Keefe Bruyette Ex-CEO McDermott Found Guilty of Insider Trading
New York, April 27 (Bloomberg) -- James McDermott, the former
chief executive of investment bank Keefe, Bruyette, & Woods Inc.,
was convicted today of charges that he leaked inside information
about pending bank mergers to his porn-star mistress.
A federal court jury convicted McDermott, once one of the top
bank stock analysts in the country, of six counts of stock fraud.
He is the first CEO of a Wall Street investment bank to be charged
with insider trading.
Prosecutors convinced jurors that McDermott passed
confidential information about five pending mergers in late 1997
and early 1998 to his girlfriend, Canadian adult film actress
Kathryn Gannon. She was also a defendant in the case, but did not
appear in Manhattan federal court to stand trial. Prosecutors
believe Gannon is in hiding in Vancouver.
``Guilty,'' the jury forewoman said repeatedly.
Prosecutors claimed that McDermott, who earned $10 million
from 1996 to 1998 as chief of Keefe Bruyette, gave Gannon stock
tips to impress her. Gannon, 30, earned $88,000 from illegal
trades, prosecutors said. McDermott, 48, did not profit
financially.
``She was an actress, dancer, and model. He was the stud
stock picker,'' Assistant U.S. Attorney Alex Oh told the jury
during summations on Tuesday.
The Other Defendant
A third defendant, New Jersey businessman Anthony Pomponio,
with whom Gannon allegedly shared McDermott's tips, was also found
guilty of six counts of stock fraud and one count of perjury.
Pomponio was accused of making $86,000 from the inside
information.
The case has been fodder for the tabloids ever since
prosecutors announced the charges four days before Christmas.
Despite her absence, Gannon, a star of x-rated films and the
operator of a sexually explicit Web site, has probably drawn the
most public interest. Yet the trial was anything but racy.
U.S. District Judge Kimba Wood barred prosecutors from
identifying Gannon as a porn star to avoid prejudicing the jury
against the McDermott. Gannon appeared in films under the stage
name Marylin Star.
The trial focused considerable scrutiny on Keefe Bruyette and
its business practices. Top management testified for hours about
the investment bank's internal procedures, especially the way it
shields confidential information from public exposure.
The bank last year cancelled a planned stock offering after
McDermott told the board that a ``friend'' was under investigation
by the U.S. Securities and Exchange Commission. He did not reveal
to board members that it was his girlfriend. The SEC's civil suit
against McDermott, Gannon, and Pomponio is pending.
McDermott, of Briarcliff Manor, New York, faces up to 10
years in prison. From the beginning, his lawyers acknowledged that
he gave stock tips to Gannon, but said the recommendations were
based on public information.
Among the stocks Gannon bought were Central Fidelity Banks
Inc. and Advanta Corp.
--David Glovin in U.S. District Court in New York (212) 732-9245,
or by email at dglovin@bloomberg.net, through the New York
newsroom (212) 893-3665/ep |
