FOR IMMEDIATE RELEASE 2002-35 SEC FILES FRAUD CASE AGAINST FORMER PRESIDENT OF IGI INC. COMPLAINT SEEKS PERMANENT BAR AS OFFICER AND DIRECTOR, RETURN OF GAINS FROM STOCK OPTIONS, BONUSES BASED ON FALSE FINANCIAL RESULTS Washington, DC, March 13, 2002 – The Securities and Exchange Commission filed suit today against John P. Gallo, the former president and chief operating officer of IGI Inc., for violations of the antifraud, periodic reporting, record keeping, internal controls and lying to auditors provisions of the federal securities laws. In addition to permanent injunctive relief and civil money penalties, the Commission is seeking a court order that Gallo be permanently barred from acting as an officer or director of any public company and that he disgorge any compensation or trading profits based on misrepresentations of IGI’s financial results. The complaint, filed in U.S. District Court in Camden, N.J., alleges that beginning with fiscal year 1995, and continuing through the third quarter of fiscal year 1997, Gallo engaged in a systematic, fraudulent scheme to inflate IGI’s assets, revenues and net income and to manage the company’s reported earnings. IGI, based in Buena, N.J., manufactures poultry vaccines and other animal health products, pet products, and cosmetics and skin care products, among other things. The complaint seeks an order that Gallo prepare an accounting of (a) all compensation and other remuneration he received as a result of IGI fraudulently misrepresenting that it had attained or exceeded any revenue, net income or other performance targets for fiscal years 1995, 1996 and 1997, including all bonuses or stock options he received, and (b) profits from all sales by him of IGI securities between Jan. 1, 1995, and Nov. 17, 1997, and from the sale of IGI securities resulting from his exercise of stock options after Nov. 17, 1997. Finally, the Commission’s complaint seeks an order that Gallo disgorge all such compensation, remuneration and trading profits, with prejudgment interest, and surrender to IGI all unexercised stock options. The complaint alleges that from fiscal year 1995 through the third quarter of fiscal year 1997, Gallo directed various former officers of the company not to record properly the costs associated with reductions in IGI’s inventory for large quantities of poultry vaccine that either were destroyed or were defective and could not be sold. The complaint alleges that in connection with these fraudulent inventory practices, Gallo directed IGI’s former chief financial officer to improperly account for destroyed or defective poultry vaccines as inventory reserves, instead of writing them off as the losses were realized in conformity with Generally Accepted Accounting Principles. The complaint alleges that Gallo decided how much defective poultry vaccine would be destroyed and directed the former chief financial officer to adjust inventory reserve balances to achieve his desired financial results. The complaint alleges that Gallo directed the former vice president of operations and the former manager of international sales to record revenue from the sale of IGI products prior to shipment in order to fraudulently increase IGI’s revenues and to manipulate its earnings. The complaint alleges that Gallo directed these individuals and the former chief financial officer to hold IGI’s books open after the quarter had ended and then directed the former vice president of operations and the former manager of international sales to backdate sales invoices and shipping documents. According to the complaint, Gallo also directed the former vice president of operations and the former manager for international sales to delay approval of large sales credits until revenue levels were high enough to allow write- offs of the credits without affecting the company’s ability to announce realization of its quarterly earnings targets. Finally, the complaint alleges that in connection with the annual audits of IGI’s financial statements for fiscal years 1995 and 1996, Gallo signed IGI’s management representation letters, later given to IGI’s independent auditors, that he knew, should have know, or was reckless in not knowing were materially false and misleading. The complaint alleges that as a result of Gallo’s fraudulent conduct, IGI materially overstated its assets, revenues and net income for fiscal years 1995 and 1996, the interim quarters thereof, and for the first three quarters of fiscal year 1997, and IGI filed materially false and misleading reports and financial statements with the Commission for fiscal years 1995 and 1996, and for the first three quarters of fiscal year 1997. The complaint alleges that Gallo violated and/or aided and abetted violations of Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2. [SEC v. John P. Gallo, Civil Action No. 02-1087 (SMO)(D.N.J.)] (LR-17410) (March 13, 2002) In related actions, the Commission filed a settled antifraud injunctive action against Lawrence N. Zitto, IGI’s former vice president of operations (Civil Action No. 02- 1088); and a settled civil penalty proceeding against Donald J. MacPhee, IGI’s former chief financial officer (Civil Action No. 02-1089). The Commission also instituted and simultaneously settled administrative cease-and-desist proceedings against IGI, MacPhee, William Dickson, IGI’s former production manager for poultry vaccines, and Stephen Collins, IGI’s former manager of international sales. (LR- 17410) (March 13, 2002) Contact Persons: Linda Chatman Thomsen, Deputy Director (202) 942-4501 Christopher R. Conte, Assistant Director (202) 942-4579 # # #