A basic tenet of ethics for all government employees is to avoid "even the appearance of impropriety" (and it's a good principle for non-government professionals as well). Tennessee Senator Bill Frist, who also happens to be the majority leader of the Senate, is certainly looking ethically suspicious after he dumped his substantial holdings in HCA, the hospital giant, just a month before its stock fell 9%. Is Dr. Frist following in Martha Stewart's inside-trading footsteps? Will Donald Trump develop a version of "The Apprentice" for him, too?

Probably not, but the appearances aren't good. Frist had long resisted divesting his stock in HCA, claiming that his holding shares in the nation's largest for-profit hospital chain posed no conflict of interest despite the fact that 1) it was founded by his father 2) his brother sits on the board, and 3) Frist has a major role in legislation affecting health care. His contention was ridiculous, of course, but the Senate's ethics committee, only slightly less moribund than its House counterpart, put a stamp of approval on Frist's investments, which he held in blind trusts that still allowed him to order a sell-off. This Frist did in June of this year, explaining that he suddenly had seen the ethical light and the stock raised conflict issues.

Hmmm.

Why did Frist choose now to sell his stock, right before the value tumbled, when he had stubbornly held on to it over critics' objections for over a decade? That is the question being raised by, among others, CREW, the Citizens for Responsibility and Ethics in Washington. [A short digression: The news media calls CREW a watch-dog group, but as the Scoreboard has pointed out (Bad Dog: The Warped Ethics of a Watch-Dog Group), the only dogs they watch are Republicans. In this and other cases the group has raised a valid complaint, but they also have a partisan agenda, and their efforts to hide it shouldn't be aided and abetted by the media.] Two possibilities exist. Either Frist really did suddenly decide that it was ethically prudent to divest himself and just got lucky (or unlucky), or he got an illegal tip-off from inside HCA. Either way, it's a problem of his own making, since he should have sold the stock long ago to avoid the conflict issue, or at least had a blind trust that didn't allow him to control divestiture. The second problem, however, is far worse if true.

And it may be the tip of a nasty iceberg.

A study undertaken by four universities and released in 2004 showed unusually large portfolio gains for U.S. senators during the market boom years of 1993-98. During that period, the data indicated, a majority of senators were trading stocks and beating the market by an average of 12%... even better than corporate insiders (5%). Meanwhile, the typical household investor missed the market average by 1.4 %.

Appearance of impropriety, you say?

At the time the study was released, financial experts interviewed by the Christian Science Monitor agreed that the senators' profit was "too big to be a mere coincidence." The Monitor story reported that during the 1990s years in question, 62 senators disclosed some 6,000 stock trades, with nearly half being reported by just four Senators, including current members John Warner (R-Va.) and Barbara Boxer (D-Cal.). The majority of the purchase transactions by senators were less than $15,000, but the study indicated that both the big traders and the small ones beat the market consistently. The study wasn't easy to do, it seems, because the Senate goes out of its way to make complete data on its members' financial matters hard to acquire. "If public disclosure is the first line of defense, it has obviously failed," the Monitor quoted Thomas Ferguson, a University of Massachusetts political scientist, as pointing out. "These files were public in name only. It's very hard to get this information. Note that it took the team that did this research eight years."

The results of the study raise the specter of a serious ethical problem in the Senate that goes far deeper than Bill Frist, and one that has so far escaped widespread attention. The study was published in last December's issue of The Journal of Financial and Quantitative Analysis, and it seems that just a handful of newspapers noticed. "The behavior of common stocks purchased and sold by senators indicates that senators trade with a substantial informational advantage," Professor Alan Ziobrowski, a professor of finance at George State University, told the Monitor's reporter. CREW take note: the study found no difference in the returns of Republicans and Democrats.

The SEC is reportedly looking into Frist's well-timed deal, but the Scoreboard recommends that the Commission expand its inquiry to the Senate a whole. Maybe all the Senators, like Dr. Frist, are just lucky.

But it sure doesn't look good.