Former CEO of Comtech, Ken A. Peterman, indicted on charges of insider trading, wire fraud

The former CEO of a telecommunications company once headquartered on Long Island was arrested Wednesday and charged in a federal indictment of insider trading, securities fraud and wire fraud.

Ken A. Peterman, 67, of Encinitas, California, was arrested in San Diego after a grand jury handed down a three-count indictment. Peterman served as CEO of Comtech Telecommunications Corp., a public company formerly based in Melville.

Information on Peterman's legal representation was not available Wednesday.

Peterman is among four men who have served as Comtech CEO since 2021. The company has lost money for four of the last five years and faces questions about whether it can continue to operate because of a cash crunch, according to securities filings.

Peterman was accused of selling off his shares ahead of a negative earnings report and the company’s plan to oust him as CEO for having an improper relationship with a subordinate, according to the U.S. Attorney for the Eastern District of New York.

The indictment charged Peterman with insider trading, wire fraud and securities fraud. He could face up to 25 years in prison if convicted of securities fraud and 20 years in prison if convicted of wire fraud.

"As alleged, the defendant exploited for his own personal benefit confidential information, including derogatory news of his own impending termination, that was meant to be available only for corporate purposes," U.S. Attorney Breon Peace said in a statement. "In doing so before he was shown the door, Peterman breached the trust and confidence placed in him by his former employer and its shareholders."

Peterman served as CEO of the company that makes satellite base stations and next-generation 911 systems for municipalities and the military for less than two years. The company announced in August that it was moving its headquarters to Chandler, Arizona.

The Comtech board announced Peterman's firing in March without explanation, but prosecutors said in the indictment that he was terminated for cause for the improper relationship. Prosecutors said Peterman knew the firing would trigger a form filed to the Securities and Exchange Commission to notify shareholders.

Peterman was under a nondisclosure agreement and was contractually required not to trade stock until the second business day after the departure was released, according to the indictment.

Prosecutors said about an hour after learning of his firing, Peterman "unsuccessfully attempted to trade some or all of the 49,400 shares of Comtech stock" in his account. He also asked his broker to "sell/liquidate all Comtech stock at the first opportunity in the morning," according to the indictment.

The shares were sold the next day. After his termination was announced, the Comtech stock dropped 27%, according to the indictment. The stock dropped another 25% a week later when Comtech’s earning report of the 2024 second quarter was released.

The indictment alleges Peterman received net proceeds of more than $40,000 for his shares and saved thousands of dollars in market losses by selling the shares prior to the release of Comtech’s earnings report.

Peterman is set to make his first appearance Thursday in the Southern District of California, prior to extradition to be arraigned in the Eastern District of New York at a later date.

Comtech’s 9,636-square-foot former headquarters is south of the Long Island Expressway in Melville and still maintains "around 40” jobs locally.

Before moving its headquarters to Arizona, Comtech employed a total of 118 people last year at the office and at a factory at 105 Baylis Rd., also in Melville, based on state records. The company has since sold its power systems technology business, which includes the factory, to Stellant Systems Inc. for $32.5 million.

The unexplained firing of Peterman was one of the issues brought up by two former CEOs who led a dissident group of investors that challenged the election of the Comtech board of directors. The group recently reached a settlement with the company.

With James T. Madore

By John Asbury

john.asbury@newsday.comJohnAsbury

John Asbury is a breaking news and general assignment reporter. He has been with Newsday since 2014 and previously worked at The Press-Enterprise in Riverside, California.