Washington – The Securities and Exchange Commission, which is examining a stock sale by Senate Majority Leader Bill Frist, has upgraded its initial informal inquiry to a formal investigation.
The change means the agency can issue subpoenas for documents rather than just requesting them. Federal prosecutors also are investigating the Tennessee Republican’s recent sale of stock in HCA Inc. about two weeks before its price dropped. Frist’s family founded the large hospital operating company.
It is customary in potential cases of insider trading for the agency to initiate a formal inquiry so investigators can obtain telephone and financial records and other documents.
Frist ordered the stock sold from several blind trusts this summer, about two weeks before HCA issued a disappointing earnings forecast that drove its share price down almost 16 percent by mid-July.
He sold the stock at a time when top executives and directors of HCA – including the chief executive and the treasurer – also were selling off shares worth a total of $112 million.
Aides to the majority leader, who is widely considered a potential presidential candidate in 2008, say he ordered his trustee to sell his shares to avoid any appearance of a conflict of interest.
