New York ? Prosecutors in the Martha Stewart case received a big boost Tuesday when stockbroker’s assistant Douglas Faneuil testified that his boss ordered him to pass insider information to Stewart, prompting her to sell all of her shares in ImClone Systems Inc.

But Faneuil, who is certain to come under intense cross-examination, also acknowledged that he later lied to federal officials investigating Stewart’s sale of roughly 4,000 shares of stock on Dec. 27, 2001. He allegedly lied “to cover up” for Stewart and Peter Bacanovic, her former stockbroker at Merrill Lynch & Co.

Faneuil’s testimony countered the claims of lawyers for Stewart and Bacanovic that the stock sale was prompted by a pre-existing agreement to sell once ImClone’s stock fell to $60 a share.

The government charges that there was no pre-existing agreement and that Stewart received a “secret tip” that Samuel Waksal, her close friend and ImClone’s founder, had just learned that the Food and Drug Administration was about to issue a negative report on his company’s new cancer drug.

Once Stewart got word that Waksal, who also dated Stewart’s daughter Alexa, was unloading tens of thousands of his own shares in the biotech company, she ordered Faneuil to sell her stock as well, prosecutors contend. Waksal is serving a seven-year prison sentence in Pennsylvania for crimes including securities fraud.

In riveting testimony, Faneuil, 28, testified that on the morning of Dec. 27 Bacanovic, vacationing in Florida, ordered him to get word to Stewart that she should immediately sell all of her ImClone shares.

“‘Listen, Martha’s going to call and you’ve got to tell her what’s going on,”‘ Faneuil said, recounting what he said Bacanovic told him while he worked the phones in Merrill Lynch’s Rockefeller Center office. “And from that I took him to mean that I had to tell her about Waksal’s sale from early that morning.”

Prompted further by Assistant U.S. Atty. Karen Patton Seymour, Faneuil added that he asked Bacanovic, “Can I tell her about Sam. Am I allowed to?”

Bacanovic’s answer, Faneuil said, was a curt one: “Of course, you must. You’ve got to. That’s the whole point.”

Martha Stewart arrives at Manhattan federal court in New York. A witness testified Tuesday that he was ordered to give Stewart insider-trading information.

Stewart and Bacanovic are charged with perjury and obstruction of justice. Stewart is also charged with securities fraud. If convicted of all charges, Stewart could be sentenced to a prison term of up to 30 years. Bacanovic faces a term as long as 25 years.

Faneuil’s much-anticipated testimony is scheduled to continue at least through today.

Under cross-examination, Stewart’s lawyer, Robert Morvillo, is expected to question the credibility of a witness who initially told investigators that Stewart sold for tax loss reasons and not because of inside information.

Faneuil, who now works at a Manhattan art gallery, later pleaded guilty to a misdemeanor, saying he did not believe the $60 sell order existed. He is expected to be sentenced after the trial.