A small-town New Jersey deli’s financials early last year looked too good to be true.
Your Hometown Deli of Paulsboro reported less than $40,000 in annual revenue from selling cheesesteaks and Italian subs. But its parent company, Homestead International — which owned nothing but the deli — was valued at more than $100 million, according to public reports.
The business got the attention of federal authorities, and now three men are facing charges for allegedly manipulating the stock price, which skyrocketed from $1 per share in October 2019 to nearly $14 per share just seven months later, the Securities and Exchange Commission (SEC) said Monday.
James Patten, 63, and Peter Coker Sr., 80, both of Chapel Hill, North Carolina, N.C., and Coker’s son Peter Coker Jr., 53, of Hong Kong, “artificially inflated the price” of Homestead International and a related company, E-Waste, through manipulative trading, the SEC’s complaint said.
Hometown’s stock price rose 939% and E-Waste stock rose 19,900%, prosecutors said.
“We allege that the defendants’ brazen schemes resulted in the artificial inflation of the stock price of two publicly traded companies with little to no annual revenues,” Scott Thompson, one of the agency’s associate directors of enforcement, said. “Such manipulative schemes diminish the trust investors must have in the integrity of the markets, and we will pursue those who engage in such wrongdoing.”
The complaint, filed in the U.S. District Court for the District of New Jersey, charged the trio with 12 counts, including securities fraud, wire fraud, money laundering and market manipulation.
Patten and Coker Sr. were arrested and could not immediately be reached, while Coker Jr. is still at large, CNBC reported.
The eatery at the heart of the investigation, Your Hometown Deli, of Paulsboro, a small town on the Delaware River in Gloucester County about nine miles southwest of Philadelphia, shut down earlier this year.
Patten convinced the owners of the deli to put it under the control of Hometown International, officials said.
“Unbeknownst to the deli owners, almost immediately after Hometown International was formed, Patten and his associates began positioning Hometown International as a vehicle for a reverse merger that would yield substantial profit to them,” prosecutors said.
The company’s CEO until he was fired in May 2021 was Paul Morina, principal and wrestling coach at Paulsboro High School. He did not immediately return messages asking for comment.
Patten, who CNBC said wrestled in high school with Morina, could not be reached.
The company first caught the public’s eye last year after hedge fund manager David Einhorn questioned the company’s valuation in a shareholder newsletter.
“The pastrami must be amazing,” Einhorn wrote.
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NJ Advance Media reporter Ted Sherman contributed to this report.
Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com. Follow her on Twitter at @KPMueller.
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