"We are in discussions with the Department of Justice," Andersen spokesman Patrick Dorton said, but he declined to elaborate.

People close to the investigation disclosed that Andersen has reached a tentative outline of a settlement with federal prosecutors that will resolve criminal and civil charges stemming from the collapse of its former client Enron Corp.

Andersen was indicted last month for obstruction of justice for shredding Enron-related documents. Under the outline, Andersen would admit to a government condition that it committed a crime when those documents were destroyed.

Andersen's former top auditor on the Enron account, David Duncan, pleaded guilty on Tuesday to ordering the shredding of documents and agreed to cooperate with the government's probe.

Duncan's plea undermines Andersen's legal position that no one at the firm engaged in intentional wrongdoing.

The current discussions began last Friday at the request of lawyers representing Andersen.

Enron filed the biggest bankruptcy in U.S. history in December, crushed by debts and a series of complex "off-the-books" partnerships. Andersen handled Enron's audits.

In addition to the Justice Department indictment, the Securities and Exchange Commission (SEC) and former Enron shareholders have filed civil complaints against Andersen.

The New York Times said on Thursday that the basis for a settlement with the SEC has been reached, but that no final deal will be set until the criminal case is resolved.