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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 15312 / April 2, 1997
Accounting and Auditing Enforcement
Release No. 901 / April 2, 1997
SECURITIES AND EXCHANGE COMMISSION v. CHESTER HOLDINGS, LTD.,
formerly named AQUA BUOY CORPORATION, JOSEPH PIGNATIELLO,
CONSTANCE PIGNATIELLO, and CHRISTOPHER WERNER, 97 Civ. 1654
(D.N.J.) (MTB)
The Securities and Exchange Commission ("Commission")
announced today the filing of a Complaint in the United States
District Court for the District of New Jersey charging a public
company and three of its former officers and directors
("Defendants") with making false statements to the public
concerning the company's financial condition and about certain
businesses and assets that the company acquired. The three
former officers and directors are also charged with obtaining
approximately $2 million in illicit profits by selling the
company's stock at inflated prices.
Named in the Complaint are: Chester Holdings, Ltd. (formerly
named Aqua Buoy Corporation) ("Aqua Buoy"), with its principal
office located in Wayne, New Jersey; Joseph Pignatiello, age 50,
residing in Coral Springs, Florida; Constance Pignatiello, age
40, married to Joseph Pignatiello, and residing in Coral Springs,
Florida; and Christopher Werner ("Werner"), age 34, residing in
Newport, Rhode Island.
According to the Complaint, between March 1991 and October
1992, the Defendants made materially false or misleading
statements in press releases and Commission filings concerning
five acquisitions of assets and businesses by Aqua Buoy.
Specifically, the Defendants allegedly overstated the value of
the consideration paid for the acquisitions, overstated Aqua
Buoy's assets and shareholders' equity in its financial
statements, and made false and misleading statements about the
acquisitions. For example, the Defendants claimed that Aqua Buoy
had acquired certain assets from Lord Jeff Knitting Company, Inc.
("Lord Jeff"), a then-bankrupt sweater manufacturer, for $14
million in securities when, in fact, the Lord Jeff acquisition
was worth no more than $4.9 million. The Complaint also alleges
that Werner made materially false and misleading statements, and
gave misleading documents to, Aqua Buoy's auditor in connection
with audits of Aqua Buoy's financial statements.
The Complaint also alleges that Joseph Pignatiello,
Constance Pignatiello, and Werner sold Aqua Buoy common stock
while knowing the truth about Aqua Buoy's falsely inflated
financial statements and its acquisitions. Specifically, the
Complaint alleges that Joseph Pignatiello and Constance
Pignatiello, through several different brokerage accounts, sold
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approximately 1 million shares of Aqua Buoy common stock and
realized nearly $2 million in illicit profits. The Complaint
also alleges that Werner sold 27,000 shares of Aqua Buoy stock
and realized approximately $74,000 in illicit profits.
The Commission seeks permanent injunctions against the
Defendants, prohibiting further violations of the antifraud
provisions of the Securities Act of 1933 and the Securities
Exchange Act of 1934. The Complaint alleges that Joseph
Pignatiello, Constance Pignatiello, and Werner are liable, as
controlling persons of Aqua Buoy, for Aqua Buoy's false and
fraudulent reporting. The Complaint also demands that Joseph
Pignatiello, Constance Pignatiello, and Werner disgorge their
illicit insider trading profits and pay prejudgment interest on
those illicit profits. The Complaint further demands that Joseph
Pignatiello, Constance Pignatiello, and Werner pay civil monetary
penalties for their fraudulent conduct. Finally, the Complaint
demands that the Court issue an order barring Joseph Pignatiello,
Constance Pignatiello, and Werner from serving as an officer or
director of a public company.
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