James Murphy, Robert Lockwood and Gilboa Peretz; Emanuel Pinez

Litigation Release No. 16725 / September 26, 2000

Accounting and Auditing Enforcement 1310 / September 26, 2000

SEC v. James Murphy, Robert Lockwood and Gilboa Peretz, Civ. Action No. 00CV11981-PBS (D. Mass., filed September 26, 2000); SEC v. Emanuel Pinez, Civ. Action No.97cv10353-PBS (D. Mass. D. Mass., 3^rd Amended Complaint filed September 26, 2000)

EMANUEL PINEZ, FORMER CEO OF CENTENNIAL TECHNOLOGIES, AGREES TO PAY $5.3 MILLION FROM ILLEGAL TRADING IN CENTENNIAL STOCK DURING COURSE OF $40 MILLION FINANCIAL FRAUD AT COMPANY; CENTENNIAL AGREES TO CEASE AND DESIST FROM VIOLATING ANTIFRAUD AND RECORD KEEPING PROVISIONS OF THE SECURITIES LAWS

The Securities and Exchange Commission announced today that it filed civil and administrative actions in connection with the $40 million financial fraud at Centennial Technologies, Inc., a high-technology manufacturer based in Wilmington, Massachusetts. Emanuel Pinez, the founder and former chief executive officer of Centennial, agreed to pay $5.3 million to settle the Third Amended Complaint the Commission filed against him today. In that action, and in a related action the Commission filed today against James Murphy, Centennial's former CFO, and two associates of Pinez's, Gilboa Peretz and Robert Lockwood, the Commission alleged that the defendants participated in a fraud designed to artificially inflate the value of Centennial and its stock. The Commission also alleged that Pinez and Murphy illegally sold Centennial stock while in possession of material nonpublic information that Centennial's earnings, assets and revenue had been significantly overstated. In addition to the injunctive actions, the Commission filed and simultaneously settled an administrative cease-and-desist proceeding against Centennial, charging it with violations of the antifraud, record keeping and internal controls provisions of the federal securities laws.

The civil injunctive actions allege that between April 1994 and January 1997, Pinez and Murphy orchestrated a massive fraud which made Centennial appear significantly more successful than it was. Among other things, they caused Centennial to recognize revenue from invalid or nonexistent sales, to include fake items in inventory and overvalue it in other ways, to make false additions to fixed assets, and to overvalue loans and investments resulting from less-than arms' length transactions. As a result of these improper activities, Centennial overstated its earnings for this period by approximately $40 million: it reported approximately $12 million in profits when, in fact, it actually incurred losses of approximately $28 million. Based upon the false statements about the company's profitability, the stock price increased significantly. It rose 451% in 1996 alone, to $55.50 a share at the end of December, making it the best-performing issue on the NYSE for year. On February 11, 1997, upon discovery of the financial irregularities at Centennial, the company announced that Pinez had been fired and Murphy relieved of his duties. Trading was halted in the company's stock; when it resumed on February 18, 1997, the price of Centennial stock had plunged to slightly over $3 a share.

As part of their fraudulent activities, Pinez and Murphy orchestrated sales of nonexistent products to friends of Pinez's, including sales of a fake product called "Flash 98." Between February and May of 1996, Centennial sold $1.6 million worth of "Flash 98" to a company owned by Robert Lockwood. Despite the fact that the product did not exist, Lockwood paid $1.5 million for the "Flash 98" product that his company had purportedly received. Moreover, he made these payments with funds funneled to him from Pinez, via other intermediate companies.

Centennial improperly recognized an additional $2 million in revenue for December 1996 when Pinez and Murphy directed Centennial employees to ship fruit baskets to various Centennial customers, and to create fake sales documentation to make it appear as if Centennial had actually sold and shipped $2 million of Centennial product. One of the customers who assisted in this scheme was Gilboa Peretz, who accepted a fruit basket delivery as if it were really Centennial product, and falsely acknowledged that his company had purchased and received Centennial products. Another customer was Bond Fletcher, who caused his company, Media Jet, to also accept deliveries of fruit baskets and treated them as if they were real deliveries of Centennial products. In October 1997, the Commission sued Fletcher and Media Jet for aiding and abetting Centennial's violations of the antifraud and record keeping provisions of the federal securities laws. This action was settled in July 1998, when Fletcher and Media Jet consented to the injunctive relief sought by the Commission and agreed to pay approximately $3.2 million of ill-gotten gains received from participating in the fraud. ( SEC v. Fletcher and Media Jet , Civil Action No. 97cv12443 (PBS)(D. Mass.).

In parallel criminal proceedings, Pinez pleaded guilty to one count of securities fraud and on May 17, 2000, the Hon. Joseph L. Tauro, a U.S. District Court Judge in Boston, sentenced Pinez to 5 years imprisonment, which he is currently serving. On June 30, 1998, James Murphy pleaded guilty to eight counts of securities fraud and one count of conspiracy to commit securities fraud. He is currently serving 18 months in a halfway house. After a federal trial, Lockwood was convicted by a jury of one count of conspiracy to commit securities fraud. He is currently serving a 2 year, 3 month prison sentence.

In addition to the civil actions, the Commission announced that it filed and simultaneously settled an administrative proceeding against Centennial, charging it with violations of the antifraud, books and records, and recording provisions of the federal securities laws. The Commission's Order finds that as a result of the practices described above, and others, Centennial materially misrepresented its financial condition and earnings in its public announcements and periodic filings with the Commission for the period of April 1994 through December 31, 1996; failed to make and keep books, records and accounts that accurately and fairly reflected its transactions and dispositions of its assets; and failed to implement procedures designed to provide reasonable assurances that accounting errors would not occur. Simultaneously with the issuance of the Order, the Commission accepted Centennial's Offer of Settlement, in which it agreed, without admitting or denying the findings, to an Order requiring it to cease-and-desist from committing or causing any future violations of Section 17(a) of the Securities Act and Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the ExchangeAct and Rules 10b-5, 12b-20, 13a-1, 13a-13 and 13b2-1 thereunder. In determining to accept the Offer of Settlement, the Commission considered remedial action promptly undertaken by Centennial and cooperation afforded the Commission staff.

For further information, please see, Litigation Release Nos. 16170, 15818, 15605, 15548, 15405, 15399, 15295 and 15258.