Faneuil Recounts Critical Phone Call from Martha Stewart

05 February 2004

Former Merrill Lynch brokerage assistant Douglas Faneuil took the stand on Wednesday to recount in detailed and (reportedly) histrionic manner his critical telephone conversation with US lifestyle oracle Martha Stewart.

The call, made by Stewart after messages had been left for her by Faneuil and his boss (Stewart's co-defendant Peter Bacanovic), preceded the media maven's controversial sale of a large block of stock in ImClone -- a company whose new anti-cancer drug had one day earlier been refused a licence by the Food and Drug Administration. Her sale was executed just before the news became public when ImClone shares went into freefall.

Faneuil testified he told Stewart the ImClone news was not yet in the public domain, but "Peter [Bacanovic] thought you'd like to act on the information that Sam [Waksal, the former ImClone chairman and also a Merrill client] is selling all his shares." Stewart then asked for ImClone's stock price, which he provided. Moments later, Faneuil gave Stewart another stock quote and she replied: "I want to sell."

Faneuil was then subjected to aggressive cross-examination by Bacanovic's attorney, David Apfel. A series of rapid-fire questions followed.

Apfel: "Peter Bacanovic never specifically told you to lie to anyone, isn't it true?"

Faneuil: "Not explicitly."

Apfel then reeled off a list of organizations, including the Securities and Exchange Commission, the Federal Bureau of Investigation, the US Attorney's Office and Merrill Lynch, asking Faneuil if it was true that Bacanovic hadn't asked him to lie to any of them. "True," Faneuil replied after each one was read aloud.

Faneuil then recalled his telephone conversation with Stewart.

Stewart: Hi, this is Martha.

Faneuil: Peter thought you'd like to act on the information that Sam is selling all his shares.

Stewart: All of his shares?

Faneuil: What he does have here, he's trying to sell.

Stewart (later in the call): I want to sell.

In a seeming attempt to discredit Faneuil, lawyer Apfel then subjected him to intensive questioning about his personal use of drugs. Faneuil admitted recreation use but insisted he never used drugs while at work at Merrill.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff