October 23, 2002 06:06pm
Porn Star Gets Prison for Insider Stock Scheme
by: Gail Appleson
(NEW YORK, NY) -- Marilyn Star aka Kathryn Gannon, the Pornstar mistress of a former investment bank chairman was sentenced on Wednesday to three months in prison for trading on inside stock tips he gave her and sharing the information with another lover.
Calling herself a "tough chick" and an "adventuresome Aries" Kathryn Gannon, 33, told reporters that while she was surprised she got prison time, the sentence would only help promote a movie being made about her life.
"There's no fear here. I'm from Canada and I can handle it," said the blonde Gannon sporting a five-strand pearl necklace and a rhinestone-encrusted cream pant-suit. Smiling for television cameras and hugging a companion she said would be her next husband, she dashed into a black limousine parked outside the Manhattan federal courthouse."
"I gotta go. I have a cocktail waiting for me."
Gannon, who is known in the adult film industry as Marilyn Starr, had pleaded guilty in June to two conspiracy counts relating to the illegal use of inside information she got from James McDermott Jr., former head of Keefe, Bruyette & Woods.
Prosecutors said she earned about $80,000 in illegal profits from the trades.
After the hearing, Gannon said she had spent $500,000 on her legal defense and is now completely broke.
"You probably don't need much incentive to stay out of trouble. On the other hand I'm not going to tell the United States public and hardworking prosecutors that the federal securities laws have no serious teeth whether you are a lying CEO or a $150,000 cheating investor," said U.S. District Judge Richard Owen in sentencing Gannon.
Gannon was charged with McDermott in the high-profile 1999 insider trading case along with Anthony Pomponio, another lover with whom she shared the tips. Gannon fled to Vancouver before she could be arrested in the United States for her role in the scheme that lasted between May 1997 and the summer of 1998.
Gannon admitted during her plea hearing that she had received the inside information from McDermott with whom she had a "romantic relationship." She said that McDermott had told her to keep the information secret but that she had shared it with Pomponio. Prosecutors said Pomponio earned $86,000 from his trades.
"I told everybody about the information. I had no secrets," she told reporters on Wednesday. She said McDermott had given her the tips so she could save money to get out of the abusive pornographic film industry.
Gannon told reporters that she got into trouble because she had been a naive young woman who dated an older man.
"Older men like younger women because they are too dumb to stand up for their rights. Instead of saying no, they say yes, Daddy, yes Daddy."
Although McDermott had been convicted of insider trading, the verdict was dismissed when an appeals court said McDermott was unfairly convicted of being involved in a conspiracy that included Gannon's other lover, who he did not know.
Prosecutors said they planned to retry McDermott, but last year he agreed to plead guilty to one count of securities fraud for tipping Gannon. He was sentenced to five months in prison that he has already served.
McDermott was president in 1997 of Keefe, Bruyette, an investment bank specializing in bank mergers. He was chairman and chief executive from Jan. 1, 1998 until he resigned in 1999. His job gave him access to market-sensitive information about takeover deals.
When a reporter asked Gannon if she got jail time instead of probation because of the widespread publicity over the ImClone insider trading scandal that threatens homemaking guru Martha Stewart, Gannon replied:
"Ms. Martha Stewart. You little prude. Your snobby attitude is going to be frowned on by the world. Welcome to the real world. Your career is going down hill."