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Altered (Document) States

The SEC continues its enforcement efforts, yesterday announcing that criminal charges had been filed against a former E&Y accountant for allegedly altering and destroying documents to obstruct an investigation. The SEC’s press release pretty much speaks for itself (bold-faced emphasis is mine):

Thomas C. Trauger, a former Ernst & Young partner who allegedly altered and destroyed audit working papers, was arrested this morning by FBI agents on criminal charges for obstructing investigations by both the Office of the Comptroller of the Currency and the Securities and Exchange Commission. * * *

. . . The complaint contains two counts: one count charging Mr. Trauger with obstructing the examination of a financial institution and one count charging falsification of records in a federal investigation in violation of the Sarbanes-Oxley Act of 2002. * * *

According to the allegations in the criminal action, . . . Mr. Trauger . . . began to alter and destroy copies of working papers related to E&Y’s audit work for its client NextCard, Inc. . . . The document destruction allegedly occurred after the working papers had been completed and during an OCC examination of NextCard’s banking subsidiary, NextBank. * * *

. . . Finally, the complaint alleges that in April 2003, Mr. Trauger gave sworn testimony to the SEC related to NextCard where he allegedly concealed his alteration and destruction of documents when questioned about his role in the production of E&Y’s audit working papers to the OCC. * * *

In announcing the charges, U.S. Attorney Kevin V. Ryan said, “This is one of the first cases in the country in which an auditor has been accused of destroying key documents in an effort to obstruct an investigation. . . . The U.S. Attorney’s Office will bring those professionals to justice who join in the criminal acts they are supposed to uncover and expose.

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