It seems like I remember Martha Stewart going to prison on a criminal conviction arising out of “insider trading,” or at least lying during an investigation into possible insider trading. I really felt at the time that the federal government was simply making an example of her to discourage others. Now we see a real Washington political boss being targeted in a similar investigation. There can be little question that Nashville, Tennessee hospital company, HCA, Inc., has definitely been an asset for Senator Bill Frist politically. But now it appears that his connections with HCA may be a bigger problem. Saying that he finally decided to clear himself entirely of his shares in the company, Senator Frist is being investigated by the Securities & Exchange Commission and federal prosecutors over the circumstances of a recent stock sale. The sale of HCA stock was made just weeks before a July “earnings warning” from HCA. The powerful Senator has denied any “insider” knowledge regarding the sale and that may ultimately prove to be the case. Now we learn that Senator Frist actually owned stock outside the trust.

Senator Frist claims that he sold his shares in the company because he wanted a clean slate on his HCA holdings before he could potentially run for the White House in 2008. In doing so, he has apparently stumbled over the rules of the blind trust structure he set up to minimize any conflict of interest in his investments. It is most interesting that Frist’s family members also “dumped” their stock at about the same time.

The number of HCA shares that Senator Frist sold is not entirely clear. Media reports have said that Senate Ethics Committee filings showed that more HCA stock was put into the trust several years ago. But, these appear to be distributions Senator Frist received from his parent’s estate, not new purchases he made. Interviews earlier this year, both with Senator Frist’s staff and his older brother, Thomas Frist, Jr., who is also an HCA Director and the company’s former Chief Executive, both indicate they believed that the trust managers had been selling the Senator’s HCA holdings systematically.

It has troubled me for some time that a powerful Senator, with what appears to be a clear conflict of interest, has been setting important health care policy for the country. This latest episode adds another layer of doubt and questions. I have no inside information on what Senator Frist did or didn’t do and am not ready to prejudge his guilt. But, this whole thing doesn’t meet the old fashioned “smell test” that most folks where I come from understand.

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