The SEC said it had filed an emergency lawsuit against Presto Tel...

The SEC said it had filed an emergency lawsuit against Presto Telecom and its Chmn. Alfred Vassallo to halt an alleged $11 million securities fraud in San Diego. The complaint, filed in U.S. Dist. Court, San Diego, charged that the defendants induced more than 800 people in 42 states to invest in Presto by stating falsely that: (1) The company had significant business relationships with AT&T, Sprint, MCI and Qwest, which it said had expressed interest in buying Presto or in investing in the company. (2) It was a “partner” to and had “alliances” with Cisco Systems and Unisys. (3) The Commerce Dept. was lobbying Mexican telecom regulators on Presto’s behalf, and investors’ funds would be used to build and operate a telecom network in Mexico. However, the SEC alleged, only 16% of investor and company funds were used for equipment and fiber, while Vassallo himself had misappropriated at least $1.2 million for personal expenses. It also alleged Presto had failed to disclose to prospective investors that the license its affiliated entity received from the Mexican govt. in 1998 to operate a commercial telecom network there was the subject of revocation proceedings that started in 2001. The SEC seeks preliminary and permanent injunctions and other relief, including disgorgement and civil penalties against Presto and Vassallo. Meanwhile, it said the court had ordered the freezing of Presto’s and Vassallo’s assets, the appointment of a temporary receiver over the company and other relief. 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 Feb. 9.