DOJ to probe private equity firms attempting to ‘game the system,’ special counsel says

Richard Mosier, special counsel for private equity in the DOJ’s antitrust division, said the agency has “renewed focus” on making sure that private equity firms comply with the federal law that requires companies to notify antitrust enforcers of their transactions, known as the Hart-Scott-Rodino or HSR Act.

Companies that “try to game the system, they run the risk of having that HSR and perhaps prior HSRs scrutinized. The person who signs the form opens themselves up to liability,” said Mosier, speaking at a conference in Washington. 

Mosier declined to name any companies caught up in the probe. KKR & Co. previously disclosed that the Justice Department was looking at the accuracy of its merger notification filings for some transactions in 2021 and 2022. In December, the company said it received a grand jury subpoena over the accuracy of its filings, an indication that the agency had opened a criminal probe.  

KKR declined to comment. 

He cited February remarks by another senior DOJ official who said private equity firms must fully comply with the merger notification law and that failure to provide disclosure represents “an existential threat” to merger enforcement.

The Justice Department is intensifying scrutiny of the private equity industry under President Joe Biden. It has a sweeping investigation of overlapping board seats that is focused on the sector. The enforcement push relies on a rarely invoked antitrust prohibition against so-called interlocking directorates, where the same individuals or entities have board seats at competing businesses.

In the review of merger filings, in addition to a notification form, the law requires a company to turn over documents including studies, analyses and reports prepared for the company’s board or executives about a deal. Mosier said the concerns largely revolve around companies’ failure to turn over all required documents and the agency isn’t looking at “accidental” situations where a company forgets about one or two things.