Insider trading scandal: CEO sold stock after learning of termination

December 12, 2024 Robert Abruzzese, Courthouse Editor

U.S. Attorney Breon Peace announces charges against the former CEO of a Long Island telecommunications company, accusing him of insider trading and betraying investors' trust. Photo: Yuki Iwaruma/AP

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The former CEO of a Long Island telecommunications company is accused of secretly selling tens of thousands of shares after learning about a negative earnings report and his own firing, using inside information to profit while betraying investors’ trust.

Ken Peterman, the former CEO of Comtech Telecommunications Corp., a publicly traded company based in Melville, New York, was arrested on insider trading and securities fraud charges on Wednesday.

Federal authorities allege that Peterman used confidential company information for personal gain, including negative earnings data and his pending termination for cause, to sell tens of thousands of shares before the information became public.

Peterman, 67, was taken into custody in San Diego and is scheduled to make an initial court appearance tomorrow in the Southern District of California. His arraignment will follow in the Eastern District of New York.

“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,” said Breon Peace, the U.S. attorney for the Eastern District. “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.”

The charges stem from Peterman’s alleged actions in March 2024, when he learned of an impending negative earnings report and his planned removal from the company’s leadership due to an improper relationship with a subordinate. Authorities claim Peterman sold or attempted to sell substantial shares of Comtech stock from two brokerage accounts before the information became public, avoiding financial losses.

James Dennehy, assistant director in charge of the FBI’s New York Field Office, described the alleged actions as an abuse of privilege.

If convicted, Peterman faces up to 25 years in prison for securities fraud and an additional 20 years for wire fraud.

The case is being prosecuted by assistant U.S. attorney Anthony Bagnuola of the Eastern District’s Long Island Division, with assistance from the U.S. Securities and Exchange Commission’s New York Regional Office.