The U.S. Securities and Exchange Commission has charged former Ernst & Young employees for allegedly destroying audit working papers, as a former E&Y audit partner pleads guilty to obstruction charges and violations of Sarbanes-Oxley Act.

The guilty plea came from an Irish citizen, highlighting fears some market players have had about the ability of Sarbanes-Oxley to reach into other countries.

Thomas Trauger, a former Ernst & Young partner, was arrested Thursday morning by FBI agents on criminal charges for obstructing investigations by both the Office of the Comptroller of the Currency and the SEC.

In addition, the SEC instituted two administrative proceedings, an unsettled proceeding against Trauger and Michael Mullen, former audit manager at E&Y, and a separate settled proceeding against Oliver Flanagan, former senior manager at E&Y.

In a separate administrative proceeding, the SEC alleged that Trauger and Mullen, a 33-year old Seattle resident, engaged in unethical and improper professional conduct as a result of their alleged alteration and destruction of documents.

According to the allegations in the criminal action, and the SEC’s allegations, in approximately October 2001, Trauger, assisted by Flanagan and Mullen, began to alter and destroy copies of working papers related to E&Y’s audit work for its client NextCard, Inc., a publicly-traded, San Francisco-based issuer of credit cards over the Internet. The document destruction allegedly occurred after the working papers had been completed and during an OCC examination of NextCard’s banking subsidiary, NextBank.

This is one of the first cases of document destruction brought under the newly enacted Sarbanes-Oxley Act. In announcing the charges, U.S. Attorney Kevin 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.”