U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19368 / September 9, 2005
SECURITIES AND EXCHANGE COMMISSION v. PRESTO TELE-COMMUNICATIONS, INC., AND ALFRED LOUIS VASSALLO, JR. AKA BOBBY VASSALLO, Civil Action No. 04CV00163IEG(WMc) (S.D. Cal. Jan. 27, 2004)
FINAL JUDGMENTS ENTERED IN SEC FRAUD ACTION AGAINST A SAN DIEGO TELECOMMUNICATIONS COMPANY AND ITS PRESIDENT
The Securities and Exchange Commission announced that final judgments have been entered by the United States District Court in San Diego against the defendants in a telecommunications fraud case perpetrated by Presto Telecommunications, Inc. of San Diego, and its president and founder, Alfred Louis "Bobby" Vassallo, Jr., 55, of La Jolla, California. Vassallo and Presto, which purported to be an international telecommunications company "positioned to become Latin America's Premier Integrated Communications Provider," raised over $11 million from the sale of Presto securities.
The Commission's complaint, filed on January 27, 2004 in federal court in San Diego, alleged that the defendants induced more than 800 investors in 42 states to invest in Presto with promises that the company had significant business relationships with AT&T, Sprint, MCI, and Qwest. These four telecommunications companies had purportedly expressed interest in acquiring Presto or in making capital investments in the company. Investors were told that Presto was a "partner" to and had "alliances" with Cisco Systems and Unisys. Investors were also told that the U.S. Commerce Department was lobbying Mexican telecommunications regulators on Presto's behalf, and that their funds would be used to build and operate a telecommunications network in Mexico. According to the complaint, these representations were false. The complaint further alleged that Presto failed to disclose to prospective investors that the license its affiliated entity received from the Mexican government in 1998 was, in fact, the subject of revocation proceedings that commenced in 2001. Additionally, the complaint alleged that while Vassallo and others represented that investor funds would be used to pay Presto's business expenses, primarily fiber optics and equipment, only 16% of investor and company funds were used for equipment and fiber, and Vassallo misappropriated at least $1.2 million of investor and company funds for personal expenses. These expenses include jewelry, luxury automobiles, a down payment on an expensive home, mortgage payments, home improvements, political and charitable contributions, and school tuition for his children. The court appointed Thomas F. Lennon as permanent receiver over Presto.
On August 24, 2005, the District Court entered final judgments of permanent injunction and other relief against Presto and Vassallo. The judgments enjoin Presto and Vassallo from violating the antifraud provisions of Section 17(a) the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and the securities registration provisions of Section 5(a) and 5(c) of the Securities Act. The judgment against Vassallo orders him to disgorge to the receiver $1,263,658.79, representing the amount of his ill-gotten gains as a result of the conduct alleged in the complaint, plus pre-judgment interest of $23,638.97. Vassallo was also ordered to pay civil penalties in the amount of $120,000. Vassallo was further ordered to pay the costs, fees, and expenses incurred by the receiver in the amount of $601,784.77. The judgment against Presto was entered with the consent of the receiver. It specifies that pursuant to one or more plans of distribution to be submitted by the receiver to the court, the funds and assets of the receivership estate, if any, will be distributed to investors less court-approved fees and expenses.
The final judgments against Presto and Vassallo conclude the Commission's action. Administration of the receivership estate will continue.
For further information, see Litigation Release Nos. 18554 (January 28, 2004), 18616 (March 9, 2004), and 18858 (August 26, 2004).