UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

SECURITIES EXCHANGE ACT OF l934
Release No. 45551 / March 12, 2002

ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 1518 / March 12, 2002

ADMINISTRATIVE PROCEEDING
File No. 3-10720

In the Matter of William A. Dickson and Stephen P. Collins, Respondents.

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ORDER INSTITUTING PUBLIC ADMINISTRATIVE PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate to institute public administrative proceedings against Respondents William A. Dickson ("Dickson") and Stephen P. Collins ("Collins"), pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act").

II.

In anticipation of the institution of these public administrative proceedings, Dickson and Collins have submitted Offers of Settlement ("Offers"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except as to the Commission's jurisdiction over them and the subject matter of the proceeding, which are admitted, Dickson and Collins each consent to the entry of this Order Instituting Public Administrative Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order").

III.

On the basis of this Order and the Respondents' Offers, the Commission makes the following findings¹:

A. RESPONDENTS

1. William A. Dickson, age 47, was manager of production of poultry vaccines at IGI. Inc. ("IGI"), a diversified company engaged in producing and marketing animal health products such as poultry vaccines, veterinary pharmaceuticals, cosmetics and skin care products. During 1995, 1996, and 1997, Dickson was also responsible for maintaining IGI's inventory of mareks vaccines ("mareks"), a poultry vaccine that is used to inoculate chickens against cancer. Dickson engaged in improper accounting practices regarding IGI's inventory at the direction of the former President of IGI. In April 1998, IGI terminated Dickson's employment, in part, for his role in the fraudulent accounting practices that caused IGI to overstate its assets, revenues, and net income.

2. Stephen P. Collins, age 45, was manager of international sales and marketing at IGI from 1987 through April 1998. Collins engaged in improper sales cut-off practices and failed to process and record sales credits in a timely manner at the direction of the former President and the former Vice President of Operations of IGI. In April 1998, IGI terminated Collins' employment, in part, for his role in the fraudulent accounting practices that caused IGI to overstate its assets, revenues, and net income.

B. OTHER RELEVANT PERSONS AND ENTITIES

1. IGI, Inc. is located in Buena, New Jersey. IGI's common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act, and is listed for trading on the American Stock Exchange.

2. The President, who was also IGI's Chief Operating Officer, directed Dickson, Collins, and other former IGI officers and employees to engage in fraudulent accounting practices from 1995 through 1997, that caused IGI to overstate its assets, revenues, and net income. IGI terminated the President in November 1997.

C. SUMMARY

This matter involves fraudulent accounting practices and reporting, internal controls, and books and records violations at IGI. In 1995, 1996, and for the first three quarters of 1997, IGI's former President manipulated the company's annual and quarterly earnings by directing Dickson and Collins, among others, to engage in improper accounting practices that caused IGI to overstate its assets, revenues, and net income. Former senior management manipulated IGI's earnings by failing to: (1) write off inventory that was defective or that had been destroyed; (2) record sales revenue in the proper accounting periods; and (3) process and record sales credits in a timely manner. These accounting improprieties primarily concerned IGI's production and storage of mareks, a poultry vaccine that is used to inoculate chickens against cancer.

During the relevant time period, IGI derived most of its revenues from the sale of poultry vaccines, of which mareks was the most important, and other animal health products. At the direction of the former President, Dickson engaged in fraudulent accounting practices regarding IGI's inventory of Mareks vaccines. Also, at the direction of the former President, Collins engaged in fraudulent sales cut-off practices and delayed the recording of sales credits. The former President also directed Dickson and Collins, among others, to falsify the company's books and records, and directed Dickson to withhold records and conceal information from IGI's independent auditors and from the company's accounting staff.²

D. FACTS

1. Overstatement of Inventory and Understatement of
Related Expenses___________________________

From 1995 through the third quarter of 1997, IGI overstated its assets and net income by not recording properly the costs associated with reductions in its inventory for large quantities of mareks vaccines that either were destroyed or that were defective and could not be sold.

