Wide World of Swindling- Kathryn B. Gannon, aka Marylin Star, the porn star from Prince George, B.C., has settled insider trading allegations levelled by the U.S. Securities and Exchange Commission in 1999. Ms. Gannon, who has already served three months in jail on related criminal charges, was not penalized in any monetary way. She only agreed to stay out of securities-related trouble. She did not admit to any wrongdoing in settling the civil matter.
The SEC did not ask the 36-year-old to repay $141,157 in insider profits it held her liable for, based on her “Statement of Financial Condition.” (All figures are in U.S. dollars.)
Her co-accused, former New York broker James J. McDermott, was not as fortunate. Mr. McDermott, who also did not admit to any wrongdoing, agreed to pay $230,464. He also agreed to an order barring him from “associating with any broker, dealer or investment adviser.”
Mr. McDermott served five months on related criminal charges.
The settlement wraps up one of the more interesting insider trading cases to grace the halls of the SEC. The SEC, in its original complaint, claimed Mr. McDermott, who was romantically involved with Ms. Gannon in 1997, passed on inside information about six bank mergers ahead of time.
Ms. Gannon, in turn, passed this information on to a “friend,” businessman Anthony P. Pomponio. She and Mr. Pomponio both profited from the insider trades, Ms. Gannon to the tune of $88,135 and Mr. Pomponio $86,378, the SEC claimed.
The SEC did not allege that Mr. McDermott made any money from the insider information. It said his only securities-related sin was tipping off his bed partner to six mergers involving little-known regional banks.
“Each of the banks whose stock Gannon traded was either involved in merger negotiations with potential suitors or actually consummated a merger transaction contemporaneously with her trading,” the SEC claimed.
The SEC also noted that Mr. McDermott “transferred at least $37,000 to Gannon in the form of certified checks and wire transfers.”
The SEC filed the complaint on Dec. 21, 1999, in New York.
Prior to the ordeal, Mr. McDermott, now 52 years old, was the chairman and chief executive officer of Keefe, Bruyette & Woods Inc., an investment banking firm in New York. He is now barred from the industry.
Mr. McDermott’s $230,464 penalty includes Ms. Gannon’s profit of $88,135, $54,193 in interest and an $88,135 civil penalty.
Both Mr. McDermott and Ms. Gannon received lighter sentences than Mr. Pomponio, Ms. Gannon’s New York friend who benefited from Mr. McDermott’s stock tips. A New York judge sentenced Mr. Pomponio to 21 months in jail.
Ms. Gannon, meanwhile, said her life has also been no picnic since she was jailed. In 2003 she told The New York Post she spent about $500,000 defending herself from the insider trading allegations.
Depressed about the legal fees and her divorce from Howe Street promoter Michael Gilley (also several years her elder), she said she became hooked on booze and prescription drugs, and also crashed her car while on a bender in Winnipeg.
When asked about her affinity for older men, she once told a reporter: “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.”