SEC Charges Minn. CFO with Violating Internal Controls

The Securities and Exchange Commission has charged the chief financial officer of a Minnetonka-based computer networking device manufacturer with illegally diverting company funds to cover his own personal expenses and other employees’ non-business entertainment expenses.

Subramanian Krishnan, a CPA and the former CFO of Digi International, is alleged to have evaded his company’s internal controls -- which he created -- to approve employees’ falsified travel and entertainment expense reports over a five-year period from 2005 to 2010. The SEC complaint also alleges that he manipulated internal controls to approve his own unauthorized expenses.

Digi’s internal controls required that the CFO’s expense reports be approved by its chief executive, but the SEC alleges that Krishnan arranged for the Hong Kong office to submit his expenses as belonging to other employees, which allowed him to approve them.

The SEC’s complaint alleges that Krishnan violated the antifraud, issuer reporting, internal controls, books and records, filing certification and lying to auditors provisions of the federal securities laws, in part by signing Digi’s annual and quarterly reports and certifying that its internal controls were effective

Krishnan, who resigned from Digi International in 2010, has agreed to settle the SEC’s charges and consent to an officer-and-director bar and financial penalties that will be determined in court at a later date.

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