U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19093 / February 18, 2005
SEC v. PIGNATIELLO ET AL., 97 Civ. 9303 (SWK) (S.D.N.Y.)
SEC VOLUNTARILY DISMISSES CHARGES AGAINST REMAINING DEFENDANTS IN PENNY STOCK FRAUD
The Securities and Exchange Commission ("Commission") today voluntarily dismissed charges pending in the United District Court for the Southern District of New York against Joseph V. Pignatiello ("J. Pignatiello"), Constance Pignatiello ("C. Pignatiello"), James Manas ("Manas"), John Fasano ("Fasaon"), and Peter Joseph Mazzeo ("Mazzeo") (collectively, the "Defendants"). The Commission determined that the public interest in bringing this action has already been served due to criminal convictions of, and injunctions entered against, the Defendants as a result of their fraudulent actions.
This case arose from the Commission's complex and extensive investigation into widespread misconduct in the over-the-counter market for "penny stocks" or "microcap" securities. In December 1997, the Commission filed a complaint in the Southern District of New York against the Defendants and two other individuals, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on the manipulation of Spaceplex Amusement Centers International, Ltd., Inc. ("Spaceplex") and America's Coffee Cup, Inc. ("Coffee Cup"). Subsequently, the Coffee Cup portion of the original action was severed from the main action, transferred to federal court in Denver, and was recently resolved ("Denver Action"). The Spaceplex portion of the original action remained as SEC v. Pignatiello et al., 97 Civ. 9303 (SWK) (S.D.N.Y.) ("New York Action"). There was also a parallel criminal proceeding based the manipulation of Spaceplex, and, as a result, the Commission's civil action was stayed.
All of the Defendants have been sanctioned as a result of their conduct. Specifically: (a) J. Pignatiello and Fasano, who were charged as direct violators in the New York Action, were criminally convicted in the Spaceplex criminal proceeding and received substantial prison sentences and onerous restitution orders; (b) Manas, who was also charged as a direct violator in the New York Action, cooperated in the criminal proceeding and pled guilty; and (c) the Commission obtained an injunction against Mazzeo in the Denver Action and dismissed its claims against C. Pignatiello and J. Pignatiello on the ground that they were already subject to an injunction and a substantial monetary judgment in a different Commission action. SEC v. Chester Holdings, Ltd., No. CIV. A. 97-1654 (MTB), 41 F. Supp. 2d 505 (D.N.J.).
Based on the relief entered against the Defendants, the Commission has decided to voluntarily dismiss this action because the public interest in bringing this action originally has already been served as a result of various sanctions imposed on the Defendants.