Prosecutors seek 12 to 18 months for deli stock case defendant

Federal prosecutors in New Jersey have asked a judge to sentence James Patten to 12 to 18 months in prison for securities fraud tied to a stock manipulation scheme involving Hometown International and E-Waste. The request is far below the 70-to-87-month advisory range cited by the U.S. Attorney’s Office in a court filing.

Patten, a 65-year-old North Carolina resident and former stockbroker, pleaded guilty in late 2023 and has remained free while awaiting sentencing. U.S. District Judge Christine O’Hearn is scheduled to sentence him in Camden, New Jersey, on July 21.

The case drew attention because Hometown International, one of the companies involved, owned a single unprofitable deli in Paulsboro, New Jersey, while its market value at one point exceeded $100 million. The deli, Your Hometown Deli, was operated by a high school wrestling coach who was a friend of Patten and has not been accused of wrongdoing, according to prosecutors.

Prosecutors said the scheme also involved E-Waste, described in the filing as a shell company that at one stage reached an even higher market capitalization. The government said the shares of both thinly traded companies were artificially inflated to make them more attractive for reverse mergers.

A reverse merger allows a private company to become publicly traded by combining with an existing public entity, often a shell company. In this case, prosecutors said the manipulated valuations were used to improve the appearance of the public companies before merger activity.

Two co-defendants, Peter Coker Sr. and Peter Coker Jr., previously pleaded guilty in the same case. Coker Sr. received a six-month prison sentence, while Coker Jr. received 40 months, according to prosecutors. Both have since served their terms.

In the public portion of the filing, the U.S. Attorney’s Office pointed to federal sentencing law that calls on courts to avoid unwarranted disparities among defendants with comparable records and conduct. Prosecutors wrote that a sentence harsher than those imposed on Patten’s co-defendants, especially Coker Sr., would be unfair.

Part of the government’s reasoning remains sealed. Three pages of the 11-page sentencing submission are redacted, including material explaining why prosecutors believe the court should depart sharply downward from the advisory guidelines.

New Jersey federal court rules provide that sentencing submissions are not public unless a request is made. Before public release, prosecutors and defense lawyers must discuss redactions for non-public information, including victim and witness names, undisclosed cooperation by defendants or others, and sensitive personal information such as medical or psychological reports. The public filing does not identify which category applies to the redacted material.

Prosecutors also cited Patten’s criminal history as a reason for incarceration. The filing says he was convicted of mail fraud in 2010, sentenced to 27 months in prison and released in 2012, about two years before the conspiracy began. Prosecutors wrote that his return to fraud soon after serving roughly two years in prison was troubling.

The government said investor losses were estimated at nearly $5 million, including consulting fees paid to the Cokers and Patten. Prosecutors described Patten’s role as important, while also saying he acted as an employee of Coker Sr. and at his direction.

The filing also states that at least two other potential defendants will face no legal consequences. The U.S. Attorney’s Office did not immediately respond to a request for comment, and Patten’s lawyer, Adam Brody, declined to comment.

This story draws on original reporting from CNBC.