He didn’t say proof of what. Was this supposed to be confirmation of the now-discarded tax-loss-selling theory? Or the agreement to sell at $60? Or some new hybrid of the two: that the decision to sell at $60 was made during a discussion of tax-loss selling? Faneuil had no idea.
“Okay?” Bacanovic asked. When Faneuil remained silent, he repeated it. “Okay?”
“Okay,” Faneuil said, as he had in the past. He felt the web tighten around him.
Faneuil was having trouble sleeping. One night, exhausted and worried, he unburdened himself to Rob Haskell, breaking down and crying. He couldn’t figure any way out except to come forward and tell the truth. Bacanovic didn’t seem to show any appreciation for Faneuil, or awareness of the terrible situation he’d put him in. The constant pressure to acquiesce in what Faneuil knew to be lies was insulting and draining. If Bacanovic would just level with him, maybe they could figure something out.
Haskell argued that Faneuil should stick to his story and protect Bacanovic, but he could tell that Faneuil’s loyalty was wavering. Finally, at about 8:30 p.m., Faneuil went to bed.
Haskell decided to take matters into his own hands. He considered Bacanovic a friend, and he’d introduced him and Faneuil. Haskell thought Faneuil was “freaking out,” as he later recalled, and was on the brink of coming forward and confessing his lie. In Haskell’s opinion, this would be bad for both Faneuil and Bacanovic. Haskell and Bacanovic hadn’t spoken since the Stewart trade and the ensuing chill between Faneuil and his boss, but now he called Bacanovic.
“Doug’s stressed out,” he told Bacanovic. “You need to make Doug feel a lot better about not coming forward, and that he’ll be safe. I think he feels the only person you’re thinking of is yourself.”
“Doug cannot tell them what happened!” Bacanovic insisted, sounding panicked. “It’s important to me.” Speaking at his usual rapid rate, he continued, “Do you realize how much I have to lose? I pay for my mother’s life. I live paycheck to paycheck.” Haskell sensed how fragile Bacanovic’s aura of money, success, and status was, how important it was to him to remain a part of the glamorous, wealthy, sophisticated world he inhabited but wasn’t really a part of.
“He essentially acknowledged that what happened, happened,” Haskell later recalled. “It’s not as if we needed to review the circumstances. He knew or feared they were incriminating circumstances.”
Haskell knew Faneuil well enough to know that all he really needed was some attention and understanding. Faneuil, in Haskell’s view, was “a humanist. If anything was going to allow him to subsume his values [to be truthful], it had to be love for that person,” meaning Bacanovic. “Doug makes decisions for other people that are against his own self-interest and well-being,” Haskell warned Bacanovic. “I need this to be a good decision for Doug.”
“What can I do?” Bacanovic finally asked.
“Take him to lunch. Treat him gently. Let him know how hard this is for him. Be his shrink.”
The next morning, when Haskell told him he’d spoken to Bacanovic after he’d gone to bed, Faneuil was furious. He felt betrayed that Haskell had called Bacanovic without asking his permission. He stormed out without even asking Haskell what they had discussed.
When Faneuil arrived at work that morning, still angry at Haskell, Bacanovic called him in. “Let’s go to breakfast.” Faneuil was surprised; nothing like this had ever happened.
The two went to Dean & DeLuca, a gourmet café in Rockefeller Center. Faneuil ordered a hot chocolate. “I had no idea you were so upset,” Bacanovic said soothingly. “I’m sorry. But I really don’t understand your concern. I have everything under control. You have absolutely no reason to worry. This isn’t about you.” Bacanovic continued in this vein, stressing that it was the Waksals being investigated, not Bacanovic or anyone at Merrill Lynch, and certainly not Faneuil. In Bacanovic’s view, Faneuil hardly mattered.
Faneuil feared he wasn’t going to get a word in, just as in his previous exchanges with Bacanovic. But the more Bacanovic talked, stressing that none of this was about Faneuil, the angrier he became. It certainly was about Faneuil, or at least it was now that he had been enlisted in a false version of what happened. Finally he burst out, “Peter, I know what happened!”
