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June 11, 2002 05:40pm
Marilyn Star Admits She Did Wrong
Source: Reuters
by: Gail Appleson

(NEW YORK, NY) -- Marilyn Star, the porn-star mistress of a former investment bank chairman, plead guilty on Tuesday to trading on inside tips she got from the executive and sharing the information with another lover.

Kathryn Gannon, who now goes by the name Kathryn Gilley, pleaded guilty in Manhattan federal to two conspiracy counts relating to the illegal use of inside information she got from James McDermott Jr., former head of Keefe, Bruyette & Woods.

Each count carries a possible maximum prison term of five years. However, she will most likely receive a more lenient sentence because of her plea. She is scheduled to be sentenced on Sept. 20.

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. She fled to Vancouver before she could be arrested in the United States.

During the plea hearing, Gannon said that she had received the inside information from McDermott with whom she had "romantic relationship." She said that McDermott had told her to keep the information secret but that she had shared it with Pomponio. She said the scheme lasted between May 1997 and the summer of 1998.

"At the time I did these things I knew they were wrong," she said.

Although McDermott had been convicted of insider trading, the verdict was thrown out when an appeals court found that 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. He was sentenced to five months in prison that he has already served.

When he pleaded guilty, McDermott admitted that he gave Gannon tips about a potential takeover of Barnett Banks by SunTrust Banks Inc. in August 1997. Gannon then purchased 1,800 shares of Barnett stock.

Prosecutors said Gannon passed tips to Pomponio and the two reaped more than $170,000.

McDermott was not charged with making any money off the illegal trades. However, he and Pomponio stood trial together in Manhattan federal court. They were both convicted while Gannon remained a fugitive.

The appeals court held that the fact the two men were tried together was so prejudicial against McDermott that it threw out the conviction. The court also said the fact Gannon was not there made it even more prejudicial.

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.

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