Martha Stewart Witness Fined
By Brooke A. Masters
Washington Post Staff Writer
Friday, July 23, 2004; 12:11 PM
NEW YORK, July 23 -- The young broker's assistant who became the star witness at Martha Stewart's criminal trial was ordered this morning to pay a $2,000 fine for his role in misleading authorities about her stock trades, but the judge spared him probation and prison time.
Douglas Faneuil, 28, played a crucial role in the December 27, 2001, sale of ImClone Systems Inc. stock that ultimately led to the conviction of Stewart and his boss, then-Merrill Lynch & Co. broker Peter Bacanovic, convicted of conspiracy, obstruction and lying to federal investigators.
He testified that he personally tipped 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 young assistant came forward in June 2002 and told investigators a different story. In October of that year, he reached an agreement with the government in which he pleaded guilty to a misdemeanor, acknowledged that he accepted extra compensation from his boss in exchange for lying about the ImClone trade, and agreed to testify against Bacanovic and Stewart.
Under the federal sentencing guidelines, Faneuil faced zero to six months in prison, but Assistant U.S. Attorney Karen Patton Seymour asked the judge for extra leniency because of the "substantial assistance" he gave to 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."
For his part, Faneuil told the judge, "I want to apologize for my mistakes. On December 27, 2001, I should have listened to my gut feelings. Instead, I suppressed them. In the months that followed I should have offered the candor and honesty that are owed to the U.S. government and to all decent people, by refusing to cover up a misdeed. Instead, I went along with my boss. I am so sorry for all the pain these events have caused."
Last week, Cedarbaum sentenced both Stewart, 62, and Bacanovic, 42, to five months in prison and five months home confinement. But she allowed them to remain free on bond while they appeal their convictions. Stewart was also fined $30,000 and Bacanovic was fined $4,000.
Faneuil, who was fired by Merrill Lynch when he pleaded guilty, came to court surrounded by his family and close friends. He hugged his attorneys after the hearing, and Seymour patted him on the back.
© 2004 The Washington Post Company