The assistant to Martha Stewart's celebrity broker reportedly has blown the whistle on the domestic diva -- telling federal investigators that she sold her shares in scandal-scarred ImClone after learning that members of the chief executive's family were dumping theirs.
The report, in The Wall Street Journal, says the assistant, Douglas Faneuil, has been cooperating with officials looking into whether Stewart lied to investigators probing insider trading in the stock.
Stewart sold her 4,000 shares in the controversial biotech company last Dec. 27, the day before they began to plummet on news the Food and Drug Administration rejected a crucial application for ImClone (IMCL)'s new cancer drug, Erbitux.
She and her Merrill Lynch broker, Peter Bacanovic, have insisted they had a verbal deal that he would sell her out if the stock fell below $60.
She sold at $58 a share.
But Faneuil has now told probers she got rid of her shares after he advised her -- on Bacanovic's orders -- to sell because the firm's then-chief executive, Sam Waksal, was trying to sell out and members of his family were unloading their stock, the Journal reported.
Waksal, a pal of Stewart, has been charged with insider trading.
He has repeatedly denied any wrongdoing, but reportedly is negotiating a plea deal with the feds to keep them from carrying out a threat to arrest his daughter, Aliza.
She sold $2.5 million worth of ImClone before it tanked.
Although Stewart has not been charged in the case, her role has sent the stock of her own company, Martha Stewart Living Omnimedia (MSO), plummeting, prompting a class-action suit by her investors.
Faneuil had initially corroborated Stewart's story about the verbal stop-loss order, when he spoke to Merrill Lynch lawyers.
But, according to the Journal report, he is now admitting that story was false and he had been pressured by Bacanovic to back it up.
Bacanovic has also insisted he did nothing wrong.
Merrill Lynch has put both Faneuil and Bacanovic on paid administrative leave.
In June, Stewart -- who also insists she did nothing wrong -- provided congressional investigators with a number of documents they had demanded.
But missing from the package was any proof that she had placed a standing order with Bacanovic to sell.
The two have given different accounts of when that order was set up -- she said late November, he said mid-December.
Last week -- on her 61st birthday -- Stewart got hit with the class-action lawsuit.
It charges that her involvement in the ImClone scandal has "forever damaged" the value of her name and reputation - thereby ruining the value of Martha Stewart Living Omnimedia stock.