Bill Frist, Blind Trusts and Conflicts of Interest
NOAH ADAMS, host:
This is DAY TO DAY. I'm Noah Adams.
Republican Senate Majority Leader Bill Frist has come under fire lately for what he said about his multimillion-dollar stock portfolio. Earlier Senator Frist claimed that shares of his family's hospital company, HCA, were in a blind trust. Evidence has come out challenging that claim. We had a broader question: What is so blind about a senator's blind trust? NPR's Mike Pesca has the answer.
MIKE PESCA reporting:
The Senate's version of a blind trust isn't so blind and, therefore, not worthy of much trust. One reason for this, says Bill Allison of the Center for Public Integrity, is that with senators, the regulators are the regulated.
Mr. BILL ALLISON (Center for Public Integrity): They do write the rules to their own benefit, and, again, it kind of goes back to the definition of blind trust. It's blind because we say it's blind, even though, you know, we have all kinds of opportunities to find out what's going on with our money.
PESCA: Here's how a true blind trust works. Let's say tomorrow you get tapped to serve on a corporate board. You might not want to sell off all the stock you happen to own in a rival company. So you enter a blind trust, where your money is managed by someone else acting as a reasonably prudent investor, and you have zero control over it. You don't even get quarterly statements. Gerry Beyer is a professor law specializing in estates at Texas Tech University.
Professor GERRY BEYER (Texas Tech University): If a blind trust is to work properly, the person who owns the assets, the settlor, the person who creates the blind trust, should have not a clue of any of the assets in the trust or how those assets are used.
PESCA: Congress, however, defines `blind trust' a little differently. The Washington Post has reported that Senator Frist has received documents detailing sales and asset relocation 15 times. Frist also instructed his trustee that he wanted to sell, he says, to avoid even the appearance of conflict of interest. This level of involvement, though clearly in violation of the common definition of blind trust, does not violate the Senate's rules defining blind trusts. Larry Noble is the executive director of the Center for Responsive Politics.
Mr. LARRY NOBLE (Center for Responsive Politics): Like many ethics rules Congress has, they are fig-leaf-type rules, which they're meant to give you the impression that they're avoiding a conflict of interest when, in reality, they are still--have control over the assets and get information about it.
PESCA: Noble calls them sunglass trusts, a little opaque but clearly visible. And he says they're worse than no trusts at all because their creation does nothing to eliminate conflict while signaling to the public the exact opposite. Better, he says, just to say, `I own this stock, and I'm voting on this bill.' Congressional rules allow senators to vote on bills which, if passed, will boost their investments as long as they can show it will benefit the broader public as well. This is why a farm-owning senator can vote `yes' on a subsidy that will go right into his pocket. He just needs to show that it will go into other farmers' pockets, too. But as Bill Allison notes, even if Senator Frist's trust was dictionary-definition blind, he'd still have an interest in HCA where family members sit on the corporate board.
Mr. ALLISON: This is what's so absurd--is the pretense that when you're on the floor of the Senate, you can stop being a normal human being who has, you know, outside interests and conflicts and everything else, you know, and not take into account, you know, that your actions may be adversely affecting, you know, your family members or your own wallet.
PESCA: So Frist feels it necessary to go so far as to call the trust `totally blind,' which it clearly is not. But right now the majority leader has more tangible worries than choice of adjective. The US Justice Department and the Securities and Exchange Commission are currently examining his stock sale for any evidence of insider trading. It's a hard charge to prove, and Frist has offered some evidence that his desire to sell was long-standing. But as he knows, even the appearance of conflict has political, if not legal, consequences. Mike Pesca, NPR News, New York.
ADAMS: DAY TO DAY returns in a moment. I'm Noah Adams.
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