I'm with mst. It's not lying when you fail to point out the flaws in your own pitch. If the prospect asks, "do these screen shots actually exist in code" and you say "yes", you're a liar; if they don't ask at all, they don't care.
I got a little skeeved out at "development is coming along nicely", just like you, but the solution to that is just to choose better words. They could simply have said "design is coming along nicely", nobody would have cared, and they'd have the exact same outcome. So while you're right that those were unfortunate words, it's hard for me to get too bent out of shape about them.
There isn't enough information in the story to know what was really going on. Some possible contexts are a lot more venial than others. I think what irritated me was just the gloating tone of "we sure put one over on them"... but perhaps they didn't mean it that way.
I got a little skeeved out at "development is coming along nicely", just like you, but the solution to that is just to choose better words. They could simply have said "design is coming along nicely", nobody would have cared, and they'd have the exact same outcome. So while you're right that those were unfortunate words, it's hard for me to get too bent out of shape about them.