Opera Buff Hornswoggle

In late 1983, U.S. troops invaded and quickly routed the tiny Caribbean island of Grenada on fears that it would become another Cuba.

Today, Grenada is known as home of the most malodorous offshore banks in the Caribbean, and such notoriety is ill fame indeed, since virtually all the secrecy-shrouded banks in that area emit some foul odor.

Now, Grenada may be exacting a small measure of revenge for the U.S. invasion. Its foul banking odors are wafting San Diego's way.

A local company, Presto Telecommunications, and its chief executive, former Texan Alfred Louis "Bobby" Vassallo, are under formal investigation by the U.S. Securities and Exchange Commission. The SEC believes that Presto, which hopes to provide telecom service to Mexico, may have been selling its stock deceitfully and illegally. After Vassallo stalled, the commission finally pinned him down for a sit-down session last week.

A major question -- which the commission refuses to answer -- is whether this investigation is tied to a Federal Bureau of Investigation criminal probe of the now-liquidated First International Bank of Grenada, Ltd. The collapse three years ago of that bank -- if you can call it that -- was the most spectacular in Caribbean banking history and one of the most bizarre in all banking history.

In his final report of June 2, 2002, the court-appointed liquidator of the bank said that it "was a sham from its inception. Funds received by [the bank] were, in the vernacular, proceeds of crime, and are therefore tainted monies." He said he continues to provide information to the FBI. Several years ago, it would have been unthinkable for a small country making money on its offshore banks to cooperate with a foreign investigative agency. But there has been so much heat over worldwide money laundering -- particularly by characters such as Osama bin Laden -- that some countries are reluctantly cooperating.

The bank was offering returns of up to 250 percent a year to investors and plucked about $125 million from the pockets of mainly U.S. suckers. The bank claimed deposits were backed by an insurance operation that turned out to be a total sham. Mortified, Grenada closed down 17 other banks believed to be associated with First International.

With the money it took in, the bank made a handful of investments. Lo and behold, when it collapsed, the bank had 351,459 shares of Presto. The liquidator had a gloomy assessment of Presto's future: "Presto could forfeit its rights to its main asset, as it had no cash flow to develop the license it held," he said.

The liquidator, Marcus A. Wide of the Grenada office of the accounting firm PricewaterhouseCoopers, did get some modest money for the Presto shares. But he gave the San Diego company no vote of confidence by reporting that the bank "had no coherent investment strategy." The bank invested in "pet projects" of senior management, said Wide.

And what a senior management! Investigative reporters who cover Caribbean banks have had a field day with First International Bank of Grenada. In 1994, a mortgage banker and purported minister named Gilbert Allen Ziegler went into bankruptcy and departed for Oregon. In 1997, he established the Grenada Bank.

He got into Grenada with a passport from a country named Melchizedek. Problem: it doesn't exist, except in cyberspace. Ziegler claimed that Melchizedek's boundaries were the entire planet Earth. Then he capitalized the bank with a letter of appraisal on a ruby said to be worth $20 million. Problem: neither Ziegler nor the bank owned the ruby. Then, spewing religious rhetoric, he launched the investment program promising fantastic returns. Money flowed in, but little flowed out. The bank collapsed.

While riding high, Ziegler had changed his name to Van A. Brink -- a name, he said, that had spiritual meaning. The bank plunked $4.5 million into investments in Uganda. After the bank collapsed, Van Brink (a.k.a. Ziegler) disappeared to Uganda, but he kept the bank's Uganda assets.

While Ziegler and the bank were fleecing unsuspecting investors, Vassallo and Presto were hornswoggling their investors, the Securities and Exchange Commission has reason to believe. Since at least 1998, Presto, Vassallo, and their salespersons may have used fraudulent devices to peddle Presto stock, says the commission, noting Presto is not registered with the commission and neither are its securities.

On April 23, the commission served a subpoena to Vassallo, requiring him to testify beginning May 8. On May 8, Vassallo said he had changed attorneys and couldn't make it. Then Vassallo got two additional extensions and wanted a third. Finally he agreed to huddle with commission investigators on July 9 and 10.

The government appears to doubt Vassallo's excuses. On June 19, David S. Brown, staff attorney of the commission, wrote to Irving M. Einhorn of Los Angeles, one of Presto's two attorneys on the matter. "You assured us that Mr. Vassallo would appear for testimony," said Brown's letter. But, he noted, Vassallo first begged off on the grounds that he was meeting with President Bush and President Vicente Fox of Mexico in San Francisco to receive an award. "You never did provide us with any evidence of Mr. Vassallo's invitation to attend any such event."

Later, Vassallo wanted off the hook because he supposedly was meeting with the American ambassador to Mexico. Again, there was no evidence, said Brown's letter testily.

"Now they want evidence. They didn't ask for evidence," insists Einhorn.

The key questions remain: how did Presto's stock wind up in the Grenada bank's portfolio? Did Vassallo or another Presto official know Ziegler and/or his associates? Did a Presto investor plunk Presto stock, rather than cash, into the bank's scam? Did Presto have banking relationships with First International?

Neither Einhorn nor Thomas G. Kimble of Salt Lake City, Presto's second securities lawyer, knew about the Grenada adventure. Kimble promised to find out and call me back in two days. He didn't.

Einhorn says he is not giving the official version, but, "We didn't know the stock was there, don't know how it got there," says Einhorn. Presto told the liquidator that it wouldn't buy back the shares. However, "some of the larger shareholders might have bought it when they were told they could buy it cheap."

Daryl E. Sands of PricewaterhouseCoopers in Grenada confirms that Presto refused to buy the stock, and it was sold to a Presto shareholder. He says the bank originally invested in a company named Automated Telecommunications, which, he believes, was later purchased by Presto. But according to Presto's website, Automated was an earlier name for Presto. So the mysteries remain. Sands, who dealt with Vassallo on the matter, confirms that Presto wouldn't buy back the stock, but a shareholder did.

For several months, I have been getting sketchy reports of unhappy Presto investors. They had been told that the company would go public, but now, as Kimble admits, the company has no revenue, "so it has to rely on private equity capital." That's another way of saying the company is selling its stock instead of its services. It's a road to financial perdition. Kimble insists Presto is close to a business launch. But investors have heard that story for years.

There are many questions about Vassallo. He showed up in San Diego in 1994 and tried to worm into a moribund La Jolla telecom company that later failed. Vassallo noted correctly that the company's head was a disbarred attorney. The company's chief financial officer, in turn, called Vassallo "a hustler and tax-shelter promoter." In the mid-1980s, Vassallo lived in Los Angeles, managing the TV acting career of his wife, Rebecca Holden. Vassallo claimed then, as now, that he had made a fortune in oil heading a company named Texploration. I can't find anything about the company, but that doesn't mean it doesn't exist or has never existed.

Vassallo and Holden got divorced, and he showed up in San Diego with a new wife, Cynthia. Bobby Vassallo talked big and spent big bucks. The two got on the board of the San Diego Opera. They got their pictures in programs and newsletters as sponsors of an opera.

But, says Ian Campbell, general director of the opera, "The Vassallos pledged $100,000 to our January 2002 production of Verdi's Rigoletto but left the board before paying the full amount."