'Doubt' over witness in Martha trial

THE prosecution's key witness against US lifestyle guru Martha Stewart has taken the stand to give potentially devastating evidence - but the defence is hoping he showed himself in such a bad light that the jury will reject his testimony.

Douglas Faneuil, the Merrill Lynch broker who allegedly passed inside information to Stewart about ImClone, said his boss ordered him to do this, that he knew it was illegal, and that he later lied to investigators looking into Stewart's shares disposal.

Legal experts agree the case against Stewart will succeed or fail on 28-year-old Faneuil's testimony.

He was an assistant to Peter Bacanovic, Stewart's broker at Merrill, who is also charged with obstructing an investigation into the December 2001 sale of shares in the biotech company.

He admitted yesterday of being guilty of passing on information from one client - Sam Waksal, ImClone's founder - to another, Stewart. But he said Bacanovic, who was on holiday, told him to do it in a telephone conversation.

Faneuil, who now works in an art gallery, said he told investigators Stewart sold for tax-loss reasons. But he changed his story and struck a deal with prosecutors, who have charged him with only a misdemeanour. Legal watchers say his 'snitching' on a former colleague and admission of lying may undermine the jury's confidence in him.

Stewart and Bacanovic claim they had a pre-existing agreement to sell the shares when they fell below $60. Faneuil said he did not believe this agreement existed.