SEC v THOMAS C. TRAUGER and MICHAEL MULLEN RELEASE NO.: AAER-1872


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Keywords & Phrases

CaseNo: 34-48543, Defendant: Thomas C. Trauger and Michael Mullen Release No.: AAER-1872, Plaintiff: SEC, UniqueCaseRef: SEC>34-48543, Administrative Proceedings, Audit, Working Papers, Trauger, Senior Manager, Securities, Commission, Deletions, Nextcard, Practice, Alleges, Alterations, Directing, Response, Exchange, Accounting, Altering, Instituting, Pursuant, Subpoena, Administrative Law Judge, Allegations, Revise, Accounting Treatments Affecting, Legal Department, Production, Occ, Dispute, Remedial Action, Matter , ContentID: 120255611

Case Documents

2003-09-25

SEC ADMINISTRATIVE PROCEEDING
[ see first page and extracted highlights below ] ItemID: 132901

2 pages
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Total Documents: 1 document , 2 pages

Price: $ 19.95

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1 . SEC ADMINISTRATIVE PROCEEDING

EXTRACTED KEY WORDS

AUDIT
WORKING PAPERS
TRAUGER
SENIOR MANAGER
SECURITIES
COMMISSION
DELETIONS
NEXTCARD
PRACTICE
ALLEGES
ALTERATIONS
DIRECTING
RESPONSE
EXCHANGE
ACCOUNTING
ALTERING
INSTITUTING
PURSUANT
SUBPOENA
ADMINISTRATIVE LAW JUDGE
ALLEGATIONS
REVISE
ACCOUNTING TREATMENTS AFFECTING
LEGAL DEPARTMENT
PRODUCTION
OCC
DISPUTE
REMEDIAL ACTION
MATTER

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF 1934
Release No. 48543 / September 25, 2003

   ACCOUNTING AND AUDITING ENFORCEMENT
   Release No. 1872 / September 25, 2003

   ADMINISTRATIVE PROCEEDING
   File No. 3-11270

   COMMISSION ISSUES ORDERS ALLEGING THAT AUDITORS VIOLATED RULES OF
   PRACTICE BY ALTERING AND DELETING AUDIT WORKING PAPERS

   The Commission announced today that it has instituted administrative
   proceedings against Thomas C. Trauger, a former audit partner with
   Ernst & Young, LLC ("E&Y"), and Michael Mullen, an E&Y audit manager.

   The Order Instituting Public Administrative Proceedings Pursuant to
   Rule 102(e) of the Commission's Rules of Practice ("Order") alleges
   that Trauger, assisted by Mullen and a third senior manager, altered
   E&Y's working papers for the fiscal year 2000 audit of E&Y client
   NextCard, Inc. The alterations and deletions were made months after
   the audit had been completed and the working papers had been signed
   and archived. NextCard was a publicly-traded, San Francisco-based
   issuer of credit cards over the Internet. The Order alleges that
   Trauger directed Mullen to make changes to the NextCard working papers
   and delete information from them. He also instructed another senior
   manager to destroy documents inconsistent with the changes he was
   directing, and the senior manager complied in part. The alterations
   and deletions made it appear as though E&Y had thoroughly considered
   all of the appropriate issues and available facts relating to
   NextCard's allowance for loan losses ("allowance") and NextCard's
   securitization of receivables. The Order further alleges that the
   alterations and deletions were in response to the October 2001
   announcement by NextCard that the Office of the Comptroller of the
   Currency ("OCC") and Federal Deposit Insurance Corporation ("FDIC")
   were requiring NextCard's bank subsidiary, NextBank, to revise certain
   accounting treatments affecting the allowance and securitizations.
   After altering the working papers, Trauger, Mullen and the senior
   manager provided the altered documents to E&Y's legal department for
   production in response to a subpoena from the OCC and later subpoenas
   from the FDIC and SEC.

   A hearing will be scheduled before an Administrative Law Judge to
   determine whether the allegations in the Order are true, to provide
   respondents an opportunity to dispute the allegations, and to
   determine what, if any, remedial action is necessary and appropriate

SNIPPETS:

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

COMMISSION ISSUES ORDERS ALLEGING THAT AUDITORS VIOLATED RULES OF PRACTICE BY ALTERING AND

The Order Instituting Public Administrative Proceedings Pursuant to Rule 102of the

He also instructed another senior manager to destroy documents inconsistent with the changes

The alterations and deletions made it appear as though E&Y had thoroughly considered all of

The Order further alleges that the alterations and deletions were in response to the October

After altering the working papers, Trauger, Mullen and the senior manager provided the

A hearing will be scheduled before an Administrative Law Judge to determine whether the

The Commission directed that an Administrative Law Judge should issue an initial decision in


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