Sarbanes-Oxley Nets Arrest of Former EY Partner

The Sarbanes-Oxley Act of 2002 continued its sweep through corporate America yesterday when the FBI arrested former Ernst & Young partner Thomas Trauger.

In one of the first document destruction cases brought under Sarbanes-Oxley, Trauger, 40, faces federal charges of obstructing an investigation by destroying or tampering with audit work papers. The audit in question involved the now-defunct NextCard Inc. of San Francisco and its bank subsidiary NextBank.

“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,” U.S. Attorney Kevin Ryan said in a statement.

The Securities and Exchange Commission brought unrelated charges against Trauger and Michael Mulligan, a former Ernst & Young audit manager. The SEC settled another matter with Oliver Flanagan, a former Ernst & Young senior manager.

Flanagan pled guilty to a criminal charge of obstructing the examination of a financial institution, according to a statement from the SEC, which settled its civil matter with him.

The SEC suit accused the three of tampering with Ernst & Young’s work papers from its 2000 NextCard audit when Trauger began to worry in November of 2001 about regulators inspectors the audit work, the SEC statement stated.

“Mr. Trauger, assisted by Mr. Flanagan, met in E&Y's offices in San Francisco and altered portions of the E&Y electronic working papers for the NextCard 2000 audit,” the SEC said in a statement. “Later in November 2001, Mr. Trauger asked Mssrs. Flanagan and Mullen to assist him in making additional alterations to the working papers.”

Reuters reported that attorneys for Trauger and Flanagan couldn’t be reached for comment. Mulligan’s attorney, Bob Breakstone, told Reuters that “Mike has cooperated with SEC and its investigation and voluntarily appeared with the SEC. We'll continue to cooperate. He has not been charged by federal prosecutors.”

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.