New Jersey fraudster James Patten’s conviction was filed

State prosecutors are recommending a lighter prison sentence for a man who pleaded guilty to securities fraud in a notorious New Jersey stock manipulation case — and some of the reasons for doing so are being hidden.

The US Attorney’s Office in New Jersey, in a new court filing, agreed that sentencing guidelines suggest that the defendant, James Patten, serve between 70 and 87 months in prison.

But the office is urging US District Court Judge Christine O’Hearn to send the 65-year-old Patten to prison for between 12 and 18 months when she sentences him in Camden on July 21. He has been free pending sentencing since pleading guilty in late 2023.

Prosecutors, in a version of that request made public at the request of CNBC, cited the federal criminal law, which seeks to avoid “unwarranted disparity in sentencing between defendants with similar records found guilty of similar conduct.”

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

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

Both Cokers have served their sentences in the scheme, which artificially boosted the stock price of the two thinly traded companies to make them more attractive for a merger.

One of the companies, Hometown International, has 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 reached $100 million at one point.

Another company whose shares were used in the scheme, E-Waste, had a very high market cap at one point, although it was nothing more than a shell company.

Three pages of the 11-page sentencing filing filed by prosecutors have been sealed.

Those pages explain why prosecutors believe O’Hearn should give disgraced former stockbroker Patten a guided departure from the sentencing guidelines.

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

Court rules state that before a deposition is made public, prosecutors and defense attorneys will determine what “non-public information should be redacted.”

“Incriminating Non-Public Information includes” the names of victims, witnesses, unindicted persons and “information regarding the defendant’s cooperation with others that was not previously disclosed,” the rules state.

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

The nature of the non-public information that has been changed is not disclosed anywhere in the public file.

One of the reasons prosecutors believe Patten deserves prison time is his criminal record, according to the public portion of the plea.

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

“He was released in 2012, nearly two years before the conspiracy began,” prosecutors wrote. “A prison sentence is necessary because his return to fraud so soon after spending two years in prison is worrying.”

CNBC asked the U.S. Attorney’s Office and Patten’s attorney for comment for this post.

When Hometown International and E-Waste were later involved in a botched merger, investors lost an estimated $5 million, including consulting fees paid to Cokers and Patten, prosecutors noted in their filing.

“Patten engaged in a serious criminal – fraudulent scheme that resulted in the loss of approximately $5,000,000 and played a significant role in that scheme,” prosecutors wrote in part of the public filing.

“But the Guidelines address that already, and the Court must find that Patten was acting as an employee of Coker, Sr. and under his direction,” the filing said.

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