He said, she said: Martha Stewart and Merrill Lynch broker Peter Bacanovic.

People on the beach talked obsessively of his abrupt departure, but he held his cards close. "Before he left Saint Bart's, I asked him if I should sell, and he told me the trouble was just people selling short," one investor pal says. "He must have had his shortlist -- and I wasn't on it."

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To Waksal, the FDA rejection was news bad enough to bend the mind. He was leveraged to the gills with $80 million in debt, $65 million of which was on margin, secured by his stock, which was sure to crater when the FDA made its announcement. His monthly margin bill was a cool $800,000. If ImClone collapsed, he would be ruined.

Arriving back at his 5,000-square-foot loft on Thompson Street in Soho that night, he allegedly started working the phones -- first to his father and then, the next morning, his daughter.

Martha Stewart was on her way to Mexico for her New Year's holiday. Also an ImClone shareholder, as well as a close friend of Sam's, she had, on December 21, left a contact number with Waksal's office as to her whereabouts in Mexico.

Peter Bacanovic, Stewart's glamorous, socially adept private banker at Merrill Lynch, was out of the office, too -- on vacation in Miami, where friends had lent him a house from Christmas Day through New Year's -- as ImClone began to implode. Holding the fort on the morning of December 27 for Bacanovic was his 26-year-old assistant, Douglas Faneuil. Faneuil had been on the job about a year; before that, he had worked as an analyst for D.E. Shaw, a New York hedge fund. With his series 7 license qualifying him to process stock trades, Faneuil's primary job was to take care of the details for Bacanovic, who spent his time ministering to an archipelago of wealthy clients spread across the country; Bacanovic was on the road as much as a week per month.

Now the sky seemed to be falling down on Faneuil. Volume on the stock was building, and ImClone was down off its high of 75 just weeks before. Wall Street's rumor mill was churning with talk that the FDA would soon reject Erbitux. So when the order came in at 9:01 a.m. from Aliza Waksal to sell 39,472 shares, followed by her father Sam's attempt to transfer 79,797 shares into his daughter's Merrill account for another sale, Faneuil, Bacanovic, and the compliance officers at Merrill Lynch became suspicious. Something was up with ImClone. Aliza's shares were sold, but because he was an insider, the father's trade was refused.

By 11 a.m., ImClone was sinking toward $60. A phone log submitted by Stewart's office to the House Energy and Commerce subcommittee reads as follows: "Peter Bacanovic called -- ImClone is going to be trading lower." Stewart picked up the message from her office and at 1:43 p.m. sold her 3,928 shares through Faneuil. Almost simultaneously, she left the following message at Waksal's office: "Something's up with ImClone. She wants to know what." (Significantly, most accounts have Stewart calling Bacanovic before the sale; but some with knowledge of the situation maintain they hadn't talked at that point.) An hour or so later, a Merrill Lynch biotechnology analyst got on the squawk box to the firm's 15,000 brokers and issued an alert: There was acute selling pressure on the stock, the FDA decision loomed, the stock looked weak.

At 2:55 p.m. the next day, the FDA faxed a letter of rejection to ImClone offices. ImClone announced the news after the market's close that day. The following Monday, ImClone plunged 16 percent. On June 12, Sam Waksal was arrested on charges of insider trading. On June 21, Bacanovic and Faneuil were suspended with pay by Merrill Lynch over factual inconsistencies with regard to the Stewart trade. Today, ImClone trades at just under $9.

That Sam Waksal will be found guilty seems almost a given. His was an act epic in its stupidity, a desperate, bet-the-ranch gesture by an insecure man in the throes of panic -- and greed.

Waksal, in his trademark baseball cap concealing a bald spot, had long been one of the unlikeliest of the macho, large-living movie and media and culture machers -- Weinstein, New Line president Bob Shea, art dealer Larry Gagosian, music lawyer Allen Grubman, concert promoter Ron Delsener. In the Hamptons, he's a Nick & Toni's regular. With his Ph.D. in immunology and a formidable reading list, he's more intellectual than some in his set, but that's not always the way he's been perceived. "Sam Waksal is not going to be the one to cure cancer," says a friend. "You know, find somebody in a lab coat who never goes out, who looks like Albert Einstein. That's the guy who's going to cure cancer, not Sam Waksal."

Tellingly, the person in his family who didn't sell was probably the shrewdest financially -- his daughter Elana Waksal Posner. Married to Jarrett Posner, who works for financier Nelson Peltz, Elana, smart and aggressive, ran for City Council last year, and often counsels her father on business. Her sister, Aliza, younger and bubblier, an aspiring actress who once dated David Lauren, is the one who pulled the trigger on the sale, cashing out for about $2.5 million. Waksal's father, 83 years old, a Holocaust survivor (so is his mother), also sold on the 27th.

But what about Stewart, and what about Bacanovic? While Waksal has always had about him more than a tinge of the hustler, Martha Stewart and her broker had both made their careers (Stewart presiding over the multi-million-dollar empire of her very self; Bacanovic as a private banker welcome in Manhattan's most rarefied salons) devoting the utmost energy to making it look easy. Missteps -- let alone of this magnitude -- are almost nonexistent in their lives.

Photo: Patrick McMullen