April 10, 2000: KBW CEO’s Insider Tip that Shook Wall Street Trust
In this episode of This Week in Wall Street History, Todd M. Schoenberger highlights a scandal that redefined trust in Wall Street leadership. On April 10, 2000, James McDermott Jr., then CEO of Keefe, Bruyette & Woods (KBW), faced insider trading charges—accused of leaking confidential merger data to his mistress, pornography actress Kathryn Gannon, ahead of a major deal. The revelation triggered widespread public outrage and ultimately led to an 8-month prison sentence and a $25,000 fine.
This betrayal of ethics by a top executive did more than criminalize insider trading—it eroded investor confidence and sparked deeper scrutiny into Wall Street governance.
Why This Still Matters Today
In our era of increasing demands for corporate accountability and tightened regulatory standards, the McDermott case remains a cautionary tale. From “shadow trading” prosecution to modern technology facilitating front-running schemes, the persistence of trust-risking behavior among financial leaders continues to challenge how firms protect their reputations.
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