In one of the first cases of document destruction brought under Sarbanes-Oxley, a former partner in Ernst & Young's San Francisco office pled guilty to falsifying records in a federal investigation, the U.S. Attorney's Office for the Northern District of California said.
As part of his plea, Berkeley, Calif., resident Thomas Trauger, 40, admitted that he knowingly altered, destroyed and falsified records with the intent to impede and obstruct an investigation by the U.S. Attorney's Office into the collapse of NextCard Inc., an Internet-based provider of consumer credit in San Francisco. The company filed for bankruptcy in November of 2002.
During testimony before the Securities and Exchange Commission in San Francisco in April 2003 regarding the audit work that his audit team performed on NextCard Inc., Trauger didn't tell the SEC that documents related to NextCard's annual audit and the quarterly working papers for the year 2001 had been altered, or that considerable portions of those documents were deleted in November 2001, the U.S. attorney's office said.
Trauger admitted that by not informing the SEC of the alterations and deletions he knowingly concealed and covered up an original version of the documents with the intent to impede, obstruct and influence an investigation of the SEC.
U.S. Attorney Kevin V. Ryan noted that the case is one of the first in which an auditor has pled guilty to destroying key documents in an effort to obstruct a federal investigation.
Trauger was arrested by FBI agents in September of 2003 on criminal charges for obstructing investigations by both the Office of the Comptroller of the Currency and the SEC. He was originally charged with two counts of conspiracy to obstruct the examination of a financial institution and one count charging falsification of records in a federal investigation in violation of the Sarbanes-Oxley Act.
Sentencing is set for Nov. 18 in front of Judge Jeffrey S. White.
