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

John Byrne

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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 $2 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 $2.7 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 $25,000 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 $2.7 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 $21,000 to Frist's political action in the last two years -- some $5,000 of it this April.

Originally published on Thursday September 29, 2005.


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