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Washington — Election Day 2000 was five months off, but Bill Frist was already in an enviable position. With a fat campaign war chest and only token opposition in what he had decided was his last race for the U.S. Senate, Frist could turn his attention to grander plans.
Frist began focusing on raising record amounts of cash for other Republicans. But while he was picking up political IOUs that could aid him greatly in a run for president in 2008, his own campaign finances took a sharp, and in some ways baffling, turn for the worse.
Hundreds of thousands of dollars Frist's supporters had given him to run for the Senate were dwindling at a rapid rate. Much of that money was lost in a stock market investment that experts say was out of line with the way candidates traditionally invest campaign funds. Frist's campaign also took on more than $1 million in debt so that it could repay Frist for interest-free loans he made to his campaign six years earlier.
And then, in a decision experts say violated federal campaign regulations, Frist filed reports with the Federal Elections Commission that made it difficult for his contributors and political foes to determine just how bad off his campaign finances were.
The situation raises the question of whether Frist, the scion of a wealthy Nashville family and one of the South's premier heart-lung transplant surgeons, was cavalier with other people's money while protecting his own.
Frist's first critical decision, made in June 2000, was to take $1 million of the contributed money out of the bank, where it was helping earn up to $170,000 a year in interest, and invest it in the stock market.
Frist put the money into a mutual fund managed by the Charles Schwab investment firm, his campaign said. And that fund, which Frist's aides refused to identify beyond saying it was an index fund, quickly began losing hundreds of thousands of dollars.
Frist's next crucial decisions came in November 2000. Having decided that this would be his last run for the Senate and knowing that by law he could not use his Senate cash in a race for president, Frist wanted to get back $1.2 million he had lent his campaign in 1994, when he first ran for office.
But Frist 2000 Inc., with just over $1 million available, didn't have enough money to pay Frist back and continue operating. Frist solved that problem by having his campaign take out a $1.44 million bank loan, at a cost of $10,000 a month in interest, and used that money to repay himself.
Assuming the new debt would have drained all the operating funds Frist 2000 had available, according to FEC documents. Yet that didn't happen. Even after taking out such a huge loan, Frist 2000 still looked rich on paper — much richer than it actually was.
That's because Frist made a third key decision — one that experts on campaign disclosure call highly questionable — to not report the new debt on the FEC paperwork filed by Frist 2000, as required by law.
Instead, Frist told the FEC that the $1.44 million loan was held by another committee he controlled, the Bill Frist for Senate committee, which had been around since his first race in 1994. That fund was virtually dormant by 2000, with just $50,000 in the bank.
Other senators who put money into the stock market about the same time as Frist fared better.
Former Sen. Tom Daschle (D-S.D.), whom Frist helped defeat in the 2004 elections, invested campaign cash in a Merrill Lynch mutual fund in 2001. That investment went up and down with the market, but by 2004 showed a gain of $91,000.
"Those of us who are opposed to private accounts for Social Security have kind of chuckled at the notion of the majority leader not being able to make any headway with his investments," said Daschle, the former Senate majority leader whom Frist spent $226,000 through VolPAC to defeat last year. "If he's having trouble, how do they expect an 82-year-old woman like my mother to be able to do it?"
'They misreported ...'
Campaign finance experts also described as highly unusual Frist's decision to report the $1.44 million debt under the name of an old committee rather than his current campaign operation.
It's legal for campaigns to transfer debts and money between two committees as long as both committees report the transfer — something Frist 2000 failed to do.
"Looking at this, it appears they did not want to show that Frist 2000 was the actual borrower of the $1.44 million," said Larry Nobel, who worked 23 years at the FEC, 13 as the agency's general counsel.
Nobel was one of two former FEC officials who reviewed Frist's FEC and loan documents at the request of The Atlanta Journal-Constitution.
"It appears to me to be misreporting. They misreported who the actual borrower was. Misreporting is illegal," said Nobel, now executive director of the Center for Responsive Politics, a nonpartisan campaign finance watchdog group. "The question is whether the FEC would do anything about it."
FEC officials said last week they were examining the Frist documents, but have not reported their conclusions.