Merrill Lynch assistant will testify against Martha Stewart

NEW YORK -- An assistant to Martha Stewart's stockbroker has decided to plead guilty and testify against the home decorating maven and others in the ImClone Systems scandal, The Associated Press learned Tuesday.

Douglas Faneuil, 26, is expected to plead guilty Wednesday to a misdemeanor -- making a false statement to investigators -- as part of the deal, said a source familiar with the plea negotiations. The agreement was confirmed by another source familiar with the negotiations who also spoke on condition of anonymity.

Investigators are looking into Stewart's sales of nearly 4,000 ImClone shares last December, just before the stock price plunged on news the Food and Drug Administration would not review its highly touted cancer drug, Erbitux. Merrill Lynch handled Stewart's ImClone sale.

Prosecutors are trying to determine if Stewart was tipped off by her close friend Sam Waksal, ImClone's founder and ex-CEO.

Faneuil's lawyer did not return calls for comment and Stewart's spokeswoman, Allyn Magrino, declined to comment. Stewart has denied any wrongdoing and no charges have been brought against her.

A spokesman for the U.S. Attorney's office also declined comment.

Waksal was indicted in August on charges that he tipped off family members so they could dump millions of dollars worth of ImClone stock before the bad news about Erbitux became public. He has pleaded innocent to the charges.

Stewart has said she had a standing order with her Merrill Lynch broker, Peter Bacanovic, for whom Faneuil worked, to sell the ImClone shares if they fell below $60.

Faneuil initially gave investigators the same account but later changed his story and said there had been no such order.