Three men charged with defrauding a New Jersey deli in $100 million

Three men were charged with fraud and other crimes in a scheme that involved a company that was worth $100 million on the stock market despite having just a small-town deli in New Jersey, federal authorities said Monday.

The three men – James Patten, 63, of Winston-Salem, North Carolina; Peter Coker Sr., 80, of Chapel Hill, North Carolina; and Peter Coker Jr., 53, of Hong Kong — were charged with 12 counts, including conspiracy to commit securities fraud, securities fraud and conspiracy to manipulate securities prices. Patten and Coker Sr. was arrested on Monday. Coker Jr. is still at large.

Federal prosecutors said Patten is also charged with four counts of securities manipulation, four counts of wire fraud and money laundering. The men were also accused of market manipulation by the US Securities and Exchange Commission.

Your Hometown Deli, the business at the center of the probe, was located in Paulsboro, New Jersey, across the Delaware River from Philadelphia. The deli, acclaimed for its cheesesteaks and Italian subs, made less than $40,000 in annual revenue and closed earlier this year. The parent company, Hometown International, had merged with a bioplastic company. E-Waste also merged with another company last year.

The controversy surrounding Your Hometown Deli and the people involved in it led to questions about whether the parent company was operating within the law. The charges are also linked to the men̵[ads1]7;s involvement in another shell company called E-Waste.

The $100 million New Jersey deli, as Your Hometown Deli was known, was first brought to the public’s attention by investor David Einhorn in a letter to customers. CNBC reported further on the company, including by uncovering more details about the company’s then-CEO, Paul Morina, a legendary wrestling coach in southern New Jersey.

Patten, one of the men charged in the scheme, wrestled in high school with Morina. Prosecutors said Patten convinced the owners of the deli, which was established in 2014, to put it under the control of an umbrella company, called Hometown International.

“Unbeknownst to the deli owners, almost immediately after Hometown International was formed, Patten and his associates began positioning Hometown International as a vehicle for a reverse merger that would bring substantial profits to them,” prosecutors said in a news release.

In 2019, Hometown International began selling shares on what is known as the OTC Marketplace, where shares of small companies are traded.

“Shortly thereafter, Patten, Coker Sr. and Coker Jr. undertook a calculated scheme to wrest control of Hometown International’s management and its stock from the deli owners,” prosecutors said. The men took similar actions to take control of another small company, E-Waste, prosecutors said. That company’s stock also rose, even though it had no real business, according to the CNBC report.

Prosecutors said the tactic “artificially inflated” the values ​​of Hometown International and E-Waste shares by 939% and 19,900%, respectively.

As of last year, Patten was barred by FINRA, the broker-dealer regulator, from acting as a stockbroker or associating with broker-dealers. He was the subject of repeated FINRA disciplinary actions. In 2006, he successfully appealed sanctions issued by an SEC judge in a case in which he was accused of manipulating the price of a stock listed on the Nasdaq. Patten was defended in that case by Ira Sorkin, who was best known for representing Ponzi kingpin Bernie Madoff.

Cokers and Patten face high prison terms and fines. The securities fraud and securities manipulation counts carry a maximum penalty of 20 years in prison and a $5 million fine. The charges of electronic fraud and money laundering also carry a maximum sentence of 20 years in prison. The conspiracy to commit securities fraud and the conspiracy to manipulate securities prices each carry a maximum sentence of five years in prison.

Coker Jr. and Sr. are father and son. CNBC had previously reported on their business dealings and other mishaps.

Read the full indictment here.