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Wednesday December 22, 10:37 am Eastern Time
Ex-Banking CEO, Porn Star Charged
By LARRY NEUMEISTER
Associated Press Writer
NEW YORK (AP) -- The star of an X-rated videotape titled ``Marylin Does Miami' may have been less revealing about her dealings on Wall Street: She and a top banker have been charged with insider trading.
Kathryn B. Gannon, known as ``Marylin Star' in the porn industry, was intimately involved for more than a year with James J. McDermott Jr., the former chief executive at the investment bank of Keefe, Bruyette & Woods, according to a federal criminal complaint.
McDermott, 48, surrendered Tuesday to face charges he shared news of pending deals with Ms. Gannon, McDermott, who is married, was released on $1 million bail after appearing before U.S. Magistrate Theodore H. Katz.
Keefe, Bruyette & Woods had been scheduled to go public with a stock offering last spring but withdrew the plans suddenly in May. According to court papers, the offering was canceled after McDermott told the company's directors that a friend of his was being investigated by the Securities and Exchange Commission for trading in stocks he had recommended.
Had the stock offering gone through, McDermott's personal worth would likely have increased by millions of dollars.
Prosecutors and the SEC allege McDermott tipped Ms. Gannon about companies that were about to be involved in mergers dramatically affecting their stock prices. Gannon then allegedly shared the information with a friend, Anthony P. Pomponio.
The federal complaint alleges that Ms. Gannon went on to make at least $88,000 from illegal trades, while Pomponio allegedly made about $86,000. McDermott made no profit, the government said.
All three have been charged with conspiracy and securities fraud. Pomponio also was charged with perjury, and was released Tuesday on $50,000 bail.
McDermott's lawyer, Dennis McInerney, said his client would plead innocent to the charges, adding that McDermott ``will be exonerated when the facts are known.'
A warrant has been issued for Ms. Gannon, 30, who is believed to be in Canada, where she is from, federal officials said. Her lawyers did not return telephone messages seeking comment.
In its complaint, the SEC said Pomponio told investigators Ms. Gannon also worked as a prostitute and boasted that her clients included ``well-connected Wall Street types' such as lawyers and stockbrokers.
Authorities have not charged Ms. Gannon with prostitution.
Pomponio and Ms. Gannon became the targets of an investigation by the SEC after each opened a brokerage account at Charles Schwab in mid-1997 and began purchasing the stocks of obscure, small, regional banks.
The trading activity was deemed suspicious because the bank stocks being purchased had just been placed on a watch list of potential acquisition targets by Keefe, Bruyette & Woods, which specializes in bank mergers.
As a top Wall Street executive, McDermott had access to confidential, nonpublic information about potential corporate mergers and acquisition transactions and provided Gannon with such information about at least six mergers, authorities said.
Keefe, Bruyette & Woods is not accused of wrongdoing. In a statement, the company said it is cooperating fully with government officials.
McDermott resigned from the bank in June, the FBI complaint said.
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