Stewart Received Stock Tip
According to Witness

New York (CNLA)– The government's key witness in the trial of Martha Stewart testified in court that he passed on a secret tip to Ms. Stewart just before she sold thousands of shares in a biotechnology company, ImClone, in 2001.

This was the second day on the witness stand for Douglas Faneuil, who was an assistant to Ms. Stewart's stockbroker at Merrill Lynch, Peter E. Bacanovic, and was covering for his boss when the shares were sold on Dec. 27, 2001.

On Tuesday, Mr. Faneuil told the jury at the federal courthouse in Lower Manhattan that Mr. Bacanovic had instructed him to tell Ms. Stewart that the chief executive of ImClone, Sam Waksal, was selling his shares in the company.

In this morning's testimony, Mr. Faneuil said, "I told her that Sam was trying to sell." He added that Ms. Stewart then asked, "All of his shares?"

Mr. Faneuil told the jury that Ms. Stewart had asked about the ImClone share price and that he had given her the price. He then quoted her as telling him, "I want to sell all my shares."

Mr. Faneuil's testimony has been highly anticipated in the case being heard before Judge Miriam Goldman Cedarbaum of Federal District Court.

Ms. Stewart sold her 3,928 shares in ImClone Systems just before the company announced that a much-anticipated drug had run into serious regulatory obstacles. Mr. Bacanovic and Ms. Stewart have maintained that she had a standing order to sell her ImClone stock if the price dropped below $60 a share.

Ms. Stewart is not charged with criminal insider trading; she is being tried on charged of lying to investigators about what prompted her to sell her stock. Mr. Bacanovic also faces charges of obstructing justice.

Under questioning by the prosecution today, Mr. Faneuil elaborated on his Tuesday testimony about Dec. 27, 2001, the day Ms. Stewart's shares were sold. He said that Mr. Bacanovic, who was vacationing at the time, had told Mr. Faneuil to "get Martha on the phone" after Mr. Waksal and his family began dumping their shares of the company.
Ms. Stewart could not be reached, Mr. Faneuil testified, so Mr. Bacanovic told him that she would call back and "to tell her what's going on."
When Mr. Faneuil asked if he should tell Ms. Stewart about the Waksal transactions, he testified, Mr. Bacanovic replied: "Of course, you must. You've got to. That's the whole point."

In Tuesday's testimony, Mr. Faneuil said he had told one client what another client was doing in his account and then had lied to cover it up.

Mr. Faneuil also said Ms. Stewart was one of the two most important of his boss's 200 to 250 clients. She maintained both personal and business accounts at Merrill Lynch, he said.

He has also described Mr. Bacanovic as "the best boss I ever had." About one week a month, he said, he covered at Mr. Bacanovic's desk, in what he described as mostly a customer service function.