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Personal Finance > Investing
McDermott found guilty
April 27, 2000: 2:41 p.m. ET

Former Wall Street CEO convicted of giving porn star lover inside trading tips
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NEW YORK (CNNfn) - James McDermott, former chairman and CEO of Wall Street investment bank Keefe Bruyette & Woods, was found guilty on six of seven counts in an 11-day insider trading trial Thursday.

Authorities accused McDermott of passing inside information on pending bank mergers to his lover, Katherine Gannon, an X-rated film actress known as Marilyn Star.

McDermott, 48, of Briarcliff Manor, N.Y., faces up to 10 years in jail for all six insider trading counts and a maximum of about $1.3 million in fines. He is free until sentencing, which is scheduled for July 17.

"It's a real personal tragedy for Jim and his family," Joe Berry, chairman of Keefe Bruyette, said. "I feel very bad for his family."

The jury handed down the verdict in the New York courtroom of U.S. District Judge Kimba Wood.

McDermott's attorney, Dennis McInerney was not immediately available for comment.

Federal authorities alleged that Gannon made more than $88,000 on inside tips on pending bank mergers that McDermott passed on to her. Gannon was accused of sharing those tips with a friend, Anthony Pomponio, who authorities believe made $87,000.

Pomponio was convicted of five of six insider trading counts Thursday. His attorney, Tom Dunn, also could not be reached for comment.

Gannon remains a fugitive, possibly in Canada, where authorities believe she fled after being indicted last December.

The U.S. Securities and Exchange Commission charged McDermott last December with securities fraud and perjury. He was arrested on Dec. 21, six months after he unexpectedly resigned from Keefe Bruyette.

The SEC complaint alleged that he provided material, non-public information regarding at least six merger transactions to Gannon, with whom he was having a relationship.

McDermott served as Keefe Bruyette's chairman and CEO from Jan. 1, 1998 until June 30 of last year, when he unexpectedly resigned from the company he had been employed at for 22 years for "personal reasons."

Federal officials said they believe he and Gannon had a relationship for at least 14 months, ending in September 1998.

Authorities said Gannon had opened up a brokerage account at Charles Schwab & Co. Inc. on June 13, 1997 and began to trade companies McDermott fed her information about. They included relatively unknown regional banks such as Advanta Corp. and First Commercial Corp.

The 45-year-old Pomponio from North Caldwell, N.J., owns an industrial diamond wheel manufacturing company. He allegedly opened a Schwab account a month after Gannon had and began trading in the same stocks. Back to top

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.