Bacanovic was silent for a moment. He leaned forward and put his hand on Faneuil’s shoulder, looking him in the eye. “With all due respect, Doug, no, you don’t,” he said.
Faneuil was trembling. Bacanovic lifted his hand and leaned back. Faneuil didn’t know what had happened or why, Bacanovic insisted. Only he and Stewart did. “I spoke to Martha. Everyone is telling the same story,” Bacanovic assured him. So Bacanovic and Stewart were coordinating their accounts, Faneuil realized.
Bacanovic launched into a long account of his relationship to Stewart. How she’d allocated “friends and family” stock in Martha Stewart Living to Bacanovic and his clients when her company went public. “She could have given them to much bigger fish than me,” Bacanovic said. How, with Stewart’s backing, he’d gone from obscurity to being one of the most successful people in the office. He and Stewart “are close. We’re loyal. We are not going to betray each other,” he concluded.
With only the briefest mention of Faneuil and a perfunctory apology, Bacanovic had, once again, steamrolled over his assistant. Despite Haskell’s admonition to be sensitive and show he cared, Bacanovic had launched into another monologue that focused only on himself.
Far from reassuring or comforting Faneuil, the excursion to Dean & DeLuca made things worse.
Faneuil felt increasingly angry at Bacanovic for putting him in this excruciating position and then showing no empathy for what he was going through. After the call from Haskell and the breakfast, Bacanovic demanded constant reassurances that Faneuil was on the team. Sometimes it was just a knowing smile when they passed. Other times Bacanovic would repeat the $60 story and demand that Faneuil agree with him. He often repeated that “Martha is telling the same story.”
Periodically Bacanovic offered Faneuil something of value. Bacanovic suggested he take an extra week of paid vacation, and offered him a free plane ticket anywhere in the United States. After Bacanovic learned that Haskell was traveling to Argentina on an assignment from his magazine, he offered to buy a ticket for Faneuil so he could go along. Faneuil didn’t take any of it. They struck him as the equivalent of bribes. It was insulting that Bacanovic thought he could be bought off. And Faneuil hated Bacanovic’s constant need for reassurance.
Monaghan, Faneuil’s supervisor, commented frequently that he seemed under stress, but she never asked Faneuil why. Instead, she kept reassuring him that everything would be all right. She offered him coveted tickets to a New York Knicks game, which he declined. Finally she told him to take a week off with pay, and gave him no choice in the matter. He had nowhere to go, and spent most of the week at his apartment, brooding about his plight.
Bacanovic and Stewart were obviously discussing and coordinating their stories. Compared with Bacanovic and Stewart, he was a nobody. What if they decided to blame him for divulging the information that the Waksals were trying to sell? Who would believe his version, even if it was the truth? Especially since he’d already lied to protect them? Already thin, he lost much of his appetite and lost weight. He felt increasingly isolated and vulnerable.
Then, during the first week in March 2002, Dave Marcus, the Merrill lawyer, called Faneuil to say that the SEC wanted to interview him again. This time, it would be in person, with an assistant U.S. Attorney present. Marcus said he couldn’t go, but would send another Merrill lawyer, Rick Weinberg, to represent Faneuil. Faneuil immediately called Gutman, his lawyer.
It should have been obvious that the SEC’s investigation had advanced considerably, with potential criminal charges signaled by the presence of someone from the U.S. Attorney’s office. But Gutman’s advice remained the same: he told Faneuil not to lie, but not to volunteer anything either. Gutman didn’t seem unduly concerned. Indeed, when Faneuil told him the interview was scheduled for March 7 and gave him the time, assuming that Gutman would accompany him, Gutman dismissed the idea. “You don’t need me there,” he said. “You’ll have a Merrill attorney with you, right?”
“Yeah,” Faneuil said, mentioning Weinberg.
“Then you don’t need me. You’ll be fine.”
Just weeks earlier Gutman had told him to notify him immediately if the government called him again and not to answer any questions without Gutman being there. Faneuil didn’t know what to think.
