U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18616 / March 9, 2004
SECURITIES AND EXCHANGE COMMISSION v. PRESTO TELECOMMUNICATIONS, INC., AND ALFRED LOUIS VASSALLO, JR. AKA BOBBY VASSALLO, Civil Action No. 04CV00163IEG(POR) (S.D. Cal. Jan. 27, 2004)
COMMISSION OBTAINS PRELIMINARY INJUNCTION IN $11 MILLION SECURITIES FRAUD IN SAN DIEGO
On March 1, 2004, the Securities and Exchange Commission ("Commission") obtained a preliminary injunction in a securities fraud scheme perpetrated by Alfred Louis "Bobby" Vassallo, Jr., 53, of La Jolla, California, and his company, Presto Telecommunications, Inc. ("Presto") of San Diego. Presto, which purports to be an international telecommunications company "positioned to become Latin America's Premier Integrated Communications Provider," raised over $11 million from the sale of securities. Also on March 1, 2004, the U.S. District Court for the Southern District of California granted the other relief that the Commission sought, including an order freezing Presto's and Vassallo's assets, and the appointment of Thomas Lennon as a permanent receiver over Presto.
The Commission's complaint, filed on January 27, 2004 in federal court in San Diego, alleges that the defendants induced more than 800 investors in 42 states to invest in Presto with promises that the company has 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. Further, investors were advised that Presto is a "partner" to and has "alliances" with Cisco Systems and Unisys. Finally, investors were 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. Additionally, the complaint alleges that while Vassallo and others have represented that investor funds would be used to pay Presto's business expenses, primarily fiber optics and equipment, in fact only 16% of investor and company funds were used for equipment and fiber, and Vassallo himself has misappropriated at least $1.2 million in investor and company funds for personal expenses. These expenses included 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 complaint further alleges that Presto failed to disclose to prospective investors that the license its affiliated entity received from the Mexican government in 1998 to operate a commercial telecommunications network in Mexico was, in fact, the subject of revocation proceedings that commenced in 2001.
The Court's orders of March 1, 2004 preliminarily enjoin Presto and Vassallo from future violations of the registration and antifraud provisions of the federal securities laws, Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the preliminary relief granted on March 1, 2004, the Commission seeks permanent injunctions, and other relief, including disgorgement and civil penalties against Presto and Vassallo.