Broker’s Aide in Stewart Case Fined $2,000

Douglas Faneuil, the broker’s assistant who lied to investigators to help Martha Stewart but later became the star witness against her, was fined $2,000 by a federal judge Friday but given no prison time.

Faneuil, who pleaded guilty in late 2002 to a misdemeanor charge, grew teary-eyed as he apologized to U.S. District Judge Miriam Goldman Cedarbaum for lying about the stock sale at the heart of the case.

“This ordeal has been a tragic disappointment for too many people, myself included,” Faneuil said as he choked back tears. “If I were given the opportunity to prevent it from happening again, I would choose to do so every single time.”

Cedarbaum smiled at Faneuil as she told him that his cooperation with prosecutors meant he would avoid both prison and probation. He could have gotten up to six months in prison under federal sentencing guidelines.

“You are in many ways a very lucky young man,” Cedarbaum said. “I am giving you enormous credit for your assistance, and I am accepting your representation that this was truly aberrational.”

After the sentencing, Assistant U.S. Atty. Karen Patton Seymour smiled fondly at the 28-year-old Faneuil and patted him on the back.

In a letter to Cedarbaum, prosecutors sought leniency for Faneuil, who now works in an art gallery in Manhattan’s Chelsea neighborhood.

“One of the most notable things about Faneuil coming forward was that he was not under subpoena and no government agency had asked to interview him further after March 2002,” the letter said. “In fact, he had no reason whatsoever to believe that his lies would ever be uncovered.”

Stewart and her former Merrill Lynch & Co. stockbroker, Peter E. Bacanovic, were convicted in March of conspiracy, obstruction of justice and lying to investigators over the circumstances of Stewart’s sale of almost 4,000 shares of biotechnology company ImClone Systems Inc. in December 2001.

Both were sentenced July 16 to five months in prison and five months of home confinement. Their sentences were suspended pending appeals.

Stewart and Bacanovic said they had a preexisting agreement to sell ImClone shares if the stock fell below $60. Prosecutors said there was no such agreement. The jury found that Stewart sold because Faneuil, at the behest of Bacanovic, tipped her that ImClone founder Samuel D. Waksal had dumped all his shares.

As Bacanovic’s assistant, Faneuil was the only witness with firsthand knowledge of the transaction who could contradict the account given by Stewart and Bacanovic.

Faneuil initially corroborated Stewart’s account in two separate interviews with government investigators. But he later recanted, telling prosecutors that she sold after he called to notify her about Waksal’s sale.

Faneuil pleaded guilty in October 2002 to a misdemeanor charge of accepting a payoff. He admitted that he did not fully disclose all he knew about the stock trade in exchange for an extra week of vacation and an accelerated pay raise.

During the trial, several of Faneuil’s e-mails were cited by defense attorneys as evidence he disliked Stewart and was giving false testimony to spare himself from prison.

“Martha yelled at me again today, but I snapped in her face and she actually backed down!” Faneuil wrote in one. “Baby put Ms. Martha in her place!!!”

In his statement to Cedarbaum, Faneuil spoke of his fears of squaring off against Stewart.

“Although on the witness stand I only spoke the truth -- and that’s all I ever intended to do -- I had little confidence my credibility would be recognized,” he said. “Facing an aggressive legal assault on my character, I didn’t believe that the truth would carry enough weight to be heard clearly, particularly against rich and powerful people. I was wrong, and for that I am immensely grateful.”