U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18858 / August 26, 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)
FEDERAL JUDGE FINDS DEFENDANT ALFRED LOUIS VASSALLO, JR. IN CONTEMPT OF COURT AND IMPOSES SANCTIONS
The Securities and Exchange Commission announced that on August 11, 2004, U.S. District Judge Irma E. Gonzalez in San Diego issued an order finding defendant Alfred Louis "Bobby" Vassallo, Jr. to be in civil contempt. The court found that Vassallo willfully violated prior orders of the Court designed to assist the Court-appointed permanent receiver over Vassallo's former company, Presto Telecommunications, Inc. ("Presto") of San Diego. The Court's contempt order provides for sanctions against Vassallo of incarceration and monetary compensation to the receiver for losses that Vassallo's past non-compliance has caused. The Commission supported the receiver's contempt application against Vassallo.
The Court's contempt order found that Vassallo, 54, of La Jolla, California, violated the Court's March 9, 2004 Order, which provided, among other things, for Vassallo to transfer control of Presto's 49% interest in Presto Telecomunicaciones, S.A. de C.V. ("Presto Mexico") and Vassallo's authority as legal representative of Presto Mexico to the receiver. The Court's contempt order, modified by Judge Gonzalez on August 13, 2004, provided that by Thursday, August 19, 2004, Vassallo must comply with specific provisions of the Court's prior orders. The Court's contempt order states that should Vassallo fail to strictly comply with the mandates of the contempt order, a warrant will issue for his arrest and he will be incarcerated until compliance is achieved. In a separate order issued on August 19, 2004, the Court imposed a fine of $13,228 on Vassallo as compensation to the receivership estate for losses as a result of Vassallo's contempt, which Vassallo must pay no later than September 10, 2004.
The Commission's complaint against Presto and Vassallo, 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. Further, investors were advised that Presto was a "partner" to and has "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.
Additionally, the complaint alleged 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 use. Vassallo used the misappropriated funds to purchase jewelry and luxury automobiles, to make a down payment on an expensive home, and for mortgage payments, home improvements, political and charitable contributions, and school tuition for his children.
On March 1, 2004, the District Court issued an order that preliminarily enjoins 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. Also on March 1, the District Court granted the other relief that the Commission sought, including an order freezing Presto's and Vassallo's assets, and appointing Thomas F. Lennon as a permanent receiver over Presto. In addition to the preliminary relief granted on March 1, the Commission seeks permanent injunctions, and other relief, including disgorgement and civil penalties, against Presto and Vassallo.