Marylin Starr, James McDermott and Anthony Pomponio, the lead players in Marylin Does Wall Street, have been charged by U.S. Attorney Mary Jo White with conspiracy to commit securities fraud and securities fraud. But it's also now been revealed that Pomponio was also charged with perjury. A separate civil complaint was brought by the Securities and Exchange Commission.
According to court papers unsealed in U.S. District Court in Manhattan, Pomponio told investigators that Ms. Gannon not only worked in adult films but was also a prostitute.
Pomponio told authorities she boasted that she had escort clients in New York City who were "well connected Wall Street types" such as lawyers, stockbrokers and others in top jobs.
Pomponio and Ms. Gannon became the targets of an investigation by the SEC after each of them opened brokerage accounts at Charles Schwab in mid-1997 and began purchasing the stocks of obscure, small, regional banks. The trading activity was deemed suspicious because the bank stocks being purchased had just been placed on a watch list of potential acquisition targets by Keefe, Bruyette & Woods which specializes in bank mergers.
McDermott, who joined Keefe, Bruyette & Woods as a research analyst in 1977, became chairman in January 1998. The firm specializes in mergers and acquisitions involving banks and thrifts and worked on 116 bank- and thrift-related deals worth $31.1 billion from 1994 to 1998, according to the SEC.
McDermott resigned in June this year, after learning that the SEC had started its investigation and had subpoenaed Gannon. According to federal prosecutors, McDermott's company was forced to cancel a planned offering of stock expected to raise about $85 million once he informed the board of the SEC probe.
As the top executive at Keefe, Bruyette & Woods, McDermott had access to confidential, nonpublic information about potential corporate mergers and acquisition transactions and provided Gannon with such information about at least six mergers, authorities said. The SEC, which began its investigation after seeing trading similarities in the accounts of Gannon and Pomponio, said that in one instance, Gannon bought 1,800 shares in Barnett Banks Inc. a day after SunTrust Banks Inc. told McDermott's firm that Barnett Banks was in play and hired the firm to help it prepare a bid.
The SEC said Gannon shared the information with Pomponio, who bought 1,370 shares of Barnett.
Three days later, on Aug. 29, 1997, when Barnett was bought by NationsBank Corp., Barnett stock rose 24 percent, and Gannon earned a profit of $30,400 while Pomponio earned nearly $27,000, the SEC said.
Pomponio of North Caldwell, N.J., is the majority owner of Pomponio Industries, an industrial diamond-wheel manufacturer, the SEC said. He too, was believed to have had a relationship with Ms. Gannon, the court papers alleged.
The SEC filed civil insider trading charges against all three individuals, seeking to prevent them from violating securities laws and forcing them to surrender profits and pay civil penalties. The SEC said that a review of Ms. Gannon's bank records indicated that McDermott, of Briarcliff Manor, N.Y, had deposited about $37,000 into her Miami bank account including $20,000 from a joint account he shared with his wife.
Ms. Gannon was subpoenaed in April in connection with the insider trading investigation and asserted her Fifth Amendment privilege at that time, the complaint said. It alleged that Ms. Gannon, a Canadian citizen living in Miami, made at least $88,000 from illegal trades. Pomponio allegedly made about $86,000. Had Keefe, Bruyette & Woods' stock offering gone through, McDermott's personal worth would likely have increased by millions of dollars.
Prosecutors said Ms. Gannon was a fugitive in Canada. Her lawyers did not immediately return telephone messages for comment.
