Updated from 3:29 p.m. EDT

James J. McDermott Jr., former chairman and chief executive of

Keefe, Bruyette & Woods

, and once one of Wall Street's most highly regarded banking analysts, was convicted by a federal jury Thursday of providing insider trading information to Kathryn Gannon, a pornographic film star.

The jury in U.S. District Court in Manhattan also found co-defendant Anthony Pomponio guilty of conspiracy and securities fraud.

McDermott, of Briarcliff Manor, N.Y., passed along trading tips to Gannon, also known as Marylin Star, who then gave the information to Pomponio.

Both Pomponio, 45, and McDermott, 48, admitted to having extramarital affairs with Gannon but denied engaging in insider trading.

McDermott could face up to five years in prison for the count of conspiracy and up to 10 years for each of the five counts of insider trading. He could also face up to $5 million in fines.

Pomponio could face a total of 40 years in jail for charges of conspiracy, perjury and insider trading as well as more than $3 million in fines.

They will both remain free on bail until sentencing, scheduled for July 17, 2000.

Pomponio's lawyer Thomas F.X. Dunn said Pomponio would appeal the conviction.

"I'm very surpised and shocked," Dunn said about the conviction.

McDermott's lawyers did not immediately return telephone calls for comment.

The charges said Gannon and Pomponio made about $170,000 from trading on McDermott's information, which concerned potential acquisition transactions involving Keefe, Bruyette & Woods' banking clients.

Gannon, who is also an escort and exotic dancer, is currently a fugitive in her native Canada. Prosecutors have sought her extradition.

The

Securities and Exchange Commission

began its investigation of McDermott in April 1999 after Keefe, Bruyette & Woods, a privately run Wall Street investment firm, canceled its planned initial public offering.

Two months later, the firm forced McDermott to resign after 21 years with the company.