New Jersey deli fraudster James Patten sentenced to prison

James Patten, who helped orchestrate a stock manipulation scheme that led to a company that owned a single money-losing New Jersey deli being valued at $100 million, was sentenced to 21 months in prison on Tuesday.

Patten, 67, asked Judge Christine O’Hearn to sentence him to no time in prison at a hearing in U.S. District Court in Camden, New Jersey, the same court where he had pleaded guilty to securities fraud and conspiracy in December 2023.

But O’Hearn repeatedly cited Patten’s prior federal fraud conviction and related 27-month prison sentence, before saying the Winston-Salem, North Carolina resident deserved another prison term for the deli stock fraud.

The judge noted that Patten set in motion the deli scheme while still on supervised release for his prior conviction, less than two years after his release from prison, and while he still owed restitution in the first case.

“This is his idea,” O’Hearn said.

However, the judge said that Patten’s cooperation with federal authorities in investigating the case since his 2022 arrest had been “substantial” and “useful” in prosecuting his two co-conspirators, Peter Coker Sr. and Peter Coker Jr., who both pleaded guilty. She also noted his cooperation could help possible future prosecutions against others involved in the scheme.

Patten, a former stockbroker, is the last of three defendants to be sentenced in the securities fraud case involving the deli-owning company, Hometown International, and a shell company, E-Waste.

“I stand today before you to apologize, to take full responsibility for my actions,” Patten told the judge.

He choked up as he said he was “deeply sorry” for the effect of his crime on his family, and on youths he coached in wrestling.

“There is no excuse,” he said.

As he walked out of court with his partner and three sisters, Patten told CNBC, “I have no comment.”

Patten will remain free until the Bureau of Prisons sets a surrender date. His attorney, Adam Brody, asked O’Hearn to recommend that Patten be allowed to serve his sentence at the federal prison in Butner, North Carolina.

In addition to his 21-month prison term, Patten must serve three years of supervised release. He also is jointly responsible with his co-defendants for more than $5.5 million in restitution for losses by investors.

Those investors included retail buyers of the stocks for which Patten executed coordinated, fraudulent trades to boost their companies’ valuations, as well as Duke and Vanderbilt universities. The two schools are owed about 95% of the restitution.

Patten’s co-conspirators, Coker Sr. and Coker Jr., have already served their prison sentences, which were six months and 40 months, respectively.

The U.S. Attorney’s Office in New Jersey had requested a prison term of between 12 to 18 months for Patten.

“This was a serious offense,” Assistant U.S. Attorney Aaron Webman told O’Hearn.

But Webman successfully argued that O’Hearn should depart sharply from federal sentencing guidelines, which suggested that Patten serve between 70 to 87 months in prison. The prosecutor noted Patten’s cooperation, his good behavior while free awaiting his sentencing, and his subordinate role to the Cokers in the scheme.

Patten and the Cokers admitted to plotting to drive up the share price of Hometown International, which owned the Your Hometown Deli in Paulsboro, New Jersey, and E-Waste through manipulated stock trading.

As a result, Hometown and E-Waste’s stock prices were artificially inflated by 939% and 19,900%, respectively, prosecutors have said.

The goal of the scheme was to make both companies more attractive candidates for reverse mergers with private companies that wanted to become publicly traded. Both companies later were used for reverse mergers.

In 2014, Patten suggested the creation of Hometown as an umbrella corporation to a former high school wrestling teammate, Paul Morina, who was discussing opening a deli in Paulsboro at the time with another person. Morina and his fellow deli owner were unaware of Patten’s scheme to manipulate Hometown’s stock, authorities have said.

Morina is a high school principal and renowned wrestling coach.

Charges were filed against Patten and the Cokers in September 2022, more than a year after CNBC detailed a series of questionable connections between Hometown and E-Waste, Patten’s prior criminal and civil court issues, as well as those of Coker Sr., and consulting deals with the companies that benefited those two men. Your Hometown Deli closed earlier in 2022.

CNBC’s reporting was kicked off by a client letter that hedge fund manager 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 must be amazing,” Einhorn wrote in that letter.