Owners of a small deli are charged with fraud for valuing business at $100 million
Three men have been charged with securities fraud and market manipulation in alleged schemes that temporarily inflated the market value of a tiny New Jersey deli to more than $100 million, according to the U.S. Justice Department.
James Patten, 63, of Winston-Salem, N.C.; Peter Coker Sr., 80, of Chapel Hill, N.C.; and Peter Coker Jr., 53, of Hong Kong are each charged in a 12-count indictment with conspiracy to commit securities fraud, securities fraud and conspiracy to manipulate securities prices. Patten is also charged with four counts of manipulation of securities, four counts of wire fraud and one count of money laundering.
Patten and Coker Sr., who were arrested on Monday, are scheduled to appear in federal court in the Middle District of North Carolina. They'll also appear in federal court in New Jersey at an undetermined date. Coker Jr. is still at large.
The delicatessen, called Hometown Deli, was located in Paulsboro, N.J., and has since closed. It was known for its cheesesteaks and bagels but also for the fact that it was publicly traded on the stock market, where it was valued at over $100 million. The Securities and Exchange Commission, in a news release, alleges that the three men artificially inflated the share price of Hometown International — the entity operating the deli, which generated less than $40,000 in yearly revenue — from roughly $1 per share in October 2019 to almost $14 per share by April 2021, resulting in a wildly inflated market capitalization of $100 million.
"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."
In 2021, NPR's Planet Money reported on the deli when it was discovered after billionaire investor David Einhorn highlighted Hometown International in a letter to clients. Einhorn noted that in the previous two years, the company had generated less than $40,000 total in sales, yet it had a market cap of $113 million.
"The pastrami must be amazing," Einhorn joked then.
The letter was used to describe what was happening in the financial world at the time, stating, "It's as if there are no financial fraud prosecutors." The letter also pointed out that the CEO of this $100 million deli was the wrestling coach at a local high school.
At the time, no workers at the deli would speak to NPR. Additionally, James Patten and Peter Coker Sr. have not returned any messages seeking comment.
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