At the former President's direction, Dickson, among others, prepared false inventory count tags by including large quantities of defective mareks vaccines in IGI's annual physical inventory count. This inflated IGI's inventory and made it appear that the vaccines were available for sale. Dickson also removed large quantities of defective mareks vaccines from the liquid nitrogen in which they were stored and segregated them for destruction. As a result, vaccines that were defective were not written off the books and IGI's assets and net income were inflated.³

Between 1995 and 1997, Dickson maintained a separate record-keeping system -- a production log book -- for mareks. The production log book represented a more accurate record of the inventory of mareks than IGI's general ledger or perpetual inventory records, which the former assistant controller maintained. Dickson concealed this log book from the former assistant controller and from IGI's former independent auditors during the audits for fiscal years 1995 and 1996.

As a result of Dickson's misconduct, and that of others, involving IGI's inventory, IGI overstated its assets and net income for fiscal years 1995 and 1996, and for the first three quarters of fiscal year 1997.

2. Improper Recognition of Revenue - Sales Cut-off

IGI's revenue recognition policy required that sales revenue be recognized when products were shipped. Contrary to this policy, during fiscal years 1995, 1996, and the first three quarters of fiscal year 1997, IGI routinely recorded sales of its products prior to shipment in order to increase improperly its quarterly and annual revenues and to manipulate its earnings.

At or around the end of each quarter, the former President instructed several subordinates, including the former Vice President of Operations, to hold IGI's books open and to backdate invoices and shipping documents. The former Vice President of Operations then directed Collins to assist him in instructing the sales clerks to backdate the invoices and to record out-of-period sales. This improper practice caused IGI to overstate its revenue at the end of each quarter.

As a result of Collins' misconduct, and that of others, involving sales cut-off practices, IGI misstated its assets, revenues, and net income for fiscal years 1995 and 1996, during each interim quarter thereof,⁴ and for the first three quarters of fiscal year 1997.

3. Failure to Process and Record Sales Credits on a
Timely Basis____________________________

IGI failed to process and record sales credits on a timely basis in fiscal years 1995, 1996, and 1997. By delaying the processing and recording of such credits, IGI misstated its accounts receivable, sales, and net income from 1995 through 1996, and during the first three quarters of fiscal year 1997.

IGI typically issued sales credits to its customers for returned products, for the return of liquid nitrogen containers used to ship mareks, and for promotional allowances. Customers generally sent requests for credits to the sales clerks who prepared credit memoranda. Before entering the credits into IGI's accounting system, the sales clerks sent the credit memoranda to their manager, Collins, and to the former Vice President of Operations for approval.

The former President routinely instructed the former Vice President of Operations and Collins to delay approval of large sales credits until the revenue levels were high enough to allow write-offs of the credits without affecting expected or targeted earnings. Collins followed the former President's and former Vice President of Operations' instructions and delayed approval of large sales credits. In some instances, at the direction of the former President, Collins and the former Vice President of Operations also instructed the sales clerks not to process or record large sales credits at all.

As a result of Collins' misconduct, and that of others, relating to sales credits, IGI misstated its assets, revenues, and net income for fiscal years 1995 and 1996, during each interim quarter thereof,⁵ and for the first three quarters of fiscal year 1997.

E. LEGAL DISCUSSION

Section 10(b) of the Exchange Act, and Rule 10b-5 thereunder, prohibit material misstatements or omissions, made with scienter, in connection with the purchase or sale of securities. SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 860-62 (2d Cir. 1968), cert. denied, 394 U.S. 976 (1969). Scienter is the "mental state embracing the intent to deceive, manipulate or defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 n.12 (1976). A fact is material if there is a substantial likelihood that a reasonable investor would consider the information to be important. Basic, Inc. v. Levinson, 485 U.S. 224, 231-32 (1988). Misrepresentation of a company's earnings, SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (2d Cir. 1968), cert. denied, 394 U.S. 976 (1969), and the improper recognition of revenue in departure from GAAP, see Fin v. American Solar King Corp., 919 F.2d 290, 297, 300-01 (5^th Cir. 1990), may be material.

Issuers must file accurate annual and quarterly reports with the Commission pursuant to Section 13(a) of the Exchange Act, and Rules 13a-1 and 13a-13 thereunder. See SEC v. Savoy Industries Inc., 587 F.2d 1149, 1165 (D.C. Cir. 1978), cert. denied, 440 U.S. 913 (1979). Moreover, Rule 12b-20 requires that reports contain all information necessary to ensure that the statements made in them are not materially misleading.

