I spent many years in a tightly regulated industry - medical devices, pharma, and biotech - and am all too familiar with the back-and-forth movements of industry chiefs and regulatory agencies. While a lot of that was one-way, wherein an FDA inspector would retire and take on a lucrative job in the industry helping a company deal with the agency he or she just left - not really a conflict of interest - sometimes that went the other way, which can be, to put it mildly, suspect. Having a former employee of a company now evaluating that company's compliance, well, that may be a problem. It isn't always - there are a few honest people still about - but it can be. 

In another such incident, we have the story of one Jonathan Kanter, a top "antitrust cop" in the United States Justice Department, who has extensive ties to the bank and financial equity firms he is now overseeing.

The US Justice Department will overhaul its reviews of bank deals and other mergers involving financial services firms, Jonathan Kanter, the agency’s top antitrust cop, told Semafor.

The move will have major implications for the financial industry by casting a broader antitrust spotlight onto nonbank players, like private equity, private credit, and fintech companies that act as lenders.

“Our analysis has to focus on market realities,” Kanter said, speaking at a Semafor event in New York Monday evening.

Here's the onion: Kanter has, at times in his legal career, represented such private equity firms as Apollo, Kohlberg & Co, Roark Capital Group, and Searchlight Capital Partners. You can see the full list of his clients here.

Now one of those firms, Apollo, Kohlberg & Company, is under scrutiny for their acquisition of Iowa's Ottumwa Regional Health system, which has sparked an investigation by Iowa's senior Senate Budget Committee Ranking Member Senator Charles Grassley (R-IA) and Chair Sheldon Whitehouse (D-RI.) Senator Grassley, it should be noted, has been about this business for a long, long time - he was already a Senator representing Iowa when I left that state in the late '80s - and is not inclined to mistake smoke for fire. Grassley recently issued a press release on the acquisition.

Since coming under private equity ownership, many hospitals, including Ottumwa Regional Health Center, have experienced significant staffing reductions and substandard health care, and have been stripped of valuable assets, including their real estate, leaving them saddled with debt. To assess the impact of these transactions and address their harmful effects, the senators are asking for documents and detailed answers about related-party transactions and the degree to which the private equity firms are calling the shots at these hospitals.

“When it comes to our nation’s hospitals, a business model that prioritizes profits over patient care and safety is unacceptable,” Ranking Member Grassley said. “The shocking events at Ottumwa Regional Health Center prompted me to ask tough questions about how financial maneuvers by private equity and related companies have negatively impacted the resources, and thereby the patient care, at our rural hospitals. Iowa residents, including those living in rural areas, shouldn’t have to settle for anything less than the highest quality of care. I look forward to working with Senator Whitehouse to get answers and ensure that our nation’s hospitals provide high-quality health care to the communities and patients they serve.”

This is, of course, the kind of thing that Jonathan Kanter is supposedly overseeing as an "antitrust cop."

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 So, in summary, we have a regulator who works in the Justice Department overseeing regulation of bank and private equity firm acquisitions and mergers, and we have a company that has made an acquisition that is now allegedly mismanaging the organization they have acquired, resulting in substandard medical care in Iowa rural and small-town hospitals. And the regulator used to work for the private equity firm that is now under scrutiny from the Senate Budget Committee.

Curiouser and curioser. 

This is, of course, one of the risks of Big Government. The more regulation is slapped on private firms, the more regulators are needed. (Feature? Or bug?) The more regulators are needed, the more this incestuous back-and-forth between the regulated and the regulators will occur.

It's important to note that, as of this writing, there are no allegations that Jonathan Kanter has in any way abused his authority. But it's a fundamental conflict of interest all the same and one that, frankly, should not have been allowed to develop.