State Securities Commissioner Russell Yamashita has issued a cease-and-desist order against Cosmo-Hamano International Inc., its president Robert Masato Enomoto and vice president Shiro Nishimura, saying they sold unregistered securities and misled investors by loaning $267,000 to a California real estate project controlled by Nishimura.

"Basically, they misrepresented to these people that Cosmo-Hamano was in the business of developing environmental waste systems," said Patricia Moy, senior securities enforcement attorney with the state.

Moy filed the order with state Circuit Court on Feb. 18. The order requires court approval.

Enomoto, the company's president, denied wrongdoing, saying the company plans to return investors' money. He said that Cosmo-Hamano ran into difficulties when its waste-processing system - developed in Japan - didn't work.

Enomoto referred questions on the company's stock sales to Nishimura, who Enomoto said was in charge of financing. Nishimura could not be reached for comment.

"It's something we believed in but it didn't turn out right," said Enomoto, who said he lost a significant amount of his own money in Cosmo-Hamano. "Any time you have a failed investment you have all kinds of repercussion."

State business registration records shows that Cosmo-Hamano was founded in 1993 to clean oil sludges, contaminated soils and toxic materials.

The state said the Cosmo-Hamano sold between $385,000 and $500,000 in stock to 21 local investors. The stock was not registered with state regulators.

According to Moy, Cosmo-Hamano loaned $267,000 of investors' money to an Inyo, Calif., real estate project controlled by Nishimura dubbed Tecoba Hot Springs.

The loan was not disclosed to shareholders.

The state filed a preliminary cease-and-desist order against the company in June 1996 but Moy said the company didn't respond and was ruled in default.