Securities and Exchange Commission Washington, D.C. LITIGATION RELEASE NO. 14976 / July 9, 1996 SECURITIES AND EXCHANGE COMMISSION v. SHIMON GIBORI and HENRY VOGEL, United States District Court for the District of the District of Columbia, Civil Action No. 94 Civ. 0607 (EGS) The Securities and Exchange Commission today announced that on July 5, 1996 the United States District Court for the District of Columbia entered a final judgment against Shimon Gibori, the founder and former chief executive officer and president of the now-defunct Gil-Med Industries, Inc., which enjoins him from violating the federal securities laws and permanently prohibits him from serving as an officer or director of any publicly held company which files reports with the Commission. The complaint alleges that Gil-Med, a small Illinois-based manufacturer and distributor of plastic medical products, initially offered its common stock to the public in March 1988. According to the complaint, Gibori caused Gil-Med's underwriter to "park" over twenty percent of its initial public offering in certain accounts in order to give the impression that the offering was successfully closed. Thereafter, Gibori used $705,000 of the offering proceeds from bona fide purchasers -- over half of the actual total -- to purchase, for $475,000, the parked Gil-Med stock and to purchase $230,000 of outstanding convertible Gil-Med debt securities. The complaint alleges that Gibori also misappropriated related debt securities worth another $225,000 and later misappropriated from other Gil-Med investors 320,000 shares of Gil-Med stock which he sold, without registration, for approximately $750,000. The complaint alleges that Gibori began issuing counterfeit Gil-Med stock shortly after Gil-Med became a publicly traded company. According to the complaint, from June 1988 through 1990, Gibori issued approximately 2,000,0000 counterfeit shares and sold them to the public, without registration, for approximately $2,500,000. The complaint alleges that Gibori created this stock by backdating and printing names of fictitious nominees as well as real persons on blank, unauthorized stock certificates which Gil-Med had used before going public. In this way, according to the complaint, Gibori sold approximately 400,000 shares of counterfeit stock and sold approximately 1,600,000 shares of nominee stock to the public through broker- dealers. The Commission alleges that Gibori funneled substantial ==========================================START OF PAGE 2====== amounts of proceeds from the sales of his nominee stock improperly into Gil-Med, accounting for these proceeds as revenue from sales of Gil-Med products. The Commission further alleges that, in an effort to account for the counterfeit stock and fictitious revenues, and to make Gil-Med appear financially successful, Gibori created and forged documents showing fictitious business entities and transactions. According to the Commission, one such fictitious transaction involved a purported $2.2 million loan to Gil-Med from Technology Products, Ltd., one of Gibori's shell companies, for the purchase of equipment costing about $2 million; in fact, there had been no such loan and Gil-Med had only paid about $131,000 for the equipment. This fictional transaction substantially inflated Gil-Med's assets after Gibori, acting through his shell company, "converted" the fictitious debt to account for over 1,200,000 shares of counterfeit stock. According to the Commission, Gibori fraudulently used this over-valued equipment as collateral to obtain two business loans in excess of $1.3 million. Gil-Med defaulted on both loans. According to the complaint, Gil-Med's public filings with the Commission contained material misrepresentations and omissions concerning Gibori's fraudulent activities. Despite Gibori's efforts to finance Gil-Med through his sales of counterfeit stock, Gil-Med collapsed in February 1991 and was dissolved by the State of Illinois in March 1991. For other information related to this matter, see Litigation Release No. 14025.