The Justice Department has given the green light for criminal charges to be filed against former Sen. John Edwards for alleged campaign finance law violations arising from the cover-up of an extramarital affair, sources close to the investigation told NBC News.
One source with knowledge of the case says that while prosecutors are moving toward an indictment, it is still possible that a plea agreement could be reached.
However, NBC News has been told that prosecutors are insisting that Edwards plead to a felony, which friends doubt he will do.
Federal authorities have been investigating whether Edwards illegally spent campaign money from his 2008 run for the presidency to hide his relationship with videographer Rielle Hunter, and whether some $1 million, provided by wealthy donors to keep her hidden, amounted to illegal contributions.
More than a dozen witnesses have testified before a federal grand jury in Raleigh, N.C., over the past two years.
The government's key witness against Edwards is Andrew Young, a former aide. Young says Edwards directed the cover-up of his own affair. Young claims he kept Hunter in hiding and provided 50 voice messages to prosecutors.
Hunter, then pregnant with Edwards' child, was hidden in lavish homes and flown around in a private jet. Much of that was paid for by Edwards' campaign finance chair, Fred Baron. He claimed, just before he died, that Edwards didn't know anything about it.
In a tell-all book, Young claimed that elderly heiress Rachel "Bunny" Mellon financed the cover-up. Her decorator, Bryan Huffman, says she sent him checks totaling about $700,000 that he forwarded to Young.
Huffman and Mellon, through her attorney, say they were asked to help Edwards with a personal problem, but were unaware of the specifics.
"John Edwards has done wrong in his life — and he knows it better than anyone — but he did not break the law," a lawyer representing Edwards, attorney Daniel Craig, said in a statement Wednesday. "The government's theory is wrong on the facts and wrong on the law."
Edwards was the Democratic vice presidential nominee in 2004. He sought the party's nomination for president in 2008.
Hunter had been hired to shoot video of Edwards as he prepared for his White House bid. Their child was born in February 2008, a month after he dropped out of the race.
Edwards initially denied having an affair with Hunter but eventually admitted to it in the summer of 2008. He also denied being the father of her child before finally confessing last year. His wife, Elizabeth, died of cancer in December.
Edwards, who made his millions as a trial lawyer, could lose his law license if he enters a guilty plea.
Sources tell NBC News that an indictment or a plea bargain is imminent, possibly within the next two weeks. According to The Associated Press, a person familiar with the situation says Edwards could be indicted within days. The U.S. attorney in Raleigh declined to comment Wednesday.
The Edwards team did not comment on the NBC News report, but in a 2008 interview with ABC News, the former senator said he was unaware of a cover-up.
"I've never paid a dime of money to any of the people that are involved. I've never asked anybody to pay a dime of money, never been told that any money's been paid," insisted Edwards. "Nothing's been done at my request."
NBC's Lisa Myers contributed to this report.