From WikiGTA - The Complete Grand Theft Auto Walkthrough
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The chisel can be used as a weapon in GTA Liberty City Stories. It isn't as strong as the Knife, but this doesn't mean a stab with it won't be painful.
Besides Toni nobody will use this weapon, apart from our motor devil Wayne. He won't attack you very quick with it when you get him off his bike in the mission Biker Heat, because he will first counter you with his deadly stubby shotgun. When he runs dry, he will switch to his secondary weapon. This will be his chisel.