U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18554 / January 28, 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)
SEC HALTS $11 MILLION SECURITIES FRAUD IN SAN DIEGO
The Securities and Exchange Commission ("Commission") today filed an emergency action to halt an ongoing 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," has raised over $11 million from the sale of stock to date. Also today, the U.S. District Court for the Southern District of California granted the relief that the Commission sought, ordering the freezing of Presto's and Vassallo's assets, the appointment of a temporary receiver over Presto, and other relief.
The Commission's complaint, filed 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 have purportedly expressed interest in acquiring Presto or in making capital investments in the company. Further, investors are advised that Presto is a "partner" to and has "alliances" with Cisco Systems and Unisys. Finally, investors are told that the U.S. Commerce Department was lobbying Mexican telecommunications regulators on Presto's behalf, and that their funds will be used to build and operate a telecommunications network in Mexico.
According to the complaint, these representations are 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 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 complaint further alleges that Presto has 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. Only recently has Presto informed investors that revocation proceedings had begun.
In its lawsuit, the Commission obtained an order freezing the assets of Presto and Vassallo, an accounting, an order preventing destruction of documents, an order appointing a temporary receiver over Presto and temporarily enjoining 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. The Commission also seeks preliminary and permanent injunctions, and other relief, including disgorgement and civil penalties against Presto and Vassallo. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed over the company is scheduled for February 9, 2004, at 11 AM.