U.S. Securities and Exchange Commission
Litigation Release No. 22500 / September 28, 2012
Accounting and Auditing Enforcement Release No. 3414 / September 28, 2012
SEC v. Subramanian Krishnan, Civil No.: 12-CV-2495 PAM-JJG (USDC Minn., Filed Sept. 28, 2012).
SEC CHARGES FORMER CFO WITH EVADING INTERNAL CONTROLS TO PAY FOR UNAUTHORIZED TRAVEL AND ENTERTAINMENT EXPENSES
On September 28, 2012, the Securities and Exchange Commission filed a partially-settled civil injunctive action in the U.S. District Court for the District of Minnesota against Subramanian Krishnan (Krishnan). In its complaint, the Commission alleges that Krishnan, the former Chief Financial Officer (CFO) of Digi International, Inc. (Digi), engaged in conduct which resulted in the filing of inaccurate reports and accompanying certifications in Digi’s annual quarterly reports from March 2005 through May 2010. Krishnan engaged in a course of conduct, as a result of which corporate funds were used to pay for unauthorized travel and entertainment expenses. Krishnan authorized such expenses for Digi employees, caused the Company to file inaccurate reports, failed to enforce Digi’s internal controls, demonstrated a lack of management integrity, failed to act to reveal inaccurate reports, and wrongly certified that he evaluated the effectiveness of Digi’s internal controls and disclosed they were effective.
Without admitting or denying the allegations in the Commission’s complaint, Krishnan consented to a final judgment permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. Krishnan is also permanently restrained and enjoined from future violations of Sections 13(a) and 13(b)(5) and Rules 12b-20, 13a-1, 13a-13, 13a-14, 13b2-1 and 13b2-2 thereunder of the Exchange Act and from aiding and abetting violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act. Krishnan consented to a bar from serving as an officer or director of any issuer with the duration of the bar and amount of disgorgement, prejudgment interest, and a civil penalty to be determined by stipulation of the parties or by motion of the Commission at a later date.
Jennifer Moore, Justin J. Sutherland, and Karen I. Martinez conducted the Commission’s investigation; Daniel J. Wadley and Thomas M. Melton will lead the litigation.