NEW YORK -- The stock of Martha Stewart's media empire fell sharply Thursday after a published report said an assistant at Merrill Lynch has agreed to testify against her in the ImClone insider-trading case.

Prosecutors had sought to charge the assistant, Douglas Faneuil, with a felony of making false statements to investigators but agreed to a misdemeanor charge in exchange for his cooperation, The Wall Street Journal said, citing unidentified sources.

The charge is expected to be filed within days, the newspaper reported.

Martha Stewart Living Omnimedia declined 7.7 percent, or 60 cents a share, to close at $7.20 on the New York Stock Exchange.

Through his lawyer, Faneuil declined comment, as did federal prosecutors and a Stewart spokesperson.

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