A man involved in a brazen plot 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, admitted to orchestrating a series of deceptive transactions in an apparent attempt to enrich himself and two co-defendants in United States District Court in Camden, New Jersey.
Patten faces up to 20 years in prison and a fine of up to $5 million for securities fraud. He also pleaded guilty to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a fine of up to $250,000.
Patten's attorney, Ira Lee Sorkin, said in an interview Wednesday that the attention paid to the case “was exaggerated beyond any perception: This was about a $100 million fraud involving a deli.” He said prosecutors “had not mentioned” any “ill-gotten gains.”
The scheme began around 2014, prosecutors said, when Patten helped open Your Hometown Deli in Paulsboro, New Jersey. The store sold Philadelphia cheesesteak sandwiches, groceries and other ready-to-eat foods, according to regulatory filings.
Around 2019, Patten and two associates, Peter Coker Sr. and Peter Coker Jr., “undertook a calculated plan” to gain control of the deli's parent company, Hometown International, the U.S. attorney's office said in New Jersey.
The group used others' accounts to make coordinated transactions using shares of Hometown International and E-Waste, another company the three men controlled. This gave “the false impression that there was genuine market interest in the stock,” causing its price to rise, the U.S. attorney's office said.
The scheme caught the attention of merchants in 2021, when Hometown International's value soared to $113 million, even though the small deli made just $13,976 in revenue.
“Pastrami must be amazing,” David Einhorn, a hedge fund manager, wrote in a memo to investors after noting the price rise and issuing a warning about the frothy stock market conditions.
E-Waste shares were inflated by 19,900 percent, the US attorney's office said.
News of Your Hometown Deli's sky-high valuation hit front pages around the world as investors warned it could be a scam.
The 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.
