The former chief financial officer of Digi International Inc., Subramanian Krishnan, was charged Friday with securities fraud by the Securities and Exchange Commission for his role in approving unauthorized and questionable expense reports for Digi employees and then hiding his knowledge of those reports with public misstatements to the commission and investors.
Krishnan, who currently is chief financial officer for the Minneapolis-based National Marrow Donor Program, allegedly approved the use of corporate funds for unauthorized personal expenses for more than five years until he left the company in 2010 amid a corporate investigation into possible violations of expense policies overseas.
In a civil lawsuit filed in U.S. District Court in Minneapolis, the SEC said the disputed travel and entertainment expenses “appeared to have marginal, if any, business purpose.” The lawsuit said some of the expenses were for personal matters.
The SEC also said Krishnan, 58, hid the questionable expenses from top executives at Digi, including his own hotel and entertainment expenses, by routing the expense reports through Digi’s Asia Pacific regional office which was based in Hong Kong. As a result, the payments were not approved by the company CEO as required by company policy.
Neither Krishnan of Plymouth nor his attorney were available for comment.
The lawsuit does not identify the types of questionable expenses that were approved by Krishnan nor the amount involved.
An internal investigation by Digi into the expense reporting discrepancies two years ago found violations of company policy and internal controls. Krishnan and three others in the Asia Pacific region were fired or allowed to resign from the company in July, 2010. The government took no enforcement actions against Digi as a result of the improper activities.
The SEC lawsuit says Krishnan’s actions resulted in the filing of inaccurate annual and quarterly reports from March 2005 until May 2010.
In a statement, Digi said, “Digi has not been affiliated with Mr. Krishnan since May 2010 when it became aware of the allegations of his behavior that led to the SEC’s recently filed complaint. The company reported the allegations to the government and has not bee charged with any wrong doing.”
Digi is an international manufacturer of wireless devices including modules, microprocessors and satellite communications products.
Jeffrey Chell, chief executive of the National Marrow Donor Program, said in a statement, “We are aware of the allegations regarding Kris [a nickname] Krishnan’s tenure at Digi International Inc. Kris remains a valued employee.’’
David Phelps • 612-673-7269