On March 6, the day before the interview, Faneuil went back to Merrill’s downtown offices. Marcus introduced him to Weinberg, who would now be handling the matter. Then Marcus went over Faneuil’s earlier testimony in great detail in order to get Weinberg up to speed. Or so he said. Faneuil interpreted the exercise as a way to make sure he didn’t change his story. Marcus and Weinberg didn’t ask him any questions.
The next day Faneuil met Weinberg outside the federal courthouse in downtown Manhattan. Schachter met them in the lobby of the U.S. Attorney’s office, then took them to a conference room upstairs. Glotzer and Slansky, who had questioned him on the phone, were already there.
The interview was remarkably similar to their earlier conversation. Once again, he was warned that failure to tell the truth is a crime. By Faneuil’s estimate, 98 percent of the questions were about the Waksals and his dealings with them on December 27. At one point Schachter played a recording of Faneuil’s discussion with Merrill Lynch compliance officials. In the call, Faneuil mentioned speaking to ImClone officials about whether any news was pending. He’d completely forgotten that; indeed, he still didn’t remember it. But he conceded that the recording indicated he must have had such a conversation.
There were questions about Martha Stewart, but they seemed perfunctory. Faneuil simply repeated his earlier story: that Stewart called; he gave her the price of ImClone; she decided to sell; he executed and confirmed the order. No one pressed him or asked him to elaborate. They did ask quite a few questions about Heidi DeLuca, Stewart’s bookkeeper. Faneuil wondered why, but didn’t have much to add. He didn’t say anything about DeLuca’s later call, and how annoyed she was that the ImClone sale had upset their tax-loss-sale planning.
All in all, Faneuil felt he had handled the interview well, successfully carrying out Gutman’s advice not to volunteer anything. Of course, Gutman had also told him not to lie. But by withholding crucial evidence he hadn’t told the truth either. Still, he was feeling pretty good until the very end. Schachter concluded the interview by telling Faneuil he’d be receiving a subpoena to testify under oath before a grand jury. He added that this was confidential information, and Faneuil couldn’t tell anyone.
Faneuil was startled. A grand jury? He felt it was one thing to tell his admittedly incomplete and misleading story on the phone or even at the U.S. Attorney’s office. Although the government lawyers had told him to tell the truth, he’d never had to take an oath. But a grand jury: he’d have to place his hand on the Bible and swear to tell the truth in a court of law. He knew he couldn’t make such an oath and then lie. It went against everything he’d been taught and believed in.
“How did I do?” he asked Weinberg as they left the building. He tried to contain a mounting sense of panic. He desperately needed someone to talk to and wanted reassurance.
“What do you mean?” Weinberg asked, giving Faneuil a hard look, according to Faneuil. “I don’t understand the question.” Weinberg turned and walked briskly away, leaving Faneuil alone on the sidewalk.
Faneuil frantically called his therapist. She was out; he left a voice message. Minutes later his father called.
“How did it go?”
“Fine,” Faneuil said, trying to keep up a front. He didn’t mention the grand jury.
Then he went to a bar. He gulped several drinks. Worried he was getting drunk, he called a friend to come get him. He just wanted to make everything go away.
The next morning he was a wreck. Bacanovic was away, so Faneuil went into Bacanovic’s office and closed the door. He called his father. “It is
not
okay,” he said, and then burst into tears.
“Pull yourself together!” His father sounded both angry and alarmed. “What the fuck is wrong with you?”
Faneuil just cried harder.
“Everyone has to deal with this kind of shit,” his father said.
“What are you talking about?” Faneuil managed to stammer. What did his father know? How dare he talk to him like that? Furious, he slammed down the phone.
As soon as he got back to his cubicle, Faneuil typed an angry e-mail: “Do not talk to me that way or you won’t have a son.”
There’s only one way out, he concluded. I’ve got to tell the truth.
D
espite Schachter’s warning, no grand jury subpoena materialized. As Faneuil steeled himself to confess, life went on at Merrill Lynch. He heard nothing further from the government lawyers.
The grand jury turned its attention back to the Waksals. As one government lawyer put it, “I thought it was over for Doug.” The prosecutors assumed Faneuil was an innocent bystander who had simply taken and executed the order from Stewart, a transaction so insignificant that Stewart herself had forgotten she’d spoken to him.