WASHINGTON – The new chairman of the Securities and Exchange Commission, Christopher Cox (search), said Monday that to avoid a potential conflict he will not participate in the agency's investigation of the sale of HCA Inc. stock by Senate Majority Leader Bill Frist (search).
Cox, who was in Congress for 16 years as a California Republican and left the House to assume the SEC job last month, had been a member of the GOP leadership in Congress for the past 10 years.
"Because of my service in the congressional leadership for the last 10 years, I have recused myself in this matter," Cox said in a statement. "The purpose of the recusal is to avoid any appearance of impropriety in the (SEC's) consideration of this case."
Cox's statement was the first public acknowledgment by the SEC that it is investigating Frist's sale of stock in HCA, the big hospital operating company founded by his family.
Frist's sale of the stock from several blind trusts this summer came about two weeks before the company issued a disappointing earnings forecast that drove its share price down almost 16 percent by mid-July.
On Friday, the Nashville, Tenn.-based HCA (search) said it had received a subpoena from federal prosecutors asking for documents the company believes are related to Frist's sale of company stock. Frist's office said that prosecutors and SEC investigators had contacted the senator's office about the sale.
Frist sold the stock at a time when insiders in HCA, the nation's largest for-profit hospital company, also were selling off shares worth $112 million. Aides to the senator, a Tennessee Republican, say he sold his shares to avoid any appearance of a conflict of interest.
Documents show that Frist was updated several times about his investments in HCA and other transactions even though they were held in blind trusts. Despite the updates, Frist insisted in public statements afterward that he didn't know what was in the trusts, specifically denying knowledge of his HCA holdings.
Cox said in his statement that his recusal from the SEC's inquiry covers "any future action" requiring deliberation by or a vote of the SEC commissioners as well as any management responsibilities he might have related to it.
As SEC chairman, Cox normally would receive updates from agency attorneys on the course of an investigation and would vote along with the other four commissioners — two Republicans and two Democrats — on any enforcement action to be brought or settlement to be reached. Having excused himself at the outset, he would be unable to have any knowledge of or involvement in the Frist stock inquiry.
President Bush chose Cox, a free-market conservative and former securities lawyer, in June to lead the SEC after the surprise resignation of then-chairman William Donaldson.