It was baloney long before they began slicing the pastrami, allege prosecutors.
In federal court filings this past week involving Peter Coker Jr. — the man behind what the U.S. Attorney’s office called a massive international stock manipulation scheme involving a local South Jersey deli — prosecutors offered additional details about what they called “a complex, long-term fraud, running at least seven years.”
Those filings noted that Coker created at least four foreign shell corporations based in Macau, China, that were used to mask his ownership interest, and to keep secret his position as a majority shareholder in the deli. They added that emails revealed that he had also discussed the need to put shares in other company’s names to avoid appearing too “close.”
Coker, 53, who was extradited from Thailand earlier this month to face the charges, is seeking bail.
But at a hearing on Thursday in Newark, prosecutors told a federal judge that he had renounced his U.S. citizenship more than a decade ago, having declared that he had “no intention to return to live or work in the U.S.” They deemed him a flight risk.
In a letter to the court, they said, “there are no conditions…that can assure his appearance at future proceedings,” in asking U.S. Magistrate Judge Edward Kiel to keep Coker from being released. “He is facing serious charges that involve significant penalties and the evidence…is overwhelming. He has minimal ties to the United States. Simply stated, he has every reason to flee.”
Coker’s attorney, John Azzarello of Morristown, in his own letter, asked the court to release Coker to his parents’ home in North Carolina on conditions of strict home confinement, GPS location monitoring, and on a $1.5 million bond secured by five properties located in that state.
“We submit these conditions will more than adequately secure Mr. Coker’s appearance in court in a case where Mr. Coker does not likely face a term of incarceration, and where the government has not identified a single victim who has suffered financial loss,” Azzarello wrote.
The hearing, though, was put on hold with no determination regarding Coker’s bail after it was learned there was a detainer on him from U.S. Immigration and Customs Enforcement because he is now a non-citizen. He remains at the Essex County Correctional Facility, said his attorney.
Coker had been considered a fugitive since October, after the federal indictment was unsealed charging him along with his father, Peter Coker Sr., 80, of Chapel Hill, N.C., and James Patten, 63, of Winston-Salem, N.C., in a wide-ranging conspiracy to commit securities fraud using the little-known New Jersey deli as a vehicle.
The charges grew out of the public filings related to the Hometown Deli in Paulsboro in Gloucester County about nine miles southwest of Philadelphia that struck financial experts as too good to be true. The small sandwich shop reported less than $40,000 in annual revenue from selling cheesesteaks and Italian subs. Yet its parent company, Homestead International — which owned nothing but the deli — was valued at more than $100 million, according to the public reports.
“The pastrami must be amazing,” wrote hedge fund manager David Einhorn, who first drew attention to the company’s valuation in a shareholder newsletter.
The story took on added mystery after it was disclosed that the otherwise unremarkable deli was owned by Paul Morina, the principal and a famed wrestling coach at Paulsboro High School, who on paper became the CEO of Homestead International, which bought out the deli. Morina was abruptly forced out in May 2021.
In their latest filings with the court, prosecutors said what was going on “was not just a simply ‘pump-and-dump’ scheme.” The all-too-common scam involves the artificial pumping up of a stock price through false and misleading positive statements that target unsuspecting investors, and then dumping it at a far higher price before duped shareholders who purchased the shares discover that their $5,000 investment is only worth about 50 cents.
“This was a complex fraud that took years to develop,” wrote assistant U.S. attorneys Shawn Barnes and Lauren Repole in opposing any bail for Coker. “Indeed, by his own words, the defendant stated: “WE HAVE CURATED HOMETOWN FROM DAY 1 . . ITS BEEN AROUND FOR 6 YEARS OR SO,” referring to Hometown Deli.
The prosecutors said the whole enterprise was not about “merely ‘dumping’ overinflated shares back onto the market,” but geared towards a reverse merger.
In a reverse merger, an existing public “shell company,” which is a public reporting company with few or no operations, acquires a private operating company — usually one that is seeking access to funding in the U.S. capital markets, noted the Securities and Exchange Commission. Typically, the shareholders of the private operating company exchange their shares for a large majority of the shares of the public company. The private operating company’s shareholders gain a controlling interest in the voting power and outstanding shares of stock of the public shell company.
In earlier filings by the government and the SEC, authorities alleged that Patten, a friend and former classmate of Morina, had convinced the high school principal to put the deli under the control of Hometown International.
Morina, who has not responded to requests for comment, was apparently a victim.
“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 scheme artificially inflated the price of Homestead International and a related company, E-Waste, through manipulative trading, according to the SEC.
Hometown’s stock price soared 939% and E-Waste stock went up by 19,900%, according to prosecutors.
The U.S. Attorney’s office in its letter to the court opposing bail for Coker said he in emails he discussed the need to put shares in other company’s names to avoid appearing too “close.”
Almost immediately, prosecutors said, steps were also taken to arrange the sale or gifting of Hometown shares to family members and close associates to get the stock publicly listed, because the OTC Marketplace requires a certain number of shareholders.
“And then, they began engaging in illegal manipulative trading, such as match trades and wash trades, in order to artificially inflate the price of Hometown’s stock,” they wrote. Over approximately 18 months, they said Coker and the others charged in the case manipulated the price of Hometown’s stock for an increase of approximately 939% — from $1.25 per share to $12.99 per share.
They said Coker and the others then arranged for a private placement of Hometown shares with a foreign business in exchange for $2.5 million, in which they paid themselves consulting fees totaling over $800,000.
The only reason that they were unable to achieve their ultimate objective of entering into a reverse merger, which would have allowed for a massive payout, was because of the negative news articles that exposed the whole scheme, prosecutors said.
Coker’s attorney said the government had not alleged that anyone other than Coker or those knowingly involved in the scheme invested money in either Hometown or E-Waste.
“Although the government’s indictment alleges market manipulation designed to artificially inflate the price of two publicly traded securities, it does not allege that the manipulated securities were ever sold to those not involved in the conspiracy,” said Azzarello. He observed that the indictment charged “an attempted fraud that did not result in actual financial loss to any identifiable victim.”
In his letter, he said Coker had not been a fugitive and that his residence in Hong Kong and Thailand was not intended to distance himself from the United States or frustrate arrest, nor was his presence abroad related to the American prosecution.
“The simple fact remains Mr. Coker did not flee the United States after learning of the charges in the indictment. Rather, he awoke one day in Thailand after living in Hong Kong and Thailand for over 30 years and learned for the first time he was indicted in the United States,” said Azzarello.
He pointed out that Coker had lived and worked outside of the United States for his entire adult life. Upon graduating from Lehigh University in 1990, Coker — who is fluent in Chinese — was recruited by a US financial services company to expand its business in China and Hong Kong, said Azzarello. Coker moved to Hong Kong and was later granted permanent resident status in Hong Kong and Macau.
Acknowledging that he relinquished his U.S. citizenship to become a citizen of St. Kitts and Nevis, his client took those steps well before the government unsealed its indictment, Azzarello said.