Your Hometown Deli in Paulsboro, N.J.
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A North Carolina ex-convict pleaded guilty to securities fraud in reference to conspiring to govern the stock of an organization that after had a market capitalization of as high as $100 million despite owning only one, small money-losing deli in southern Latest Jersey.
Disgraced former stockbroker James Patten also admitted on Wednesday in Camden, Latest Jersey, federal court to conspiring with two other men to govern the share price of one other related shell company, which had no tangible assets. That company’s market cap was even higher than the Hometown International deli company the lads controlled.
Prosecutors said that Patten, 64, and the opposite two defendants conspired over eight years to extend the stock price of Hometown International and the shell company E-Waste to create a misunderstanding of demand for the firms’ shares, and higher position them as candidates for so-called reverse mergers with privately owned firms.
Courtroom sketch of James Patten, left, and attorney Ira Sorkin at N.J. District Court in Camden, N.J., Oct. 11, 2022
Source: Elizabeth Williams
The opposite defendants, Peter Coker Sr. and son Peter Coker Jr., remain charged within the case, wherein they’ve pleaded not guilty.
The Cokers and Patten are also being sued over the alleged scheme by the Securities and Exchange Commission. That lawsuit in Latest Jersey federal court has been paused until the resolution of the criminal case.
The scheme relied on a pattern of coordinated stock trading between a comparatively small variety of accounts nominally held by relations, friends and associates, in accordance with court documents.
Because of this, Hometown and E-Waste’s stock prices were artificially inflated by 939% and 19,900%, respectively.
The scheme began in 2014, when Patten suggested the creation of Hometown as an umbrella corporation to a friend, a highschool principal and wrestling coach named Paul Morina, to own Your Hometown Deli, which Morina and one other person were discussing opening in Paulsboro on the time. Morina and the opposite deli owner were unaware of Patten’s scheme to govern Hometown’s stock, authorities have said.
Hometown Deli, Paulsboro, N.J.
Mike Calia | CNBC
Patten’s guilty plea to securities fraud, and conspiracy to commit securities fraud, could well ratchet up pressure on each Cokers to achieve plea deals within the case.
Coker Sr., who lives in North Carolina, stays free on bond, while Coker Jr., a former Hong Kong resident who was arrested as a fugitive in Thailand in January, is being held without bond in a Latest Jersey jail.
Charges were filed against the trio in September 2022, greater than a yr after CNBC detailed a series of questionable connections between Hometown and E-Waste, past criminal and civil court problems with Patten and the elder Coker, and eyebrow-raising consulting deals with the businesses that benefitted those two men. Your Hometown Deli closed earlier in 2022.
CNBC’s reporting was sparked by a client letter that hedge fund mamager David Einhorn sent clients in April 2021, which highlighted Hometown International’s bizarre stock price given its very meager single asset of the deli.
“The pastrami have to be amazing,” Einhorn wrote in that letter.
On the heels of those articles, each Hometown International and E-Waste took the highly unusual step of disavowing their market capitalization, saying there was no basis to support their stock prices. The businesses later executed reverse mergers with other firms.
Peter Coker Sr. and his wife Susan Coker at U.S. District Court in Newark, Latest Jersey, March 15, 2023.
Dan Mangan | CNBC
Patten, who lives in Winston-Salem, faces a maximum possible sentence of 20 years in prison and fines of $5.25 million, but he’s prone to get much lower than that given federal sentencing guidelines.
He’s scheduled to be sentenced on April 23, at which point the opposite 10 securities fraud charges he faced with the Cokers might be dismissed.
His lawyer Ira Sorkin told CNBC, “He admitted that he had engaged in wrongdoing.”
When asked if Patten had agreed to cooperate with prosecutors of their case against the Cokers, Sorkin said, “I’m not going to get into anything.”
Sorkin, who previously represented the notorious late Ponzi scheme mastermind Bernie Madoff, said that Patten’s case was unusual only due to the media attention paid to it.
“The press has are available in and said the pastrami sandwich cost $100 million,” Sorkin quipped.
The attorney said that at sentencing “one can find out” what the pastrami actually cost.
Lawyers for the Cokers have argued that nobody actually lost money within the alleged scheme.
But prosecutors have pointed to the tons of of hundreds of dollars Hometown and E-Waste paid out in consulting fees, and to the funding of the businesses by other individuals who should not charged.
Patten previously pleaded guilty in 2010 in Latest Jersey federal court to a mail fraud charge related to sending a client a false financial plan to cover up bad investments he had made using her money. He was sentenced to 27 months in prison in that earlier case.
4 years earlier, Patten was barred by FINRA, the broker-dealer regulator, from acting as a stockbroker for having did not comply with an arbitration award of greater than $753,000, for violating securities laws, unauthorized trading for churning a client’s account. Sorkin had represented him in that regulatory motion.
Coker Sr. previously was sued for allegedly hiding money from creditors and alleged business-related fraud. He has denied wrongdoing in those cases.
