The U.S. Department of Justice has sued KKR, accusing the private equity firm of improperly filing premerger documents, risking penalties exceeding $650 million.

The U.S. Department of Justice (DOJ) has filed a lawsuit against KKR, one of the world’s largest private-equity firms, accusing it of making improper premerger filings in violation of the Hart-Scott-Rodino Antitrust Improvements Act of 1976. This civil lawsuit, filed on Tuesday, could result in penalties exceeding $650 million for KKR.

The lawsuit claims that KKR, over the course of 2021 and 2022, made at least 16 faulty filings in order to circumvent antitrust scrutiny. Internal communications reportedly reveal that employees at KKR discussed altering or omitting documents with the intention of avoiding regulatory review of their mergers. The government has characterised these violations as part of a “culture of noncompliance” within the firm.

The DOJ contends that KKR’s actions were not isolated but rather a series of expansive and long-running violations. The complaint, filed in the U.S. District Court for the Southern District of New York, accuses KKR of manipulating the filing process, including withholding essential documents, such as competitive effect analyses, from antitrust authorities.

“This is more than just a case of administrative oversights; it’s a deliberate strategy to escape antitrust scrutiny and close deals without regulatory interference,” a source familiar with the case revealed. The lawsuit alleges that KKR didn’t submit required filings before starting acquisitions worth billions of dollars, including one valued at $6.9 billion and another at $919 million.

In response, KKR has countersued, accusing the DOJ of launching a politically motivated attack on the firm and applying excessive penalties for what it claims are trivial mistakes in paperwork. The firm alleges that the government’s actions are intended to discourage future mergers and acquisitions, with KKR arguing that the HSR Act is being applied unconstitutionally.

“The Antitrust Division’s actions are intended solely to make an example of KKR and intimidate other firms into avoiding business deals,” KKR’s countersuit states. The firm maintains that its filings provided the necessary information for the government to assess each transaction properly.

Despite the legal battle, KKR’s stock rose 1.6% by mid-afternoon on Tuesday, demonstrating investor confidence. The company remains confident that its actions were in compliance with regulations, despite the ongoing investigation.

The lawsuit comes amid growing concerns from the Biden administration over the influence of private equity and its role in potentially reducing competition. Regulators have focused on private equity-backed mergers, especially those in healthcare and other essential sectors.

As scrutiny of private equity firms intensifies, particularly with regard to merger and acquisition activities, many in the industry expect a shift in policy once a new administration takes over, with the possibility of a more lenient approach under Trump-appointed regulators. However, it remains unclear how ongoing cases, including those involving Facebook and Amazon.com, will be affected by any leadership changes.