project.

It was an incredible success. By 2002, if you look at numbers from the Center for Responsive Politics, industries that had long made bipartisan campaign contributions largely abandoned the Democrats, leaving Republicans with an overwhelming edge in corporate donations. By 2004, the lobbyists themselves gave the Republicans $1 million more than they gave Democrats. The number of Republican lobbyists grew. And so did the number of lobbyists, period - from about 9,000 when the Republicans took power to more than 34,000 today.

Now the seamy side of all this explosive growth, the fundraising and lobbying scandals like those plaguing Mr. DeLay and Mr. Abramoff, poses a serious threat to Republican power.

Things weren't meant to be this way. The K Street Project was a means to an end. The means was harnessing the political energies of the private sector and its agents. The end was a lasting Republican majority that would limit government and increase individual freedom and responsibility. But, as tends to happen, the means became an end in itself.

Young conservatives in particular will react to the new, post-DeLay reality in different ways. I know I have. First, looking at your party's troubles, you see perverse confirmation of conservatism's animating idea: that as the sphere of public decision-making expands, so do the opportunities for graft and wrongdoing. Next you note, with sadness, that while political power helped bring about some achievements - welfare reform, pro-growth tax cuts, an assertive, moralistic foreign policy - it may have also exhausted conservatism's fighting spirit, lowered the movement's intellectual standards and replaced a healthy independence with partisan water-carrying.

But then you take solace in the idea that the Republican Party has once again bested the Democrats, who after all took 40 years to sprout the warts of power.

Matthew Continetti,a staff writer at The Weekly Standard, is writing a book about the Republican Party.