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A N.J. deli was valued as high as $100 million last year. Now, three men have been charged with fraud.

Hometown Deli stock scheme draws federal fraud charges. Two men are arrested, one is at large.

Your Hometown Deli, 541A Mantua Ave. in Paulsboro, closed in August.
Your Hometown Deli, 541A Mantua Ave. in Paulsboro, closed in August.Read moreELIZABETH ROBERTSON / Staff Photographer

A father-son duo and a business associate were charged Monday with manipulating shares of a South Jersey delicatessen — pushing the value of the tiny public company as high as $100 million in 2021.

The federal Department of Justice and the Securities and Exchange Commission filed separate complaints, alleging that the trio befriended Paul Morina, the owner of Hometown Deli in Paulsboro, Gloucester County, and enlisted their associates to bid up the sandwich shop’s share price illegally, then cash out at an artificially inflated profit.

The three men — Peter Coker Sr., Peter Coker Jr., and James Patten — took control of the shares of the deli’s holding company, Hometown International, over a period of years beginning in 2015. The suits allege that the trio bought with the intent to dump the shares at much higher prices. Patten and Coker Sr. were arrested Monday in North Carolina and will be transferred to New Jersey for a criminal trial, officials said.

Regulators were able to trace accounts and monitor the three men’s trades using IP addresses, according to the complaint.

The background

Hometown Deli attracted the spotlight when in 2021 its stock price skyrocketed from $1.25 in November 2019 to $14.50 two years later, earning the company its outsized value — at least on paper.

Hometown’s shocking $100 million valuation in 2021 “was just part of a new wave of stock manipulation,” said accounting expert Francine McKenna, who writes TheDig, an investigative newsletter and teaches at the Wharton School.

Residents of Gloucester County in South Jersey frequented the deli for its subs, bagels, and Italian dishes and the fact that it was owned by Morina, who was well-known in the community as a successful Paulsboro High School wrestling coach.

Patten and Morina attended Paulsboro High School at the same time. Both were on the wrestling team, winning titles in 1976.

Patten convinced Morina to put the deli into an holding company, and then Patten set about manipulating the stock price without Morina’s knowledge, the DOJ suit alleges.

The deli’s shell company masked a money-losing operation. Hometown International lost money in 2021 after accounting for all the fees and expenses paid to its advisers. It generated revenue of $25,004 and $13,976 for the years ending Dec. 31, 2021, and 2020, respectively, but lost $486,219 and $624,438 for those years, according to SEC filings.

Hometown Deli closed in August, according to a regulatory filing.

The charges

Regulators on Monday took action with lawsuits against the people behind the stock’s unexplainable rise.

Scott A. Thompson, associate director of enforcement in the SEC Philadelphia regional office, said: “Such manipulative schemes diminish the trust investors must have in the integrity of the markets.”

The SEC’s complaint, filed in the U.S. District Court for the District of New Jersey, charges all three with violations of securities laws, charges Patten with market manipulation, and Coker Sr. and Coker Jr. with aiding and abetting.

In a parallel criminal complaint, the U.S. Attorney’s Office for the District of New Jersey said it was charging Patten, Coker Sr., and Coker Jr. with crimes including wire fraud and conspiracy.

Patten, 63, of Winston-Salem; Coker Sr., 80, of Chapel Hill; and Coker Jr., 53, of Hong Kong, were each charged in a 12-count indictment. Patten was also charged with four counts of manipulation of securities, four counts of wire fraud, and one count of money laundering.

Patten and Coker Sr. were arrested Monday and were scheduled to appear in federal court in North Carolina.

They will appear in court in the District of New Jersey at a future date.

Coker Jr. remains at large. A 1990 graduate of Lehigh University, according to LinkedIn, he was at one time listed as chairman of Hometown International and lives in Hong Kong.

The securities fraud and manipulation of securities counts each carry a maximum penalty of 20 years in prison and a $5 million fine. The wire fraud and money laundering counts are punishable by a maximum penalty of 20 years in prison and a $250,000 fine.

Morina wasn’t charged in either suit, and the Justice Department complaint alleges that he was taken in by Patten, according to the federal criminal indictment.

Wharton professor and investment due diligence expert Francine McKenna, who teaches accounting to MBA students, said the lesson for Mom-and-Pop investors is clear: “Don’t be a stooge for your childhood friend who makes you sign stuff you don’t understand, takes control of your business checking account, and takes your New Jersey deli public,” she said.