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KKR clashes with DOJ over deal disclosures

Private equity giant KKR & Co is at odds with the US Department of Justice (DOJ) over a proposed settlement that would hold its top executives personally accountable for disclosure lapses related to mergers and acquisitions, according to a report by Bloomberg.

The conflict has arisen as US regulators ramp up their scrutiny of the private equity sector, signalling a tougher road ahead for firms navigating increased antitrust enforcement.

The dispute centres on a federal investigation into whether KKR failed to provide accurate information in its filings with government agencies about the competitive impact of its deals. The report cites unnamed sources familiar with the matter as revealing that the DOJ’s antitrust enforcers want KKR to agree that its Co-Chief Executive Officers could be held personally liable for any future omissions.

KKR has resisted this demand, and the two parties are also at odds over potential fines and whether a settlement would include an admission of wrongdoing, said the sources. The firm’s pushback underscores the impact of the Biden administration’s more aggressive antitrust agenda on Wall Street, which is putting unprecedented pressure on private equity firms.

A potential settlement with KKR, which pioneered the leveraged buyout model in the 1980s, could establish a new precedent for how the DOJ handles future cases involving private equity firms accused of not adhering to the disclosure requirements outlined in the Hart-Scott-Rodino (HSR) Act. These filings, which must be signed by company officials, are meant to provide accurate and comprehensive information about mergers and acquisitions to regulators.

In a statement, KKR emphasised its commitment to meeting regulatory obligations. “KKR takes its responsibilities to all regulators incredibly seriously. The firm has been cooperating in good faith and is engaging in discussions with the DOJ’s Antitrust Division regarding the accuracy and completeness of some of our Hart-Scott-Rodino filings from 2021 and 2022,” the statement read.

The Justice Department, which currently has two active investigations into KKR’s merger-related disclosures – one civil and one criminal, which the firm has previously acknowledged – declined to comment on the matter.

KKR has already received a grand jury subpoena over the accuracy of its filings, with the criminal probe focusing on whether those who signed the documents were aware of any omissions.

As part of a proposed resolution to the civil case, the DOJ is pushing for a substantial monetary penalty and a requirement that KKR’s co-CEOs Scott Nuttall and Joe Bae personally sign off on future HSR filings, according to Bloomberg’s sources said.

The DOJ reportedly rejected an earlier offer from KKR to pay approximately $100m to settle the case. However, the more contentious issue is the DOJ’s insistence that the firm’s co-CEOs be held personally liable for any future lapses over the next five years, a requirement that could have far-reaching implications for senior executives at other private equity firms.

 

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