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Martha In The Crosshairs

Federal investigators probing possible insider trading are negotiating a plea deal with a Merrill Lynch employee that would give him immunity from prosecution in exchange for his testimony against domestic diva Martha Stewart, the Wall Street Journal reports.

The newspaper said trading assistant Douglas Faneuil, 26, has contradicted Stewart's account of her sale of 4,000 shares of ImClone stock a day before it was announced that the Food and Drug Administration had rejected a highly touted ImClone cancer drug. The price of ImClone's stock plummeted thereafter. [Stewart is contributor to CBS News' The Early Show.]

In a related development, ImClone founder and former chief executive Samuel Waksal was indicted Wednesday on expanded charges in an insider trading scandal.

The indictment, filed in federal court in Manhattan, brings new charges of obstruction of justice and bank fraud against Waksal, in addition to previous securities fraud and perjury charges.

Stewart said she sold the Imclone stock in accordance with a previously arranged agreement with her broker, Peter Bacanovic, to sell if the price dipped below $60.

But according to the Journal, Faneuil, who worked for Bacanovic, has told a different story to federal investigators. The newspaper said Faneuil, acting on Bacanovic's instructions, told Stewart to sell the stock because ImClone founder Waksal and members of his family were unloading their stock in the company.

Stewart has denied any wrongdoing.

Congressional investigators are pressing a separate investigation of Stewart's stock deal. On Thursday, a member of a House panel said Stewart should be subpoenaed to answer questions about the sale.

"Bring her in and if she wants to take the fifth (Fifth Amendment), that's her right. That's her legal right," said Rep. Bart Stupak, D-Mich.

Appearing on NBC's "Today" show, the Michigan Democrat, said that if Stewart hasn't responded to a request for information by Aug. 20, she should be forced to appear.

In a letter to Stewart's lawyer earlier this week, Rep. Billy Tauzin, R-La., and Rep. James D. Greenwood, R-Pa., leaders of the House Energy and Commerce oversight and investigations subcommittee, renewed a congressional request for an interview with Stewart.

The hope was to get answers in connection with discrepancies between her account of the sale and that of her broker and his assistant.

Stewart, chief executive of Martha Stewart Living Omnimedia Inc., has declined to meet with congressional investigators, saying that would be premature. But her lawyer has said that they would do everything they could to comply with the committee's request for additional documents.

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