also very costly), and the customers were people with little creditworthiness looking for a "lender of last resort". Downfall To understate its credit losses NextCard refused to "provide sufficient allowances each period for expected bad debts" . The Comptroller of the Currency (OCC) reviewed the company's accounting records and operating policies and procedures and forced NextCard to "significantly increase its allowance for bad debts". In response to this, NextCard stated that its high bad debts were due to fraudulent schemes perpetrated by hackers and the like. On October 31, 2001, it was announced that NextCard was under-capitalized and was then investigated by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency. The reason, as stated to employees, was that the company had been categorizing as "fraud losses" what should have been categorized as "credit losses"... meaning the company was trying to categorize as fraud some of the money lost due to issuing cards to people with very poor credit. The Amazon.com Visa issued by NextCard was subsequently issued by Chase following NextCard's demise. NextCard investors soon filed a class-action lawsuit with charges that the management had engaged in insider trading and hidden the financial status of the company. To add to the controversy, NextCard's external auditors, Ernst & Young, edited past-audit's work-papers and electronic timestamps in order to rid themselves of any liability for giving NextCard a clean audit opinion in the previous year. One of the auditors, Oliver Flanagan, saved a computer disk containing evidence of the edits and turned it in to the federal authorities. The lead auditor of NextCard from Ernst & Young, Thomas Trauger, would be sentenced to one year in prison and two years of "supervised release." NextCard's stock price fell from its high of $53.12 to $.14 per share, and in February 2002 the company was taken over by the FDIC. The bank tried to find a buyer and was under negotiations with CompuCredit for a while, but in the end no buyer was found. In early July 2002, most NextCard credit card accounts were closed. A small portfolio of credit cards that were issued to those with low credit scores was sold to Merrick Bank of Utah, who then increased the annual percentage rates (APRs) and fees. In 2003, NextCard was liquidated with liabilities of nearly $470 million and realizable assets of approximately $20 million. Fraud charges