Home-empire wrecker

NEW YORK -- Martha Stewart's fate -- and the future of the vast empire that has put her name on everything from books and bed linens to garden boots and garlic presses -- may well be in the hands of a lowly brokerage assistant by the name of Douglas Faneuil.

Faneuil, 28, will be the government's star witness at Stewart's securities fraud trial, set to begin in mid-January.

The baby-faced Faneuil lives in relative obscurity in an apartment in Brooklyn, famous among his friends as a fierce competitor at pingpong and air hockey. Friends describe him as a sweet, gentle, guileless soul.

And his version of events in the insider trading scandal could prove extremely harmful to Stewart.

According to the government, it was on Dec. 27, 2001, at a Merrill Lynch brokerage office in New York, that Faneuil took a call from Stewart. Prosecutors say Faneuil, on orders from his boss, broker Peter Bacanovic, told Stewart that the family of ImClone Systems Inc. founder Samuel Waksal was trying to unload its stock in the pharmaceutical company.

Thirteen minutes later, Faneuil, on orders from Stewart, unloaded her 3,928 shares of ImClone stock, netting about $228,000, according to the government.

The next day, ImClone announced that the government had issued a negative report about its new cancer drug -- news that sent the company's stock plummeting 18 percent. Waksal later admitted he had advance knowledge of the report and had tipped his daughter to sell ImClone.

Stewart was never charged with insider trading. Instead, the indictment centers on charges she lied to investigators about why she sold.

Stewart and Bacanovic, indicted with her in June, have said they had a standing oral agreement to sell Stewart's stock if it fell below $60.

Faneuil backed up that account in initial interviews with Merrill investigators and the government. But then he hired a lawyer and changed his story.

In October 2002, Faneuil pleaded guilty to a misdemeanor and admitted that he had received an extra week of vacation and a free airline ticket in exchange for misleading investigators about the stock sale.

Legal experts say Faneuil's testimony for the prosecution will be nothing less than pivotal -- particularly if, as many analysts believe, the defense decides not to put Stewart herself on the stand.

Stewart's attorney, Robert Morvillo, is likely to attack Faneuil's loyalty and credibility and portray him as eager to tell the government what it wanted to hear to keep himself out of more legal trouble.

"Bob Morvillo is fabulous, but I think Faneuil's youth and inexperience may play well to the jury as someone who was taken advantage of by Stewart and Bacanovic," said Seth Taube, a former Securities and Exchange Commission lawyer now in private practice.

"I think the government will portray him as someone scooped up by people more sophisticated than himself."

Faneuil himself declined an interview request from The Associated Press.

Details about Faneuil's upbringing in Newton, Mass., are difficult to come by -- less because of his involvement in the Stewart case than because, by most accounts, he was quiet and shy, blending in with his peers.

At upper-middle-class Newton South High School, where he graduated in 1993, he is remembered by classmates as unassuming and well-mannered. Many said they could only remember saying hello to him in the hallways.

One moment in the spotlight: In a senior class production of "South Side Story," a spoof of the musical "West Side Story," Faneuil, 17 years old, appeared as a nerd and sang a solo.

He held typical after-school jobs -- scooping ice cream, delivering pizza.

"He was very polite, very honest," said Konstantine Chronopoulos, owner of Bill's Pizzeria in Newton, where Faneuil worked on and off. "All around just a good employee. A very nice kid."

And when news surfaced, nine years later, that the former delivery boy was wrapped up in a stock scandal? "I was surprised," Chronopoulos said. "Very surprised."

Faneuil studied political science and art at Bennington College in Vermont and Vassar College in New York. He worked for four years at D.E. Shaw & Co., a New York hedge fund, and joined Merrill in the spring of 2001, signing on as an assistant to Peter Bacanovic.

Faneuil left Merrill after the Stewart scandal exploded. Friends say he is working occasional temp jobs.

Most of Faneuil's friends in New York and elsewhere have closed ranks around him, declining to discuss his personality. But those who will talk about him describe him as an innocent soul, somewhat overwhelmed by events.

"Doug is probably one of the most benevolent, sweet, kind and gentle human beings I know," said Sally Haskell, a friend who has known him for four years. She added: "He doesn't have a mean bone in his body."

Faneuil's lawyer, Marvin Pickholz, suggested those qualities should work in his favor in court.

"And I think the prosecutors know that, too," he said.