New Jersey deli stock-fraud defendant gets 21 months in prison

A federal judge in Camden, New Jersey, sentenced James Patten to 21 months in prison on Tuesday for securities fraud tied to a stock-manipulation scheme involving Hometown International, the public company that owned a small, unprofitable deli in Paulsboro. Prosecutors said the trading scheme helped give Hometown, whose main asset was Your Hometown Deli, a market capitalization of about $100 million.

Patten, 67, had pleaded guilty in U.S. District Court in Camden. 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, while Patten sought a sentence with no prison time, according to CNBC.

Authorities said Patten and two co-conspirators, Peter Coker Sr. and Peter Coker Jr., admitted they worked to inflate the share prices of Hometown International and E-Waste, a shell company, through manipulated trading. Prosecutors have said the activity artificially lifted Hometown’s stock price by 939% and E-Waste’s by 19,900%.

The purpose, according to prosecutors, was to make both public companies more appealing partners for reverse mergers with private companies seeking to become publicly traded. In such transactions, the public entity can be used as a vehicle for a private company to enter public markets, making the perceived value and trading profile of the public company central to the deal’s appeal.

Co-conspirators have completed sentences

The Cokers have already served their prison terms in the case, CNBC reported. Peter Coker Sr. was sentenced to six months, and Peter Coker Jr. was sentenced to 40 months.

Patten, a North Carolina resident, had a prior conviction unrelated to the deli matter. CNBC reported that he previously served 27 months in prison after a mail-fraud conviction.

Authorities said Patten suggested the creation of Hometown in 2014 as an umbrella corporation when Paul Morina, a former high school wrestling teammate of Patten’s, and another person were discussing opening a deli in Paulsboro. Morina, described by CNBC as a high school principal and prominent wrestling coach, and the other deli owner were unaware of Patten’s plan to manipulate Hometown’s stock, authorities said.

Your Hometown Deli later became widely known in financial circles because of the disconnect between its modest operating business and the market value of its parent company. Hedge fund manager David Einhorn drew attention to Hometown International in an April 2021 client letter that cited the company’s unusual valuation relative to its small deli asset. “The pastrami must be amazing,” Einhorn wrote, according to CNBC.

Federal charges against Patten and the Cokers were filed in September 2022, more than a year after CNBC reported on links between Hometown and E-Waste, prior legal issues involving Patten and Coker Sr., and consulting arrangements that benefited the two men. Your Hometown Deli closed earlier in 2022, CNBC reported.

This story draws on original reporting from CNBC.