The U.S. Justice Department is investigating whether some private equity firms intentionally withheld information from antitrust regulators during contract reviews to avoid the opportunity of blocking takeovers, a senior official said Wednesday.
The move comes as top regulators on the Federal Trade Commission and the DOJ’s antitrust division are scrutinizing the multibillion-dollar private equity industry as a part of the Biden administration’s aggressive antitrust enforcement agenda.
Richard Mosier, a former special agent for personal equity within the DOJ’s antitrust division, said the agency has “renewed its focus” on ensuring that non-public equity firms comply with federal law generally known as the Hart-Scott-Rodino, or HSR Act. In addition to a notification form, the law requires the filing of documents, including studies, analyzes and reports prepared for the corporate’s board of directors or officers a few transaction.
Mosier said the concerns largely focus on corporations’ failure to show over all required documents and that the agency will not be “random” situations where an organization forgets a thing or two.
Companies that “attempt to game the system risk having this HSR and possibly previous HSRs scrutinized.” “The person who signs the form is making themselves liable,” Mosier said at a conference in Washington.
Comments from some FTC commissioners, including Chairwoman Lina Khan, show an “open distaste for a particular business model” utilized by private equity, said Rebekah Goshorn Jurata, general counsel for the American Investment Council, an industry lobbying group. “It is baseless and not based on any empirical data or evidence,” she said at the identical event.
Mosier declined to call corporations involved within the investigation. But KKR & Co. previously said the Justice Department was reviewing the accuracy of its merger filings for some transactions in 2021 and 2022. In December, the corporate said it received a grand jury subpoena regarding the accuracy of its filings, a sign that the agency had launched a criminal investigation.
KKR declined to comment. The Justice Department didn’t immediately reply to a request for comment.
Mosier moved to the Federal Trade Commission in February, where he now focuses on mergers and conduct with a give attention to hospitals and physician groups.
He cited February comments from one other senior Justice Department official who said private equity firms must fully comply with merger reporting laws and that failure to reveal “poses an existential threat” to enforcing mergers.
The DOJ can be conducting a comprehensive investigation into overlapping board seats focused on the sector. The enforcement push relies on a rarely invoked antitrust ban against so-called interlocking directorates, wherein the identical people or organizations hold board seats at competing corporations. In February, the FTC also opened an investigation into private equity firms’ investments within the healthcare sector.
–With assistance from Yiqin Shen and Allison McNeely.
