Gary Susman
October 02, 2002 AT 04:00 AM EDT

The Manhattan U.S. attorney’s office is closing in on Martha Stewart. The Associated Press reports that the broker’s assistant who handled her controversial ImClone stock sale in December has agreed to a plea deal and plans to plead guilty Wednesday to a misdemeanor charge in return for his testimony against Stewart in the insider-trading investigation of the transaction.

According to the New York Daily News, Douglas Faneuil will plead guilty to blackmail for accepting a gratuity in return for his silence over the Stewart trade. The gratuity was a pair of New York Knicks tickets, which Faneuil reportedly accepted in April when the feds first started investigating insider-trading allegations surrounding ImClone and its founder, Stewart pal Sam Waksal. Faneuil initially backed the story put forth by Stewart and his boss, Merrill Lynch broker Peter Bacanovic, that Stewart’s sale of her ImClone holdings was the result of a longstanding limit order she had placed, requesting that her shares be sold if the stock price ever fell below $60. But this summer, Faneuil changed his story, saying there was no stop-loss order, and that he’d been asked to parrot the story as a cover-up to protect Bacanovic and Stewart.

Faneuil’s apparent about-face lends credence to the possibility that former stockbroker Stewart made the trade based on inside information that the stock was about to tank because of federal rejection of a new ImClone cancer drug. Neither Stewart nor Bacanovic has been charged with a crime, but a source close to the investigation told the New York Post that Faneuil’s testimony could lead to charges being brought against Stewart ”within some weeks.”

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