Ethics is just a pretty word

Well, it’s a brand new day and what have we on the news? Mostly Rita, but also a little blurb about our Senator Frist being investigated, by the SEC and Justice (according to Bloomberg), for insider trading. The story goes like this: Frist had blind trusts set up, for himself and his family, to protect himself from any accusations of conflict of interest while being an important person in the Congress. Then he sold some of those securities two weeks before a publicly traded company, with Frist family connections, issued a poor earnings report. According to Investopedia, a blind trust is a “trust in which the executors have full discretion over the assets, and the trust beneficiaries have no knowledge of the holdings of the trust.”

According to this Associated Press article, Frist’s trusts weren’t so blind. He received regular updates on his investments held in these ‘blind’ trusts.

Then, when HCA, Inc (a hospital operating company founded by his father and brother and on whose board of directors his brother still serves) started to head south, he sold off the company stock held in those blind trusts, coincidentally just two weeks before the company issued an unfavorable earnings report—after which the publicly traded stock tanked some 16%.

Two problems there: He, not the trust executors, was making investment decisions on the blind trusts’ contents, despite publicly stating on national television that he had no knowledge of the blind trusts’ composition and he gives every appearance of having sold off the HCA, Inc securities, along with other insiders, two weeks before the stock tanked on the basis of a poor earnings report—before the general public knew anything about the earnings report.

Frist claims, of course, that he did no such thing. He claims that he lately learned that he still had the HCA, Inc securities and was trying to unload them to prevent conflict of interest. Which, supposedly, is what the blind trusts were supposed to protect him from. I wonder how he’ll weasel around verifiable evidence that he was being fed updates on the securities, and then sold a bunch of his family company’s securities just before an unfavorable earnings report came out.

The SEC and Justice are now investigating. And if I was cynical, after reading the slant of the Bloomberg piece, I might suspect there was some political payback involved in this.  It’ll be interesting to see if Frist ends up wearing an orange jumpsuit or just ends up with his presidential ambitions crushed.

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On Rita: Still too soon to know what damage has been wrought across the Texas and Louisiana coastal regions, but there are a lot of people who are feeling the slightest bit jumpy about the state of oil and natural gas production. The hurricane came on shore in an area thick with refineries. And it plowed through a portion of the Gulf that is thickly populated with oil rigs. The Oil Drum will have tons of reliable information coming in during the next several days that will keep those interested up to date on the damage and production issues. It’s a good resource.

While the potential loss of life and property are very important concerns in the wake of the hurricane, a hard hit to the energy industry will not help the already devastated local economy nor the health of our national economy.

As for New Orleans—now what? I love that city very much. It has always been dear to my heart. But realistically, how do we pump billions and billions of dollars into rebuilding the city when the levees are so compromised? Wouldn’t it be prudent to address the levees first before rebuilding and redeveloping the city?