Report: Martha Stewart’s Broker Blames Assistant

The stockbroker for Martha Stewart claims his assistant took the initiative to tip her off with “inappropriate information” about insider sales of shares in biotechnology company ImClone Systems Inc., the Financial Times reported late Monday.

The newspaper’s Web site, citing people familiar with Merrill Lynch & Co. broker Peter Bacanovic’s version of events, said the broker also believes that his assistant, Douglas Faneuil, fabricated claims that he passed on the information under his chief’s orders to spare himself from possible charges.

Richard Strassberg, Bacanovic’s attorney, declined to comment on the report when contacted by Reuters. Attorneys for Faneuil and Stewart also had no comment.

Stewart, chief executive of Martha Stewart Living Omnimedia Inc., is being investigated for possible insider trading for selling almost 4,000 shares of ImClone a day before the company publicly announced regulators had refused to review its cancer drug, Erbitux.

She has denied wrongdoing, citing a preexisting arrangement to sell the stock if it fell below $60 a share.

The Financial Times said Bacanovic’s defense emerged for the first time as Samuel D. Waksal, ImClone’s founder and former chief executive, pleaded not guilty on Monday to charges stemming from the government probe into insider trading at the biotechnology company last December.

Waksal, a close friend of Stewart, was arrested in June for allegedly trying to sell shares in ImClone and tip off his family members just before the Food and Drug Administration publicly rejected the company’s application for Erbitux.

Bacanovic and Faneuil were placed on paid leave by Merrill in June after an internal probe.

Faneuil is understood to have told the Justice Department that Bacanovic told him to call Stewart to warn her that Waksal was selling his ImClone shares.