The New York Daily News by Greg B. Smith - October 4, 2009
On TV financial shows, James McDermott Jr. was the $4 million CEO of a Wall Street powerhouse, a go-to guy on bank mergers.
To his neighbors in the exclusive Westchester enclave of Briarcliff Manor, he was the owner of a $7 million Tudor-style mansion on the Rockefeller estate, and an upstanding husband and father. But to his siblings, he was selfishness personified. "Although we lived 10 minutes away, we spent no time with them," said his sister, Kathryn, who now lives outside Albany. "Why would you want to spend time with a snake?" The siblings have written letters to judges urging hard time in prison. They've tried to get him indicted on larceny charges. Now his family is suing him on grounds that he looted the family trust while his mother fought Alzheimer's in a nursing home. McDermott's squeaky-clean image was a joke members of his family say they have seen through for years. One of his brothers, Robert, a Catholic priest in St. Louis, called it a "sad tale." After all these years, he says he is at a loss to explain his brother's many bad choices. "My parents were very good people and devout Roman Catholics," he wrote in an e-mail to the Daily News. "They raised us well. I do not know where Jim went so wrong." The truth began to emerge on Dec. 21, 1999, the day McDermott was busted for leaking stock tips to his porno queen girlfriend, Marilyn Star, the X-rated lead of "Marilyn Does Miami" and "Babes on Bikes." He denied everything, telling his father he was being singled out for something everyone on Wall Street did - give friends insider info, Kathryn said. He was convicted at trial. The day he was sentenced, Kathryn and her husband, Al Sorrentino, were the only family present. His wife and children were in Europe.
The judge, Kimba Wood, read piles of fawning letters from friends, but never got to see Kathryn's very different letter - advising that her brother go straight to prison. "The lawyer said it wouldn't be in his best interests," said Sorrentino. That day McDermott called himself "just an average person who's tried to work hard and give back." He got eight months, served just under five and was later barred from the securities industry that had made him rich. It was time to start over. He set up a woodworking business with a partner and was going to pull himself up by his bootstraps. When his father, James Sr., died in June 2003, he became sole trustee of the family trust, taking full responsibility for his ailing mother, Mary. That, anyway, was the plan. Meanwhile, he was drowning in debt, records show. There was the crushing mortgage of the Briarcliff mansion and the $635,000 luxury condo and cabana his wife had bought in Palm Beach, smack on the Atlantic. He fell behind in his taxes, and federal and state liens on his properties mounted. Sometime in 2006, James' brother Robert was looking over his mother's taxes when he realized something was wrong. "He asked Jim where the trust money is," Kathryn said. "Jim says it's all gone."
When Robert demanded an accounting, James responded in a self-pitying July 2007 e-mail admitting he'd "borrowed" $464,000 of what had been a $600,000 trust to pay his many debts. He claimed that "nothing unfolded as I expected" regarding his grand business plans, and mentioned his "difficulties with the IRS." He was confronting what he called "a personal financial maelstrom" that "overwhelmed my ability to respond and fix the situation." "There is simply not enough apology to cover the hurt that I may have caused Mom and for that I am beside myself." So where, the family wanted to know, did it all go? The family went to Westchester District Attorney Janet DiFiore for help in finding out. Two prosecutors were assigned to the case and a grand jury subpoenaed boxes of documents.
Last year, the family says, the district attorney advised them there was no criminal case and told them to file a civil suit. McDermott's lawyer, Kevin Kitson, did not return calls seeking comment. The suit, filed by lawyer Bill Neary in Wisconsin in July, says that between October 2003 and September 2006, McDermott siphoned off most of the fund into accounts he and his wife, Darian, controlled. During that time, records show, his wife bought the condo in Florida, and he made payments toward his tax debt and coughed up $230,000 to settle a civil suit with the SEC. He also set up several limited liability corporations, including one based in the Florida condo called Woodside Enterprises. Today his sister, Kathryn, says the family wants to pursue the funds to make sure their mother - who does not know about any of this - is taken care of. "I am just so very grateful she doesn't have a clue what's going on," Kathryn said. "She has a few good years left. Couldn't you at least make it easier? But no." "Emotionally," she said, "this is taking a toll." firstname.lastname@example.org