SEC v. Subramanian Krishnan (D. Minn. 2012)

• Case Name
• SEC v. Subramanian Krishnan (D. Minn. 2012)

• Date Filed
• 09/28/2012

• Enforcement Agency
• SEC

• Foreign Official
• Not stated.

• Date of Conduct
• 2005 to 2010

• Nature of Business
• Subramanian Krishnan, a resident of Minnesota, was the chief financial officer of Digi International, Inc., a global hardware technology company headquartered in Hopkins, Minnesota. Digi’s common stock is registered with the SEC and traded on the NASDAQ exchange.

• Influence to be Obtained
• According to the complaint, Krishnan approved expenses submitted by himself and other Digi employees that lacked a business purpose. At Digi, Krishnan oversaw the internal controls through which employees submitted expenses. These systems processed travel and entertainment expenses, including those submitted by employees in Digi’s Hong Kong office. Between 2005 and 2010, Krishnan submitted his own travel and entertainment expenses and then approved them for reimbursement. Some of these expenses had a business purpose, but others were personal. These approvals contravened Digi’s policies, which required approval of Krishnan’s expenses by Digi’s CEO. Separately, Krishnan also approved cash payments in the Hong Kong office that lacked appropriate documentation.
  
  As a result of Krishnan’s failure to enforce Digi’s internal controls, Digi filed inaccurate public disclosures. Specifically, Krishnan told Digi’s outside auditors that he had no knowledge of any fraud at the company, and signed documentation to the same effect. This caused the submission of inaccurate Form 10-K and Form 10-Q documents between 2005 and 2010.

• Enforcement
• On September 28, 2012, the SEC filed a ten-count complaint against Krishnan alleging books and records and internal control violations. The same complaint also alleged violations of Section 17(a) of the Securities Act of 1933, violations of Section 10(b) and 13(b) of the Securities Exchange Act of 1934, and aiding and abetting violations of Section 13(b) of the Securities Exchange Act of 1934.
  
  On July 2, 2013, the SEC announced a settlement with Krishnan. Pursuant to the settlement, Krishnan agreed to a five year ban as an officer or director of a public company from the time of the filing of the complaint and a ban on appearing as an accountant before the SEC, with leave to apply for reinstatement after five years. Krishnan also agreed to pay a $60,000 civil monetary penalty.

• Amount of the Value
• Not stated.

• Amount of Business Related to Payment
• Not stated.

• Intermediary
• Not stated.

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 60,000

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 60,000

Subramanian Krishnan

• Citation
• Securities and Exchange Commission v. Subramanian Krishnan, No. 0:12-cv-02495 (PAM) (JJG) (D. Minn. 2012).

• Date Filed
• 12/28/2012

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• Section 17(a) of the Securities Act of 1933; Section 10(b) and 13(b) of the Securities Exchange Act of 1934.

• Disposition
• Civil Settlement, Civil Settlement

• Defendant Jurisdictional Basis
• Agent of Issuer

• Defendant's Citizenship
• United States

• Individual Sanction
• Five year ban as an officer or director of a public company from the time of the filing of the complaint and a ban on appearing as an accountant before the SEC, with leave to apply for reinstatement after five years; $60,000 civil monetary penalty.