The Justice Department is investigating whether some private equity firms may have intentionally withheld information about previous mergers, a senior official said Wednesday.
Richard Mosier, special counsel for private equity in the Justice Department’s antitrust division, said the agency has a “renewed focus” on enforcing private equity firms’ compliance with a federal law that requires companies to notify antitrust regulators of their transactions, known as the Hart Act. Scott-Rodino Act or HSR.
Companies that “attempt to game the system risk having this HSR, and possibly previous HSRs, scrutinized. The person signing the form is responsible,” Mosier said at a conference in Washington.
Mosier declined to name any companies involved in the investigation. KKR & Co. previously reported that the Justice Department was reviewing the accuracy of its merger notices for certain transactions in 2021 and 2022. In December, the company said it had received a subpoena over the accuracy of its documents, indicating the agency was pursuing a criminal investigation.
KKR declined to comment.
He quoted February remarks another senior Justice Department official who said private equity firms must fully comply with merger notification laws and that failure to provide information poses a “substantial threat” to merger enforcement.
The Justice Department is increasing oversight of the private equity industry under President Joe Biden. He conducted a wide-ranging investigation into overlapping board seats, focused on the sector. The enforcement action is based on a rarely used antitrust prohibition against so-called interlocking directorates, in which the same individuals or entities occupy seats on the boards of directors of competing businesses.
When considering merger applications, in addition to the notification form, the law requires the company to turn over documents, including studies, analyzes and reports prepared for the company’s board of directors or executives about the transaction. Mosier said the concerns mostly stem from companies’ failure to provide all required documents, and the agency doesn’t address “occasional” situations where a company forgets one or two things.