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Comtech Says CEO Being Probed by Grand Jury Over Sales

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Sept. 27 (Bloomberg) -- Comtech Telecommunications Corp., a New York electronics communications company, said it’s being investigated by a U.S. grand jury and that its chief executive officer has lost his U.S. security clearance.

Comtech, based in Melville, New York, said it believes the investigation stems from Chief Executive Officer Fred Kornberg’s contact with a “scientific attache” he met with to discuss equipment sales to Israel in the 1980s, according to a U.S. Securities and Exchange Commission filing yesterday.

The U.S. last month notified Comtech that Kornberg’s clearance was suspended, according to the company’s filing.

The attache was “later alleged to have conducted intelligence operations in the U.S.,” the company said.

Comtech shares fell 3.4 percent to close at $27.43 in New York, the biggest decline since June 13. More than 362,500 shares traded hands, more than three times the average daily volume in the past three months.

Comtech, which had revenue of $425 million in the year ended July 31, has made “made certain internal organizational realignments” in order to maintain eligibility for some government contracts, the company said. Comtech derives about half its revenue from the U.S. government.

The changes “restrict access to classified information to other Comtech senior executives, management and other employees who maintain the required level of clearance,” according to the filing.

Satellites, Tanks

Separately, Kornberg and others have received subpoenas from the SEC for documents concerning transactions in shares of CPI International Inc., the company said in the filing. Kornberg purchased CPI stock in November 2010, two months after the termination of Comtech’s May 2010 agreement to acquire CPI, according to the filing.

Michael Porcelain, Comtech’s chief financial officer, declined to comment on the filing.

Comtech’s products include satellite communications gear installed on Abrams tanks, Apache helicopters and other military vehicles. The company’s technologies for tracking troops on the ground “are critical components of the U.S. Army’s satellite communications network,” according to its filing.

The company yesterday reported net income for the fourth quarter ended July 31 of $7.93 million, or 38 cents a share, matching analysts’ average estimate. It reported sales for the quarter of $113 million, compared with the average estimate of $109 million.

Comtech forecast profit for fiscal 2013 of $1.40 to $1.50 a share. Analysts had predicted $1.46 a share, the average of six estimates compiled by Bloomberg.

To contact the reporter on this story: Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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