Look Who's Talking

He might have been just a $50,000-a-year assistant at Merrill Lynch. But dress him in a coral-pink silk shirt and royal-blue blazer by Fendi, and in the pages of W magazine he's "Banker Douglas Faneuil," curly-haired and baby-faced with the blush of hipness on his cheeks. Faneuil, 26, has improbably emerged as a key figure in the Justice Department investigation of Martha Stewart's sale of stock in the biotech company ImClone last December. Law-enforcement officials have confirmed to NEWSWEEK that Faneuil has agreed to plead guilty to a minor charge and to cooperate in the case that has shocked all Americans with the realization of how much they enjoy seeing Martha Stewart in trouble. People get the informers they deserve; Leona Helmsley was sent up the river by a maid who recalled her sneering that "only the little people pay taxes." If Faneuil's testimony seals Stewart's fate, at least she'll have been done in by someone with taste.

Faneuil has been of intense interest to prosecutors since June, when he told Merrill's lawyers that he no longer supports Stewart's account of how she came to sell almost 4,000 shares of ImClone just a day before it nose-dived. Faneuil was at the center of events as the assistant to Peter Bacanovic, the Merrill broker whose clients included both Stewart and ImClone founder Sam Waksal. Waksal, whose daughter sold a large stake in ImClone the same day as Stewart, has been indicted on insider trading and other charges. (He pleaded not guilty.) What investigators want to know is whether Stewart was tipped off about ImClone's problems--the FDA had rejected the company's submission seeking approval of a new cancer drug--and sold her stock before the news was public. Her explanation was that she'd left standing orders to sell the stock if the price went below $60, as indeed it did that day. Bacanovic reportedly backed her account--as did Faneuil, until his unexplained change of heart this summer. It's unclear whether Faneuil, who spoke to Stewart that day and executed the trade himself, has information that could implicate Stewart in insider trading. But in contradicting her account of a standing stop-loss order, he could be the key to making a case against her for lying to the government. Lawyers for Stewart, Bacanovic and Faneuil all declined to comment last week, and Justice Department officials were mum on their next moves--but were believed to be turning their attention to Bacanovic next.

The case opened a window into the world of the society stockbroker, who helps the rich get richer and keeps them amused at dinner parties. Bacanovic, an urbane 40-year-old bachelor, is a far cry from the avuncular, tweedy brokers who populate TV commercials. (My client had a dream... She wanted a $30 million house in the Hamptons so she could hang out with Steven Spielberg.) But he was much sought-after as an extra man at charity events, one who was not just handsome and charming but could afford $1,000 for his own ticket. Faneuil, who grew up in Newton, Mass., and graduated from Vassar in 1997, entered this world almost by accident, as the close friend of the journalist Rob Haskell. Although virtually unknown to the public, Haskell, as editor of the "Eye" section of W magazine, had the power to make or break a Park Avenue lady's whole lunch. "There is a certain hierarchy to Park Avenue," says Jane Stanton Hitchcock, the author of "Social Crimes." "It's a society with ranks and rituals." Haskell's clout and polish rubbed off on Faneuil, which friends say made him the perfect assistant to Bacanovic. And Faneuil brought valuable traits of his own, says an acquaintance: "Doug's an attractive guy, well-dressed, polite. Peter needs an assistant who won't freak out when Sharon Stone or Ron Perelman calls."

Nor did the power to put Sharon Stone on hold turn Faneuil's head. He lived modestly in an inexpensive Brooklyn neighborhood, although last week he picked up the phone at Haskell's Chelsea digs and politely told a NEWSWEEK reporter that "I'm really not supposed to talk to you." ("Of course I don't," he said in response to her suggestion that he must hate the media.) He went to his share of parties with Haskell but never became a serious social player. "He's an extremely nice, caring person who was never affected by the New York scene," says a childhood friend, Ori Winitzer. "I can't see him rolling with Martha Stewart." Faneuil's true calling, Winitzer says, is art: he does sculpture in wood and plaster, and hoped to make enough on Wall Street to start a foundation for young artists. Since June, when both he and Bacanovic were suspended by Merrill, with pay, he's been meeting with lawyers. But it's a good thing he wasn't interested in palling around with Stewart. Because the next time he sees her might be in court.