Monday, September 26, 2005

More Enron Era

The Senate Majority Leader Bill Frist (aka the catkiller) may be in trouble, perhaps of the type that bothered Martha Stewart (of the iron-your-underwear fame). It is a story of blind trusts and what a blind trust means. Blind trusts are used to absolve federal politicians who own stock from accusations of conflict of interest: if they don't know what stocks they own they can't be accused of conflict of interest with respect to the involved companies. The idea is to hand over the day-to-day running of the portfolio to an outsider who will then take care of it without informing the owner as to its contents. This can't work completely as the politicians do know what they had in their portfolios to begin with. Like, say, shares in a family-owned company:

Blind trusts are designed to keep an arm's-length distance between federal officials and their investments, to avoid conflicts of interest. But documents show that Senate Majority Leader Bill Frist knew quite a bit about his accounts from nearly two dozen letters from the trust administrators.

Frist, R-Tennessee, received regular updates of transfers of assets to his blind trusts and sales of assets. He also was able to initiate a stock sale of a hospital chain founded by his family with perfect timing. Shortly after the sale this summer, the stock price dived.

A possible presidential contender in 2008, Frist now faces dual investigations by the U.S. attorney for the Southern District of New York and the Securities and Exchange Commission into his stock sales.

Think Progress presents a history of the events in this little scandal. And a little scandal it is, nothing to compare to the big scandals that this administration is busy organizing. It is not even comparable to the hiring scandal my previous Enron era post referred to. But it's a sign of the times, a sign of the Republican strong values and ethics.