- The Washington Times - Thursday, October 3, 2002

NEW YORK (AP) Prosecutors turned up the heat on Martha Stewart yesterday when a stockbroker's assistant admitted taking a payoff to keep silent about a reputed insider stock trade by the home decorating diva.
Douglas Faneuil, 27, pleaded guilty as part of a deal to testify against Mrs. Stewart and others who might be charged in connection with sales of ImClone Systems Inc. shares last December.
He admitted to a misdemeanor charge of receiving money and other valuables "as consideration for not informing."
Mr. Faneuil worked at Merrill Lynch for Mrs. Stewart's broker, Peter Bacanovic.
Immediately after the plea, the firm announced that both Mr. Bacanovic and Mr. Faneuil had been fired.
"This public plea is designed to convince Martha Stewart to lay down her sword and admit that she traded on inside information," said Seth Taube, a former Securities and Exchange Commission lawyer who is now in private practice.
"The idea is, you flip Faneuil, then you flip Bacanovic, and then you get Stewart," Mr. Taube said. "She is clearly the top of the pyramid in this little triangle."
Mrs. Stewart dumped nearly 4,000 shares of ImClone just before the stock price began to plunge on news that the Food and Drug Administration would not review its application for its highly touted cancer drug, Erbitux. The FDA's decision meant that the drug, upon which the company's fortunes relied, was unlikely to gain federal approval anytime soon.
Mr. Faneuil admitted during his plea that he had withheld the truth from SEC investigators, as well as FBI agents, when first interviewed about the trading activity.
"I did not truthfully reveal everything I knew concerning the actions of my immediate supervisor and the true reasons for the 'tippee's' sale of ImClone stock," Mr. Faneuil said.
In exchange for stonewalling probers, Mr. Faneuil was offered an extra week of vacation and a free airline ticket, and was given an increase in his commission rate, court papers said.
His attorney denied published reports that the assistant had received Knicks basketball tickets in exchange for his silence.
Court papers say that on Dec. 27, Mr. Faneuil's boss let the "tippee" know that Sam Waksal, ImClone's former chief executive officer, was trying to sell all of the ImClone stock he held at Merrill Lynch.
"The tippee then sold all of the tippee's shares of ImClone stock, approximately 3,928 shares, yielding proceeds of approximately $228,000," the federal court papers stated.
Mr. Waksal was indicted in August for reputedly telling family members to dump millions of dollars worth of ImClone stock before the bad news about Erbitux became public and the stock dropped.
He pleaded not guilty to the charges.
Mrs. Stewart, who has previously denied any wrongdoing, has said she had a standing order to sell the ImClone shares if they fell below $60.
Mr. Faneuil initially gave investigators the same account, but later changed his story and said there had been no such order.
Allyn Magrino, a spokeswoman for Mrs. Stewart, declined to comment on Mr. Faneuil's plea.
Mr. Bacanovic's attorney did not immediately return a call for comment.

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