Friday, October 07, 2005

What About Frist? Wanna Find Out Something? Check HERE!

Media reports on Frist stock sale investigation largely omit company's history of fraud

Out of hundreds of newspaper stories on Senate Majority Leader Bill Frist's (R-TN) stock sale currently under investigation by the Securities and Exchange Commission (SEC) and the Justice Department, only a handful have noted that, in December 2002, HCA Inc. -- the company whose stock Frist sold off before share prices dropped sharply -- agreed to pay the government $1.7 billion in fines and penalties related to 14 counts of defrauding Medicare and Medicaid. HCA Inc. is the for-profit hospital chain founded by Frist's father. The total in penalties is the largest settlement ever recovered by the federal government in a health care fraud case, although many observers -- including a prominent Republican senator -- criticized the Bush administration's withholding of information in the case and aired concerns that the government may not have been adequately compensated.

Media Matters previously noted that network news broadcasts devoted little air time to coverage of Frist's stock sale. As first reported on September 19 by Congressional Quarterly, and subsequently by the Associated Press, Frist ordered the trustee managing his blind trust to sell all shares in HCA owned by his family on June 13. Frist's shares were then sold on July 1, and those owned by his wife and children were sold one week later. On July 13, the price of HCA shares dropped considerably after the company reported weaker-than-expected earnings [Associated Press, 9/20/05]. On September 29, HCA announced that the SEC had opened an investigation into the circumstances surrounding the transactions.

But few print stories have mentioned the company's history of fraud and its precedent-setting fine to settle charges stemming from kickbacks to doctors and overcharging the Medicare program. Media Matters has reviewed all 350 articles in the Nexis database that mention the Frist stock sale; only six articles -- five by print news outlets and one by a wire service -- have mentioned the record $1.7 billion settlement in their coverage of the investigation: Gannett News Service [9/21/05], The New York Times [9/22/05], Roll Call [9/26/05 (subscription required)], The New York Observer [10/3/05], and The Tennessean [9/22/05 and 10/1/05 (subscription required)].

Frist's defenders have highlighted his family wealth in claiming that he would have no incentive to try to profit from insider information. For instance, Nicholas E. Calio, a former aide to President Bush, defended Frist in a September 25 article in The Washington Post, noting, "To me, it's inconceivable that he [Frist] would sell stock based on inside information. He doesn't need the money." Readers might have thought it relevant that the Frist family might owe its underlying fortune in part to the family-founded company's illegal practices.

In addition, at the time of the record settlement, at least one Republican lawmaker raised concerns about the way the investigation into HCA concluded and was frustrated with the response from the Bush departments of Justice and Health and Human Services (HHS). Following years of litigation with the Justice Department, HCA agreed to a settlement on all remaining charges of fraud just prior to the anticipated testimony of Sen. Frist's brother Thomas Frist Jr., according to a December 19, 2002, Tennessean article:

Attorneys for the whistle-blowers who accused HCA Inc. of Medicare fraud say they were within weeks of taking testimony from HCA co-founder Tommy Frist Jr. and Chairman and Chief Executive Officer Jack Bovender Jr. when the company agreed to a final settlement.


HCA, the attorneys suggested, tossed in the towel to avoid the spectacle of Frist, a physician and an icon in the Nashville business community, being questioned about the former business practices of the company. He founded what is now HCA in 1968 with his father, Dr. Thomas Frist Sr., and businessman Jack Massey, both deceased.

Many of the questions, and the executives' answers, eventually would make their way into public court records, the lawyers observed.

"I speculate Bovender and Frist didn't want to be put under oath to explain what they knew (about) the worms under the rocks that were being uncovered," said Stephen Meagher, a San Francisco attorney with a firm that represented two whistle-blowers.

HCA spokesman Jeff Prescott said the company agreed to settle because it was "comfortable" with the amount it would have to pay.

In April 2003, following the final settlement, Sen. Chuck Grassley (R-IA), who was then the incoming chairman of the Senate Finance Committee, sent a letter to Attorney General John Ashcroft and HHS secretary Tommy Thompson demanding that the details of the HCA settlement be made available to congressional scrutiny. A press release Grassley's office sent out with the letter summarized the senator's concerns:

The most important question is unanswered.... That's whether the taxpayers will get their money back from any fraud perpetrated by HCA. I haven't seen the statistical evidence to show this settlement will fairly compensate the taxpayers for their losses. Until I see the math, I'll remain skeptical. I look forward to learning more about the government's case, although I'm getting tired of asking.

From Grassley's letter:

Given that HCA's track record includes several guilty pleas relating to Medicare cost report fraud, it is especially troubling that its cost reports allegedly were not subjected to heightened scrutiny. At this point, and because DOJ and CMS [Centers for Medicare and Medicaid Services] decided to withhold information pertaining to my inquiries, the Committee is unaware of whether CMS conducted even a cursory review of the thousands of cost reports mentioned above. Despite my repeated attempts to cast sunlight on the basis behind this tentative settlement, it has been crafted in the dark for apparently a fraction of the damages. In light of the failure of DOJ and CMS to provide satisfactory and timely responses to my concerns, I am forwarding them by this letter to DOJ Inspector General, Glenn Fine, and HHS Acting Principal Deputy Inspector General, Dennis Duquette.

