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April 26, 2000 10:24am
Jury Mulls Porn Star Stock Case
Source: APBnews
by: Carol Huang

(NEW YORK, NY) -- A jury began deciding today whether the former chairman of a Wall Street investment bank provided insider-trading tips to a porn actress who became his mistress.

The deliberations follow the end of a two-week trial in which prosecutors accused James McDermott, 48, of giving confidential information on six potential bank mergers involving his firm's clients to Kathryn Gannon, who acted in adult movies as Marilyn Star.

The seven-woman, five-man jury also will decide the fate of Anthony Pomponio, 45, a New Jersey businessman accused of trading on information he obtained from Gannon during a simultaneous romance with her.

If found guilty, each man faces up to five years in prison on charges of conspiracy and 10 years in prison for each count of insider trading. Each also faces a fine of up to $1.25 million.

Pomponio also is accused of lying to investigators with the Securities and Exchange Commission (SEC) and faces a charge of perjury, which carries a prison sentence of up to five years and a maximum fine of $250,000.

$80,000 profit

An SEC investigation into trades by Gannon and Pomponio forced McDermott's firm, Keefe Bruyette & Woods, to cancel a public offering of the company's stock planned for last year that was expected to raise about $85 million.

Prosecutors said McDermott, who earned $4 million a year as chairman and chief executive of Keefe Bruyette & Woods, provided information to Gannon from June 1997 to September 1998 that allowed her to earn nearly $90,000 in illegal profits by trading the stocks of regional banks that entered merger talks.

They said Gannon shared the information with Pomponio, who earned nearly $80,000 by trading the same bank stocks within days and sometimes minutes of Gannon's trades.

Xanax blamed for alleged memory loss

Both men's wives appeared with them in court throughout the trial. McDermott's wife sat behind him in the first row of benches.

Pomponio's wife, Bonnie Clark, testified to boost arguments from her husband's defense attorney that Xanax, a prescribed anti-anxiety drug, affected her husband's memory, so that he may have been forgetful rather than untruthful when he met with SEC investigators.

Noticeably absent from the proceedings was Gannon, 30, who has been a fugitive since December when U.S. authorities issued a warrant for her arrest on charges of insider trading.

800 phone calls estimated

Defense attorneys say McDermott, whose knowledge of the banking industry made him a regular on investment talk shows, provided only stock recommendations to Gannon and that his recommendations were made before he had either confidential or material information on the stocks.

Assistant U.S. attorneys prosecuting the case produced bank records, testimony from bank executives and brokers, and records of some of an estimated 800 phone calls between McDermott and Gannon to demonstrate guilt.

"The only thing the government is asking you at this trial is for a fair and just verdict," said Assistant U.S. Attorney Alex Oh. "The only fair and just verdict for both defendants in this case is guilty."

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