12 May 2021
Shell companies sure make strange bedfellows.
A New York real estate tax lawyer — who did work for former President Donald Trump decades ago — in 2011 purchased a shell company whose creators later became key investors in a mystery $100 million company that owns just a small New Jersey deli, records show.
The shell company — Europa Acquisition I Inc. — was one of eight shell entities set up in 2010 by Peter Reichard and Peter Coker Sr., the North Carolina-based investors in deli owner Hometown International.
After Reichard and Coker sold them, most of those shell companies — including the one later purchased by Trump’s former real estate tax lawyer Allan Schwartz — ended up having their registrations revoked by the Securities and Exchange Commission for failing to keep current in their disclosure filings, records show.
Schwartz, the former Trump lawyer, told CNBC in a phone interview that he knew nothing about Coker Sr. and Reichard, Hometown International, or its deli in Paulsboro, New Jersey, which has minuscule sales. Coker Sr. and Reichard sold the Europa shell months before Schwartz bought it from other entities.
Schwartz, 73, is the latest person with an eyebrow-raising history to pop up in financial records linked to the deli company investors or to entities they were involved in.
“I know nothing about it,” Schwartz said Monday after a reporter told him that key investors in Hometown International had created a shell company he once owned.
Schwartz laughed when he was told details about Hometown International, including its market valuation of $100 million despite it owning only a South Jersey deli that had sales of less than $37,000 for the past two years.
Schwartz is in good company.
A lot of people have laughed or made jokes about Hometown International since last month, when hedge fund manager David Einhorn first highlighted the deli owner’s preposterous market capitalization and used it as a warning to retail investors.
“The pastrami must be amazing,” Einhorn quipped in an oft-quoted line from that letter.
In recent weeks, CNBC has detailed criminal and regulatory sanctions imposed on people and entities linked to Coker Sr. and Reichard, reported on the investments by Duke and Vanderbilt universities in Hometown International and revealed details about the opaque nature of a group of Macao-based investors in that company.
Articles also have explored the incongruous professional backgrounds of Hometown’s two executive officers — both of whom are public high school administrators — and the existence of a related shell company. That shell company, E-Waste, like the deli owner, has a sky-high stock market capitalization that is not justified by any meaningful business operations.
Those articles led to the termination of consulting agreements in which Hometown International and E-Waste had paid thousands of dollars per month in fees to a firm controlled by Reichard and Coker Sr.
Another firm controlled by the two men, Europa Capital Investments, remains a major investor in Hometown International, as does Coker Sr. as an individual. Coker Sr.’s son, Hong Kong-based Peter Coker Jr., is the deli company’s chairman.
Both Hometown International and E-Waste in recent weeks took the extraordinary step of telling the SEC in a filing that their relatively high stock prices are unjustified.
That move came after OTC Markets Group in late April demoted the deli owner’s stock from one over-the-counter trading platform to a less prestigious platform.
OTC Markets said that move, and its imposition of a “buyer beware” warning label on Hometown International stock, were warranted by “irregularities” in public disclosures filed by the company.
A crooked pedigree
Records reviewed in recent days by CNBC show that a now-disbarred lawyer — who last year pleaded guilty to federal criminal charges related to a shell company factory scheme — also was involved in the creation of the Europa Acquisition shells for Coker Sr. and Reichard. That same lawyer three years later played a similar role in the creation of Hometown International and later securities filings for that company.
SEC records show that the accounting firm involved during the registration of the Europa Acquisition shell companies was an earlier incarnation of a Florida-based firm that handled accounting work for Hometown International.
The Florida firm itself was censured last year by an accounting oversight board for lack of oversight in work for a company that is not connected to either the deli owner or to the Europa shell companies.
CNBC last week obtained from the Raleigh Police Department in North Carolina a record of Coker Sr.’s arrest on April 30, 2010, on a charge of soliciting a prostitute, who herself was arrested that day.
That arrest came nearly 18 years after Coker Sr. was reportedly arrested in Allentown, Pennsylvania — where he had been a high school basketball star — on prostitution and other charges. The Morning Call newspaper at the time reported that Coker, then 49, was nabbed by police after allegedly exposing himself to three girls, one as young as 10 years old, and trying to proposition them.
“Yes,” Coker Sr. said when he answered his phone Monday and was told that a reporter was calling.
“Thanks, but no,” he said when told that CNBC was preparing to publish another article about him. He then hung up after a reporter asked if he would listen to details of that article.
Coker, 78, previously was accused in lawsuits of hiding assets from a bank that he owed nearly $900,000, and of business-related fraud. He denied those allegations at the time of the lawsuits.
The 64-year-old Reichard, who was sued along with Coker Sr. in 2019 in a now-settled case regarding alleged business fraud involving a specialty foods retailer in North Carolina, did not respond to repeated requests for comment. His lawyer in the lawsuit had denied the plaintiff’s claims of wrongdoing at the time the case was filed.
In late 2011, Reichard was convicted in North Carolina court of a criminal scheme that illegally contributed thousands of dollars to the successful campaign of Bev Perdue, a Democrat, for governor of that state in 2008. The scheme involved the use of bogus consulting contracts with Tryon Capital, a firm controlled by Reichard and Coker Sr. The elder Coker was not charged in that case.
Tryon Capital is the same firm that until last month was being paid $15,000 a month by Hometown International for a consulting agreement and $2,500 per month by E-Waste for a similar agreement.
In financial filings, Hometown International and E-Waste have indicated that they are marketing themselves as candidates for reverse mergers or other financial maneuvers, which would have them effectively taken over by a private company that wants to become publicly traded in the United States.
Investments by outside entities in the past year, including ones linked to Duke and Vanderbilt that were placed by a Hong Kong-based investment firm, in both companies were meant to bolster that effort.
But the investments do not explain the bizarre steep rise of share prices of both Hometown International and E-Waste in the past year, particularly since E-Waste has no actual business.
Both stocks are thinly traded, at best, each day. They also, despite having millions of common stock shares outstanding, have relatively few shareholders, the largest of which are entities involved in the plan to have the companies merge with other firms.
If that plan is successful, shareholders are expected to receive a return on their investment that bears little, if any, resemblance to the current share prices of either company.
All of those facts raise the question of why anyone would pay so much now to buy shares of the companies on the open market.
Adding to the oddness is the fact that the CEO of the deli owner, 62-year-old Paul Morina, is the principal of Paulsboro High School and the head coach of the school’s renowned wrestling team. The only other executive is Christine Lindemuth, 46, an administrator and a teacher at the same high school, which is close to the deli.
By Dan Mangan, CNBC, 11 May 2021
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