Key figure in $100 million New Jersey deli stock scheme gets 21 months

James Patten, a central figure in the stock manipulation case tied to a small New Jersey deli, was sentenced Tuesday to 21 months in prison. The case drew attention because a company with a money-losing deli as its main asset reached a market value of about $100 million, according to prosecutors.

Patten, 67, had pleaded guilty to securities fraud in U.S. District Court in Camden, New Jersey. Securities fraud involves deceptive conduct connected to the buying or selling of financial securities, such as stocks.

The U.S. Attorney’s Office in New Jersey had asked Judge Christine O’Hearn to impose a prison term of 12 to 18 months. Patten, a North Carolina resident, had requested no additional prison time, according to CNBC.

Patten’s two co-conspirators, Peter Coker Sr. and Peter Coker Jr., have already completed their sentences. Coker Sr. received six months in prison, while Coker Jr. received 40 months, according to CNBC.

How the deli became a market oddity

The case centered on Hometown International, a public company that owned Your Hometown Deli in Paulsboro, New Jersey, and another company called E-Waste. Patten and the Cokers admitted they worked to push up the share prices of both companies through manipulated trading, prosecutors said.

Prosecutors said Hometown’s stock price was inflated by 939%, while E-Waste’s stock price rose by 19,900% as a result of the scheme. The aim, according to prosecutors, was to make the companies look more appealing for reverse mergers.

A reverse merger is a deal in which a private company becomes publicly traded by combining with an already public company. For a private business, that can be a faster route to the public markets than a traditional initial public offering, though the public company’s value and trading history can be heavily scrutinized.

Authorities said Patten suggested creating Hometown in 2014 as an umbrella company while Paul Morina, a high school wrestling teammate, and another person were discussing opening the deli. Morina, described by CNBC as a high school principal and well-known wrestling coach, and the other deli owner were unaware of Patten’s plan to manipulate Hometown’s stock, authorities said.

Earlier warnings and charges

Federal charges against Patten and the Cokers were filed in September 2022. That came more than a year after CNBC reported on unusual links between Hometown and E-Waste, earlier criminal and civil matters involving Patten and Coker Sr., and consulting arrangements that benefited the two men.

Your Hometown Deli had closed earlier in 2022, according to CNBC.

CNBC said its reporting began after hedge fund manager David Einhorn highlighted Hometown International in an April 2021 client letter. Einhorn pointed to the company’s unusual stock valuation given that its main business was the deli.

“The pastrami must be amazing,” Einhorn wrote in that letter, according to CNBC.

Patten had previously been convicted of mail fraud in an unrelated case and served 27 months in prison, CNBC reported.

This story draws on original reporting from CNBC.