Section 13(b)(2)(A) of the Exchange Act requires issuers to make and keep books, records, and accounts that accurately and fairly reflect the transactions and dispositions of their assets. Section 13(b)(2)(B) of the Exchange Act requires issuers to devise and maintain a system of internal controls sufficient to provide reasonable assurances that, among other things, transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain the accountability of assets. Section 13(b)(5) provides that no person shall knowingly falsify any such book, record, or account or circumvent an issuer's system of internal accounting controls. Exchange Act Rule 13b2-1 also prohibits, directly or indirectly, the falsification of any book, record, or account subject to Section 13(b)(2)(A) of the Exchange Act.

F. VIOLATIONS BY DICKSON AND COLLINS

As a consequence of the fraudulent practices described above, IGI's Forms 10-K for the fiscal years ended December 31, 1995 and 1996, and its Forms 10-Q for the periods ended March 31, June 30, and September 30, 1997, contained materially false and misleading financial statements that were not prepared in conformity with Generally Accepted Accounting Principles ("GAAP"). IGI also maintained, with respect to fiscal years 1995 and 1996, and for the first three quarters of fiscal year 1997, false and misleading books and records which, among other things, materially overstated its assets, revenues, and net income during those financial reporting periods. Accordingly, IGI violated Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder.

1. Dickson

From 1995 through 1997, Dickson was manager of production for mareks and was responsible for maintaining IGI's mareks inventory. During this time, Dickson reported to IGI's former Vice President of Operations. However, Dickson also took orders directly from the former President, who directed him to engage in improper accounting practices related to IGI's inventory that caused IGI to overstate its assets, inventory, and net income.

In connection with the audit of IGI's financial results for fiscal years 1995 and 1996, Dickson prepared false and misleading inventory count tags, thereby falsifying the annual physical inventory counts that were used to verify the mareks inventory. Dickson also concealed the more accurate production records that he maintained from IGI's accounting staff and from the independent auditors. As a result, IGI overstated its inventory, assets, and net income by failing to write off the bad vaccines from its books. Dickson knew that his actions were improper and that his conduct caused IGI to overstate its financial results.

Accordingly, the Commission finds that Dickson violated Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder, and that he was a cause of IGI's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder.

2. Collins

From 1995 to 1997, Collins participated in the scheme to manipulate IGI's earnings. Upon instructions from the former President and the former Vice President of Operations, Collins directed IGI's sales clerks to backdate invoices and enter them in improper accounting periods, and also to delay the processing and recording of sales credits, (or not process or record them at all) so that the proper adjustments could not be made to IGI's revenues. As a result, IGI overstated its assets, revenues, and net income. Collins knew that his actions were improper and that his conduct caused IGI to overstate its financial results.

Accordingly, the Commission finds that Collins violated Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder, and that he was a cause of IGI's violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder.

IV.

Dickson and Collins have each submitted Offers of Settlement in which, without admitting or denying the findings herein, they each consent to the Commission's entry of this Order, which: (1) makes findings as set forth above; and (2) orders them to cease and desist from committing or causing any violation, or any future violation, of certain provisions of the federal securities laws. As set forth in their Offers, Dickson and Collins each undertake to cooperate with the Commission staff in connection with this action and any related judicial or administrative proceeding or investigation commenced by the Commission or to which the Commission is a party.

V.

Based on the foregoing, the Commission deems it appropriate to accept the Offers submitted by Dickson and Collins and to impose the relief specified herein.

Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that:

A. Dickson cease and desist from committing or causing any violation, and any future violation, of Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder, and that he cease and desist from causing any violation, and any future violation, of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder; and

B. Collins cease and desist from committing or causing any violation, and any future violation, of Sections 10(b) and 13(b)(5) of the Exchange Act, and Rules 10b-5 and 13b2-1 thereunder, and that he cease and desist from causing any violation, and any future violation, of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13 thereunder.

C. IT IS HEREBY FURTHER ORDERED that Dickson and Collins each shall comply with their undertakings described in Section IV. above.

By the Commission.

Jonathan G. Katz
Secretary

Footnotes

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