Three men have been charged with fraud and other crimes in connection with a scheme involving a company that was worth $100 million on the stock market when it had only a small New Jersey deli in its name, federal authorities announced on 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 – have been charged with 12 counts, including conspiracy to commit securities fraud, securities fraud and conspiracy to manipulate securities prices . Patten and Coker Sr. were arrested on Monday. Coker Jr. is still at large.
Federal prosecutors said Patten was also charged with four counts of securities manipulation, four counts of wire fraud and one count of money laundering. The men have also been charged with market manipulation by the United States Securities and Exchange Commission.
Your Hometown Deli, the business at the center of the investigation, was located in Paulsboro, New Jersey, across the Delaware River from Philadelphia. The deli, praised 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 bioplastics company. E-Waste also merged with another company last year.
The controversy surrounding Your Hometown Deli and those involved has sparked questions about whether its parent company is operating within the law. The charges also relate to the men’s involvement with another front company called E-Waste.
The $100 million New Jersey delicatessen, under the name Your Hometown Deli, was first brought to public attention by investor David Einhorn in a letter to customers. CNBC reported further on the company, including digging up more details about then-CEO Paul Morina, a legendary high school wrestling coach in southern New Jersey.
Patten, one of the men charged with the scheme, wrestled in high school with Morina. Prosecutors said Patten convinced the owners of the grocery store, which was established in 2014, to place it under the control of an umbrella company, called Hometown International.
“Unbeknownst to the deli owners, almost immediately after the formation of Hometown International, Patten and his associates began positioning Hometown International as a vehicle for a reverse merger that would yield them substantial profits,” prosecutors said in a statement. communicated.
In 2019, Hometown International began selling stocks on what is known as the OTC market, where small company stocks are traded.
“Shortly thereafter, Patten, Coker Sr. and Coker Jr. embarked on a calculated scheme to take control of the management of Hometown International and its actions with deli owners,” prosecutors said. The men took similar steps to take control of another small business, E-Waste, prosecutors said. Shares of that company also surged, even though it had no real business, according to CNBC’s information.
Prosecutors said the tactic “artificially inflated” the stock values of Hometown International and E-Waste by 939% and 19,900%, respectively.
Since last year, Patten has been banned by FINRA, the brokerage regulator, from acting as a stockbroker or associating with brokers. He has been subject to repeated disciplinary action by FINRA. In 2006, he successfully appealed penalties imposed by an SEC judge in a case where he was accused of manipulating the price of a stock listed on the Nasdaq. Patten was defended in this case by Ira Sorkin, who was best known for representing Ponzi scheme kingpin Bernie Madoff.
The Cokers and Patten face heavy prison sentences and fines. The counts of securities fraud and securities price manipulation carry maximum penalties of 20 years in prison and a $5 million fine. Counts of wire fraud and money laundering also carry maximum penalties of 20 years in prison. Conspiracy to commit securities fraud and conspiracy to manipulate securities prices are each punishable by up to five years in prison.
Coker Jr. and Sr. are father and son. CNBC previously reported on their business dealings and other mishaps.
Read the full indictment here.