During the previous July, Grassley had submitted inquiries to Ashcroft concerning rumors that investigations by the Justice Department into cases pertinent to the False Claims Act (which provides for financial compensation to whistleblowers of medical kickbacks) were being scaled back. Grassley also raised concerns to Thompson about the involvement in the HCA case of Thomas A. Scully, the administrator of CMS. Scully was president and CEO of the Federation of American Hospitals, a lobbying organization of for-profit hospital chains, immediately prior to joining the CMS. Thompson responded by rejecting the notion that Scully's role in the federal settlement with HCA constituted an ethical conflict [Thomson Financial, August 12, 2002]. (The HCA settlement did not mark the end of ethical questions about Scully. Medicare chief actuary Richard Forster testified before Congress in 2003 that Scully, under orders from the White House, instructed him not to advise Congress of the real cost of President Bush's Medicare drug benefit plan and threatened to fire Forster if he did disclose the real cost [The New York Times, 3/25/05 and 3/14/05].)

From the September 22 edition of The Tennessean:


November -- Frist is elected to a second Senate term.

December --Frist sets up new blind trusts, in accordance with stricter Senate Ethics Committee guidelines, to help minimize the HCA conflict-of-interest charges.


Columbia/HCA pays a total of $1.7 billion to the federal government to settle charges of Medicare and Medicaid fraud. The company changes its name back to HCA to avoid public relations problems caused by the charges.

December 2002

Frist is elected Senate Republican leader, replacing Trent Lott of Mississippi after Lott made racially insensitive comments. Interest in Frist's ties to HCA rises in the national media.

April 2004

The Foundation for Taxpayer and Consumer Rights, a California-based watchdog group, files a complaint to the Senate Ethics Committee over Frist's HCA stock, saying he should be forced to recuse himself from voting on legislation to reform medical malpractice laws. The committee rejects the complaint.


June 13 -- Frist asks the managers of his blind trusts to sell all of his and his family's shares of HCA.

July 1 -- Equitable Trust, based in Nashville, reports that it has sold Frist's HCA shares.

July 8 -- Northern Trust, based in Chicago, reports that it has done the same.

July 13 -- HCA reports that it will miss second-quarter earnings expectations. Its stock price falls 8.9%.

* Nexis search of U.S. newspapers and wire services for "Frist and HCA and stock; Frist and HCA and stock and 1.7 billion," September 19-October 7.

— R.M.

Posted to the web on Friday October 7, 2005 at 1:10 PM EST

Krugman on Conservation 10/7/05

October 7, 2005
A Pig in a Jacket
During the California electricity crisis, Dick Cheney sneered at energy conservation, calling it a mere "sign of personal virtue." But this week Samuel Bodman, the energy secretary - who is widely regarded as Mr. Cheney's proxy - declared that "the main thing that U.S. citizens can do is conserve." Is the Bush administration going green?

No, not really. This administration's idea of encouraging conservation is an ad campaign centered on a cartoon pig. When it comes to substantive energy policy, the administration is still thinking drill-and-burn.

The background to Mr. Bodman's remarks is growing public anger over high energy prices. Most of the focus right now is on the price of gasoline, but the worst is yet to come: just wait until people see their winter heating bills, especially for natural gas, which has roughly doubled in price since last year.

And the political danger to the administration is obvious: polls suggest that many people blame energy companies for high energy prices, and blame the administration for failing to control price gouging.

Funny, isn't it? During the California crisis, some of us deduced from economic evidence that electricity shortages were artificial, the result of market manipulation by energy producers and traders. This deduction was later confirmed by the Enron tapes, but at the time we were voices crying in the wilderness.

Now, much of the public believes that corporate evildoers with close ties to the administration are conspiring to drive prices up. But this time they aren't, at least so far.

Just in case you think I've gone soft on the energy industry, let me say that claims that we're having a crisis because environmentalists wouldn't let oil companies do their job are equally bogus. When you hear someone talk about how no refineries were built for 25 years, remember that until recently, oil companies weren't interested in building refineries, because they had excess capacity and profit margins were thin.

In fact, the current crisis is nobody's fault, except Mother Nature's. Both Katrina and Rita were stronger hurricanes when they plowed through offshore oil and gas fields than when they made landfall. And because damaged refineries and other energy facilities are competing for a limited number of repair crews, it's taking a long time to get those facilities back up and running.

What this means is that a lot of "demand destruction" must take place over the next few months. That is, one way or another, people will have to be persuaded to limit their consumption of natural gas, gasoline and heating oil to match the available supply.

In the absence of an effective conservation policy, prices will do all the persuading: the cost of fuel will rise until people drive less and turn down their thermostats. The problem, of course, is that high prices will impose serious hardship on many families.

And that's why administration officials are sounding vaguely greenish: they hope to limit the price pain by persuading people to curb their energy consumption out of a sense of public duty. Done right, such a campaign really could make a difference. In fact, energy conservation played a significant role in ending California's crisis four years ago.

But as you might expect, the administration's conservation push lacks conviction. President Bush has spoken in favor of conservation, but he seems more interested in trying to justify the Iraq war. And the administration's attempt to promote "Energy Hog," a cartoon pig in a leather jacket, as a conservation mascot verges on the pathetic.

So it's going to be a long, cold winter. But what about the longer term?

The long-term case for energy conservation doesn't have much to do with the current shortages. Instead, it's about national security, broadly defined - reduced dependence on Middle East oil supplies, reduced emission of greenhouse gases. But one might have hoped that the administration's new willingness to use the language of conservation would spill over into long-run policy.

No such luck: when it comes to substantive actions, as opposed to public relations, it's still the same old, same old. Mr. Bush has called for more refineries, but has said nothing about raising mileage requirements and efficiency standards for appliances. And as for a higher gasoline tax, which would be politically possible only with broad bipartisan backing - don't be silly.

Conservation's day will come. But it hasn't happened yet.

Copyright 2005 The New York Times Company