Former E&Y Audit Partner Jailed for SOX Violations
Back in October of 2004, Thomas Trauger pled guilty to falsifying records in a federal investigation in violation of the Sarbanes-Oxley Act. He admitted as part of this plea that he knowingly altered, destroyed and falsified records with the intent to impede and obstruct an investigation by the Securities and Exchange Commission (SEC). This is one of the first cases of document destruction brought under the recently enacted Sarbanes-Oxley Act.
U.S. Attorney Kevin V. Ryan said, "This is one of the first cases in which an auditor pleaded guilty to destroying key documents in an effort to obstruct a federal investigation. Our financial markets depend on the integrity of auditors, lawyers and professionals to do their jobs ethically and fairly. The U.S. Attorney's Office remains committed to prosecuting those professionals who participate in the criminal acts they are charged with uncovering."
Mr. Trauger was a former partner in the San Francisco offices of Ernst & Young. Mr. Trauger is a certified public accountant licensed in the State of California and is scheduled to surrender into custody on March 30, 2005.
As part of his guilty plea, Trauger admitted that on April 30, 2003, he appeared before the SEC in San Francisco to provide testimony under oath regarding the audit work that his audit team performed on NextCard Inc. He was aware that the SEC was conducting an investigation into the collapse of NextCard Inc. During the course of the deposition, Trauger did not tell the SEC that documents related to the annual audit of NextCard and the quarterly working papers for the year 2001 had been altered and that considerable portions of those documents were deleted in November 2001.
Trauger admitted that by not informing the SEC of these alterations and deletions that 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.
On September 25, 2003, Mr. Trauger was arrested by FBI agents on criminal charges for obstructing investigations by both the Office of the Comptroller of the Currency (OCC) and the SEC.
Trauger 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 of 2002.
The prosecution is the result of an 18 month investigation by agents of the FBI along with assistance from the enforcement division of the SEC in San Francisco. Anne-Christine Massullo is the Assistant U.S. Attorney who prosecuted the case.
A copy of this press release and related court filings may be found on the U.S. Attorney's Office's website at www.usdoj.gov/usao/can.
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