A man involved in a reckless scheme to manipulate the stock price of the parent company of a New Jersey deli pleaded guilty to securities fraud on Wednesday.
James T. Patten, 64, of North Carolina, pleaded guilty to orchestrating a series of fraudulent trades in an apparent bid to enrich himself and two co-defendants in US District Court in Camden, NJ
Mr. Patten faces up to 20 years in prison and fines of up to $5 million for securities fraud. He also pleaded guilty to conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a fine of up to $250,000.
Mr. Patten’s lawyer, Ira Lee Sorkin, said in an interview Wednesday that attention to the case had been “exaggerated beyond any understanding — that it was about a $100 million fraud involving a delicacy.” He said prosecutors made “no mention” of any “ill-gotten gains.”
The scheme began in 2014, prosecutors said, when Mr. Patten to open Your Hometown Deli in Paulsboro, NJ The shop sold Philadelphia cheesesteak sandwiches, groceries and other ready-to-eat foods, according to regulatory filings.
Around 2019, Mr. Patten and two associates — Peter Coker Sr. and Peter Coker Jr. — had “conducted a calculated scheme” to take control of the deli’s parent company, Hometown International, the US attorney’s office in New Jersey said.
The group used accounts owned by others to make coordinated trades using stock from Hometown International and E-Waste, another company controlled by the three men. This gave the “false impression that there was genuine market interest in the stock,” causing its price to rise, the US attorney’s office said.
The scheme caught the attention of merchants in 2021 when Hometown International’s value rose to $113 million, even though the small deli’s revenue was just $13,976.
“The pastrami must be amazing,” David Einhorn, a hedge fund manager, wrote in a memo to investors after noting the soaring prices and issuing a warning about the stock market’s frothy conditions.
E-Waste’s stock was inflated by 19,900 percent, the US attorney’s office said.
News of Your Hometown Deli’s high valuation made front pages around the world as investors warned it could be a scam.
Sentencing is scheduled for April 23. The elder Mr. Coker, who was arrested in late 2022, is awaiting trial. His son was arrested in January.
