Reported break in Martha Stewart case (6371)

Shares of Martha Stewart Living Omnimedia Inc. fell in early trading Thursday after a published report said a gay assistant at Merrill Lynch & Co. has agreed to plead guilty to a misdemeanor and testify against Martha Stewart and others in the federal investigation of stock sales in ImClone Systems last year. The Wall Street Journal said in Thursday's editions that prosecutors had sought to charge the assistant, Douglas Faneuil, with a felony for making false statements to investigators but later agreed to a misdemeanor in exchange for his cooperation. The newspaper cited people familiar with the discussions. The charge is expected to be filed within days. Shares of Martha Stewart Living were down 7.7%, or 60 cents a share, at $7.20 in midday trading on the New York Stock Exchange.

Through his lawyer, Faneuil, who is reported to be dating W editor Rob Haskell, declined to comment, as did the U.S. attorney's office in New York. A spokesperson for Stewart also declined to comment Thursday, but in the past she has denied wrongdoing.