Authorities allege former Ernst & Young Thomas Trauger altered documents used in the financial audits of NextCard after banking regulators raised doubts about the San Francisco-based company's accounting practices in October 2001.

Trauger, 40, then destroyed key documents to cover up his alleged malfeasance, according to court documents.

FBI agents arrested Trauger Thursday. Trauger, a Berkeley resident, pleaded innocent at a hearing in San Francisco federal court. "He's going to fight this case vigorously," his lawyer, Edward Swanson, said.

Oliver Flanagan, formerly a senior Ernst & Young manager who worked on the audit, has already pleaded guilty to one count of criminal obstruction. Flanagan entered the plea last month and provided evidence that led to Trauger's arrest, authorities said. The guilty plea was unsealed Thursday.

Corporate crime fighters described the case as one of the first times the government has used expanded powers granted under last year's Sabranes-Oxley act to crack down on an alleged manipulation of financial records.

Thursday's arrest "should remind accountants and lawyers ... of our strong commitment to enforcing the law," said Robert McCallum, an acting U.S. deputy attorney general heading up the fight on corporate crime.

A one-time darling of the dot-com boom, NextCard fell into trouble with regulators a a year ago after issuing too many credit cards to deadbeat borrowers. Federal regulators shut down NextCard's banking subsidiary in February 2002 and the company went bankrupt 10 months ago.

-- Michael Liedtke, AP Business Writer