Man Admits Shocking Truth That Deli Worth $2B Was Part Of Fraud
11:54 AM EST on December 22, 2023
Hometown Deli’s slogan was "Eat So We Both Don’t Starve." There was a billboard for the place next to the Walt Whitman Bridge with that phrase on it. When I went there back in 2021 I left full, and with a T-shirt bearing that motto. Cute, but also a lie. The South Jersey deli’s food was good, but it didn’t really matter. The deli was not really in the business of serving food so much as it was in the business of securities fraud.
On Wednesday one of the deli’s owners, James Patten, pleaded guilty to a market manipulation scheme that inflated the worth of the deli and another business to astronomical figures. In the spring of 2021 Hometown Deli, a business with a single location in a borough with a population of around 6,000, was valued at $100 million. Bloomberg’s Matt Levine, who writes a popular finance newsletter, looked at the numbers and convincingly argued it was actually valued at around $2 billion.
I was fascinated by this story, and only in part because this was a deli half an hour from my house in a town I’d heard of but never been to. I am always interested in seeing new places and trying new cheesesteaks. But there was a reason I’d heard of this small town across the river from the Philadelphia International Airport. It was the home of Paul Morina, the longtime Paulsboro High School wrestling coach. I know basically nothing about high school wrestling except that Paul Morina is a legend. The team’s website has him with more than 700 wins and fewer than 50 losses. He’s also the high school principal. And suddenly he was also the owner of a deli that was very obviously part of some sort of ambitious scam.
The whole thing is a real bummer for him. The indictment of Patten, and two other men whose charges are pending, says that Morina just wanted to open a deli next to the Paulsboro wrestling gym. He told Patten, a longtime friend, about the idea. Patten suggested he incorporate the deli, and he did. Morina and his girlfriend, Christine Lindenmuth, ran the day-to-day operations. Meanwhile, the feds say, Patten and the two associates gained control of the business and began artificially inflating its value. They did massive wash trades, essentially selling shares of the company back and forth to themselves. A Justice Dept. release says this inflated the value of deli’s holding company, Hometown International, by 939 percent. Another company Patten copped to doing this with was called E-Waste Corp., which the indictment says was inflated by a whopping 19,900 percent. Peter Coker Jr. and Peter Coker Sr.’s charges are pending; Patten is scheduled to be sentenced in late April. In 2020, the United States Sentencing Commission reported the average sentence for securities and investment fraud was 46 months.
The deli has since closed. Oddly, though, the scheme… kind of… worked? Hometown International merged last year with bioplastics company Makamer; the year before E-Waste Corp. did a reverse merger with electric vehicle maker EZRaider. Sadly for cheesesteak lovers in Paulsboro, the deli closed when Makamer decided running a deli next to a wrestling school wasn’t a natural fit with their core bioplastics business. CNBC reported the company sold off Hometown Deli’s remaining inventory for $700.
It is a strange ending to this whole situation. Patten is almost certainly headed to prison for a bit. Wash trading is harmful to markets, and against the law. But was anyone actually duped by the scam around the deli? The indictment says the trio accused attempted to “defraud investors and potential investors in Hometown International and E-Waste.” But no such victims are listed. Is it possible someone bought these stocks thinking they were a great deal because of the wash trading? People do dumb things when they see dollar signs, I suppose, but it seems like anyone who stumbled upon this would just be trying to worm their way into the scam, too; it's difficult to imagine anyone looking at the stock price and thinking that this place selling pizza steaks and little bags of chips had unlocked the sacred secrets of capitalism. Makamer and EZRaider, which merged with these two companies, certainly knew what they were getting into.
The biggest victim here, I think, is Morina. He just wanted to open a deli, and he did, and somehow that deli ended up being covered on CNBC. Fortunately, wrestling season is here. Paulsboro High finished second in the season-opening Vogeding Tournament.