Hometown Deli, Paulsboro, N.J.
Mike Calia | CNBC
Federal authorities sought to detain one of the men charged in an alleged multiyear fraud scheme involving a neighborhood deli in a small New Jersey town, according to court records.
The man – Peter Coker Sr., 80 – was arrested Monday in North Carolina and then let go after the government agreed to the conditions surrounding his release. His son Peter Coker Jr., 53, was also charged. He is based in Hong Kong and remains at large.
Authorities also charged another North Carolina resident, James Patten, 63, on Monday. Both he and Coker Sr. are expected to appear in a New Jersey federal court at a yet-to-be-determined date.
The three men are charged with 12 counts, including securities fraud, wire fraud and money laundering. From 2014, when plans for the deli were first laid out, through this month, authorities say the men orchestrated a scheme to inflate the value of publicly traded companies called Hometown International and E-Waste as they sought merger partners. The Securities and Exchange Commission also sued the men in a parallel case.
Hometown International, which only had the deli and its less than $40,000 in annual sales to its name, and E-Waste, which had no discernible business, both ended up with market values of about $100 million. Both companies merged with other firms. The deli’s new owner, Makamer Holdings, closed the shop earlier this year, selling its remaining inventory for $700.
Coker Jr. was chairman of Hometown International, while Coker Sr. was a major shareholder. Patten had business relationships with them. He also wrestled in high school with the deli company’s one-time CEO, Paul Morina, the high school principal and wrestling coach in Paulsboro, New Jersey, where the deli was located. Attempts to reach Morina have been unsuccessful.
After the Cokers and Patten gained control of Hometown International, authorities said, they transferred shares to family members, friends and associates – including those in China – in a scheme to make it look like the company had more shareholders than it actually had.
The indictment lists two co-conspirators in Hong Kong, but does not name them. Neither Manoj Jain, founder of Maso Capital, a Hong Kong-based investor in the company, nor his colleagues had any contact with the investigators, according to a person familiar with the matter. This person, who declined to be named due to the sensitive nature of the matter, also claimed Jain and his colleagues aren’t the co-conspirators mentioned in the indictment. Jain was also “shocked” at the indictment, the person added.
Coker Sr. and Patten both have checkered legal histories.
Coker Sr. has been sued for allegedly hiding money from creditors and business-related fraud. He has denied wrongdoing in those cases, one of which settled out of court in North Carolina. In 1992, he was arrested in Allentown, Pennsylvania, and charged with prostitution and other crimes after he allegedly exposed himself and propositioned three schoolgirls, the local Morning Call newspaper reported at the time.
Patten is barred by broker-dealer regulator FINRA from acting as a stockbroker. He was the subject of repeated disciplinary actions by the regulator, as well. In 2006, he successfully appealed sanctions issued by an SEC judge in a case over accusations of stock manipulation. Patten was defended in that matter by attorney Ira Sorkin, who also represented infamous Ponzi scheme mastermind Bernie Madoff.
Attorneys listed for Coker Sr. and Patten declined to comment on the case’s next steps.
The lawyers who represented the men during their appearances Monday are not expected to keep working for them. It was not immediately clear whom the men would hire next as the case proceeds.
– CNBC’s Dan Mangan contributed to this report.