The star witness against Martha Stewart testified yesterday he believed he would be fired unless he lied to cover up the real reason why the trendsetter dumped stock in a company after he gave her an insider tip.

Defence lawyers sought to undermine the credibility of Douglas Faneuil, the former assistant to Stewart's Merrill Lynch stockbroker, after his damaging testimony on Wednesday that he warned Ms Stewart that the CEO of a biotech company in which she also had stock was dumping his shares.

Mr Faneuil said he lied to investigators for months about the stock trade out of fear and intimidation that left him "physically afraid" of his boss, co-defendant Mr Peter Bacanovic.

Portrayed by the defence as a drug user and a liar, Mr Faneuil (28), eventually came forward to tell authorities that Mr Bacanovic ordered him to pass insider information about ImClone Systems to Ms Stewart and later pressured him to cover up the reasons behind her trade.

Mr Faneuil said he covered up the stock sale because, "I felt I would be fired if I didn't lie.

"Peter made it very clear to me that I was never to discuss the events of the 27th with anyone as I knew them to have occurred," he said, referring to the date when Ms Stewart sold her shares.

Ms Stewart and Mr Bacanovic maintain that they had a pre-existing order to sell ImClone stock if it dropped below $60 a share. They are charged with conspiring to cover up the real reason behind the sale.

Mr Faneuil pleaded guilty to a misdemeanour for his part in the scheme and agreed to testify about Ms Stewart's sale of nearly 4,000 shares of ImClone. - (Reuters)