Witness in Stewart Trial Is Spared Prison Time
Douglas Faneuil Ordered to Pay $2,000
By Brooke A. Masters
Washington Post Staff Writer
Saturday, July 24, 2004; Page E01
NEW YORK, July 23 -- The broker's assistant who became the star witness against Martha Stewart at her criminal trial was ordered Friday to pay a $2,000 fine for initially misleading authorities about her stock trades, but the judge spared him probation and prison time.
Douglas Faneuil, 28, played a crucial role in the Dec. 27, 2001, sale of ImClone Systems Inc. shares that ultimately led to the conviction of Stewart and his boss, former Merrill Lynch & Co. broker Peter E. Bacanovic, for conspiracy, obstruction and lying to federal investigators.
Faneuil testified that he told Stewart -- on Bacanovic's orders -- that ImClone founder Samuel D. Waksal was trying to dump his stock in the company and that the multimillionaire businesswoman responded by selling all 3,928 of her own shares. The trade immediately drew regulatory scrutiny because ImClone announced the next day that its top drug was facing regulatory trouble.
Prosecutors said Faneuil, Bacanovic and Stewart all initially misled regulators about the trade. Bacanovic and Stewart said they had previously arranged to sell her ImClone stock if the price ever fell to $60, as it did that day.
But the assistant came forward in June 2002 and told investigators a different story. In October that year, he cut a deal with the government in which he pleaded guilty to a misdemeanor, acknowledged that he accepted financial rewards from his boss in exchange for lying about the ImClone trade and agreed to testify against Bacanovic and Stewart. He was fired by Merrill Lynch when he pleaded guilty.
Under federal sentencing guidelines, Faneuil faced zero to six months in prison, but Assistant U.S. Attorney Karen Patton Seymour asked the judge to give him extra leniency because of the "substantial assistance" he gave the government before and during last winter's trial of Stewart and Bacanovic.
"I am giving you enormous credit for the assistance you have given the government," U.S. District Judge Miriam Goldman Cedarbaum told Faneuil. "I am accepting your representation that this was truly aberrational and you will never again do anything to bring you in conflict with the criminal court. . . . I hope my reliance is well-placed and if it is, good luck."
Faneuil told the judge, "I want to apologize for my mistakes. On December 27, 2001, I should have listened to my gut feelings. . . . I am so sorry for all the pain these events have caused."
Faneuil, his lawyers, and prosecutors all declined to comment after the proceedings.
Last week, Cedarbaum sentenced both Stewart, 62, and Bacanovic, 42, to five months in prison and five months' home confinement.
During the trial, Faneuil faced a withering cross-examination. Bacanovic and Stewart's defense delved into his experimentation with illegal drugs, accused him of being unnaturally obsessed with Stewart and suggested that he was making up his testimony to save his own hide. Bacanovic's attorney quoted from Faneuil's e-mails to friends about his run-ins with Stewart, including one where he described her as sounding like "a lion roaring underwater" and another where he boasted, "baby put Miss Martha in her place." Faneuil also was subject to some public ridicule when the New York Post published a photograph of him dressed as a 1950s greaser with fake tattoos. A friend testified that he was wearing a Halloween costume.
On Friday, Faneuil thanked the judge for the way she ran the trial. "Facing an aggressive legal assault on my character, I didn't believe that the truth would carry enough weight to be heard clearly, particularly against rich and powerful people. I was wrong, and for that I am intensely grateful."
© 2004 The Washington Post Company
A U.S. district judge gave Douglas Faneuil, right, "enormous credit" for helping the government in its case against Martha Stewart.
(David Karp -- Bloomberg News)