Hometown Deli, Paulsboro, NJ
Mike Calia | CNBC
Federal prosecutors in New Jersey want the Securities and Exchange Commission to delay their civil suit against the alleged masterminds behind a $100 million fraud scheme involving a small-town deli so it doesn’t get in the way of their ongoing criminal case.
Prosecutors for the District of New Jersey filed a motion Wednesday saying the SEC’s case “overlaps materially” with their ongoing criminal case and the civil case should be deferred until the litigation, including a possible trial, is resolved , according to court documents.
Postponing the civil trial would preserve “the integrity” of the ongoing prosecution by preventing the defendants from seeing the extent of the government’s evidence against them, federal prosecutors argued in the filing.
During the investigative phase in both civil and criminal cases, defendants have the opportunity to see the evidence that will be used against them in the court case, but they have access to far more civil case materials as the boundaries are broader.
The SEC and the suspects’ attorneys approved the request, which is usual in such cases. Judge Christine O’Hearn has yet to rule on the matter.
A conference call in the criminal case is scheduled for December 14, but it is expected to be primarily procedural and give prosecutors and defense attorneys an opportunity to update the judge on the progress of the litigation.
In September, James Patten and father-and-son duo Peter Coker Sr. and Peter Coker Jr. were arrested and charged with securities fraud for allegedly staging a scheme to inflate the prices of two publicly traded companies, Hometown International and E- Waste Corp, a shell company.
Court sketch by James Patten (left) and attorney Ira Sorkin in NJ District Court in Camden, NJ, October 11, 2022
Source: Elizabeth Williams
Makamer, a bioplastics startup, merged with Hometown International earlier this year.
Although Hometown International’s only asset was Your Hometown Deli, a now-defunct tiny sandwich shop in Paulsboro, New Jersey with annual sales of less than $40,000, the trio used manipulative trading to push its market cap to over $100 million increase, prosecutors said.
The program began when Patten convinced Your Hometown Deli’s owner, respected wrestling coach and local high school principal Paul Morina, to place the restaurant under the control of Hometown International, an umbrella company they founded, according to the prosecutors
“Unknown 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 bring them significant profits,” prosecutors said in a press release.
“Shortly thereafter, Patten, Coker Sr. and Coker Jr. embarked on a calculated plan to gain control of Hometown International’s management and its shares from the delicatessen owners.”
Peter Coker Sr. and his wife, Susan Coker, in NJ District Court in Camden, NJ, October 11, 2022
Source: Jerry Frasier and Vinny Castaldo
The men hatched a similar plan to take control of e-waste. The tactic artificially inflated the values of Hometown International and E-Waste stocks by 939% and 19,900%, respectively, prosecutors said.
Coker Sr. and Patten have both pleaded not guilty.
Patten’s attorney Ira Sorkin, the high-profile trial attorney who once represented notorious Ponzi scammer Bernie Madoff, did not comment when asked if the case should go to trial.
Coker Sr.’s attorney, Marc Agnifilo, who previously defended “pharma brother” Martin Shkreli and disgraced film producer Harvey Weinstein, could not be reached. It’s not clear if Hong Kong-based Coker Jr. has an attorney and he remains a fugitive. Morina did not respond to a request for comment.
Patten, Coker Sr. and Coker Jr. were charged just over a year after hedge fund manager David Einhorn exposed Hometown International’s dodgy stocks in a letter to clients warning of the dangers to retail investors.
“Someone referred us to Hometown International (HWIN), which owns a single deli in rural New Jersey… HWIN reached a market cap of $113 million on February 8th. The largest shareholder is also the CEO/CFO/treasurer and a principal who also happens to be the high school’s wrestling coach alongside the deli,” Einhorn said in the April 2021 letter. “The pastrami must be amazing.”
After news of the indictment broke, he quipped on Twitter: “I think the pastrami wasn’t that great.”
