New Jersey deli scammer James Patten sentencing document filed

Federal prosecutors are recommending a relatively light prison sentence for a man who pleaded guilty to securities fraud in the notorious $100 million New Jersey deli stock manipulation case — and some of their reasons for doing so are hidden.

The U.S. Attorney’s Office for New Jersey, in a new court filing, conceded that the sentencing guidelines suggest a prison term between 70 and 87 months for the defendant, James Patten.

But the office is urging U.S. District Court Judge Christine O’Hearn to send the 65-year-old Patten to prison for a term between 12 and 18 months when she sentences him in Camden on July 21. He’s been free awaiting sentencing since he pleaded guilty in late 2023.

Prosecutors, in a version of that submission made public at CNBC’s request, cited federal criminal law, which calls for avoiding “unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct.”

Prosecutors noted that the other men who previously pleaded guilty in the same scheme, father-and-son Peter Coker Sr. and Peter Coker Jr., received prison terms of six months and 40 months, respectively.

“A sentence more severe than his co-defendants’, particularly Coker, Sr.’s, would be unfair,” the U.S. Attorney’s Office said in the filing.

Both Cokers have since served their sentences for the scheme, which artificially boosted the stock price of two thinly traded companies to make them more attractive candidates for reverse mergers.

One of the companies, Hometown International, owned just one small, unprofitable deli in Paulsboro, New Jersey — Your Hometown Deli — which was run by Patten’s friend, a high school wrestling coach, who has not been accused of wrongdoing. Hometown’s market capitalization topped $100 million at one point.

The other company whose shares were manipulated in the scheme, E-Waste, had an even higher market cap at some point, despite being nothing more than a shell company.

Three pages of the 11-page sentencing submission filing by prosecutors are blacked out.

Those pages explain why prosecutors believe O’Hearn should grant the disgraced former stockbroker Patten a steep downward departure from advisory sentencing guidelines.

Sentencing submissions are not public in New Jersey federal court unless a request is made to make them public.

Court rules say that before a submission is made public, prosecutors and lawyers for the defendant shall confer to determine what “non-public information should be redacted.”

“Presumptively Non-Public Information includes” names of victims, witnesses, uncharged individuals and “information regarding cooperation by the defendant and others that was not previously disclosed,” the rules state.

It also includes “sensitive personal information concerning the defendant” such as medical and psychological reports.

The nature of the redacted non-public information is not revealed anywhere in the filing that is public.

One reason that prosecutors believe Patten deserves prison time is his criminal record, according to a public section of the submission.

The North Carolina resident was convicted of mail fraud in 2010 and sentenced to 27 months in prison.

“He was released in 2012, approximately two years before the beginning of this conspiracy,” prosecutors wrote. “A prison sentence is necessary because his return to fraud so soon after spending approximately two years in prison is troubling.”

CNBC has asked the U.S. Attorney’s Office and Patten’s lawyer for comment on the submission.

While Hometown International and E-Waste were later involved in reverse mergers, investors lost what has been estimated to be nearly $5 million, which included consulting fees paid to the Cokers and Patten, prosecutors noted in their filing.

“Patten participated in a serious crime — a fraud scheme that resulted in losses of nearly $5,000,000 and he played an important role in that scheme,” prosecutors wrote in a section of the filing that is public.

“But the Guidelines account for that already, and the Court should recognize that Patten was acting as an employee of Coker, Sr. and at his direction,” the filing said.

The filings also said that there are “at least two other potential defendants” who “will face no legal consequences for their actions.”