By Erin McClam
The Associated Press

NEW YORK - A former brokerage assistant testified Tuesday that his boss ordered him to pass a secret tip to Martha Stewart that led the style maven to trigger her well-timed sale of ImClone Systems stock.

Douglas Faneuil, the government's star witness in the case, said broker Peter Bacanovic ordered him to alert Stewart Dec. 27, 2001, that the family of ImClone founder Sam Waksal was dumping its shares.

Faneuil said he told Bacanovic, who was on vacation in Florida, about a flurry of selling by the Waksals that morning. He said Bacanovic blurted out: "Oh my God, get Martha on the phone."

Waksal later admitted that he had advance knowledge that the Food and Drug Administration was about to refuse to review an ImClone drug application - a decision that sent the stock plummeting. Waksal is now serving a prison term of more than seven years.

Faneuil, who was manning Bacanovic's desk at Merrill Lynch & Co. Dec. 27, testified that he took calls before 10 a.m. from Waksal's accountant and Waksal's two daughters - all demanding that Faneuil sell their ImClone shares.

He said he spoke to Bacanovic, who left a message for Stewart and then ordered Faneuil to tell her of the Waksal sell-off when she called back. Faneuil said he asked his boss whether passing the tip would be appropriate.

"Of course. You must," he said Bacanovic replied. "That's the whole point."

Stewart called later in the day and ordered her entire stable of 3,928 shares of ImClone to be sold, the prosecution contends.

The government claims Stewart and Bacanovic cooked up a false story and repeatedly lied to investigators, saying they had a pre-existing arrangement to sell ImClone when it fell to $60 a share. The stock fell from $63.62 at the close Dec. 26, 2001, to $58.30 the next day, and by a month later, it was in the middle- to high- $10s. Tuesday, ImClone closed at $41.89.

Stewart is charged with obstruction of justice, securities fraud and other counts that carry a total of 30 years of prison time. Bacanovic faces up to 25 years if convicted of perjury, conspiracy and other charges.

The testimony of Faneuil is the most critical piece of the puzzle that the government says implicates Stewart.

When court recessed Tuesday, Faneuil had not reached the point in his testimony where he was expected to say he actually told Stewart the Waksals were selling.

Faneuil had initially supported Bacanovic and Stewart's story, but changed his story in a 2002 plea deal with prosecutors.

The defense is expected to argue that Faneuil was willing to lie to the government.