Bloomberg News

NEW YORK - James McDermott, the former chief executive officer James McDermott of the investment bank Keefe, Bruyette, & Woods Inc., was sentenced Thursday to eight months in federal prison and fined $25,000 for leaking bank merger secrets.

U.S. District Judge Kimba Wood said Mr. McDermott, the first CEO of a Wall Street investment bank to be charged with insider trading, had violated the public trust. "Mr. McDermott was keenly aware of the prohibition on insider trading," Ms.Judge Wood said. "The offense is serious because insider trading undermines investor confidence."

Ms. Wood also fined McDermott $25,000.

Mr. McDermott was convicted in April of passing confidential information about five pending bank mergers to his former mistress, Kathryn Gannon. Mr. Gannon, who was also charged in the case, and. U.S. authorities have moved to extradite her from her native Canada. Mr. McDermottThe former CEO was convicted of sharing merger secrets involving Keefe Bruyette clients, including Central Fidelity, First Commerce Corp., and First Commercial Corp., among others. In each instance, Ms. Gannon bought stock in the bank or the bank'its takeover target.

Mr. McDermott did n'ot profit financially from the stock trades. Ms. Gannon and another defendant, New Jersey businessman Anthony Pomponio, with whom Ms. Gannon allegedly shared theMcDermott's tips, earned more than $100,000 from the inside information, prosecutors said. Mr. Pomponio will be sentenced in September next month.

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