Canadian pornographic film actress Kathryn Gannon, known as "Marilyn Star," is accused of illegally profiting from inside information gained from an intimate relationship with James McDermott Jr., former chief executive at an investment bank.
CEO: Keefe, Bruyette & Woods
Convicted: April 27, 2000 of insider trading
Once upon a time, James McDermott earned $4 million a year as chairman and CEO of the Wall Street investment bank KBW, making regular appearing on CNBC and CNN to showcase his financial prowess. Until, that is, he brought his business expertise into the bedroom. In December 1999, McDermott, a married father of two, was arrested for leaking secrets about five pending bank mergers to his mistress. The "McDermott mess" took a turn for the tabloids when it was discovered that his mistress, Kathryn B. Gannon, had some secrets of her own — she was an X-rated film star with another lover on the sly who, along with Gannon, had made an estimated $80,000 off of McDermott's tips.
McDermott's lawyers blamed his lapse in judgment on alcohol, depression and family problems. "During this trial I was called a stud stock-picker and a master of the universe," he told the court. "Those things could not be further from the truth. I'm just an average person who's tried to work hard and to give back." In the end, U.S. District Judge Kimba Wood reduced his sentence from 24 months to just 8 months. (Reporters later overheard KBW attorney Mitch Kleinman in the courthouse saying, "She bought it hook, line and sinker.") Though an appeals court overturned McDermott's conviction in 2001, saying his mistress had been unfairly portrayed as a prostitute, McDermott decided against a new trial and instead pleaded guilty to one charge of insider trading. In the end, he lost $25,000 in fines and five months of freedom.
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