Federal prosecutors are preparing to seek criminal charges against former Enron Corp. chairman Kenneth L. Lay, capping a 21/2-year-old investigation into the collapse of the Houston energy company, said sources involved the probe.

Lay, 62, will face charges for urging investors and employees to buy Enron stock while he allegedly knew about the company's mounting financial troubles in the months before its Chapter 11 bankruptcy filing in late 2001, the sources said.

Charges against Lay, first reported by the Houston Chronicle, would mark a climax of the long-running government investigation. Enron's bankruptcy left thousands of employees without jobs and pensions and ushered in a wave of financial scandals that prodded Congress to pass landmark corporate reform legislation.

Lay was a prominent energy executive who traveled the world, donated millions of dollars to Texas charities and led fundraising drives for President Bush and his father, then-President George H.W. Bush. The current president nicknamed him "Kenny Boy" and included him in meetings related to national energy policy.

Andrew Weissmann, director of the Justice Department's Enron Task Force, declined to comment yesterday.

Michael Ramsey, an attorney for Lay, said yesterday that he has not been notified that an indictment is imminent. He said he would ask Monday for another meeting with prosecutors to address their evidence against Lay and to attempt to persuade them against pursuing criminal charges.

"We're very comfortable Ken didn't commit a crime," Ramsey said. "We're uncomfortable with the fact that we had prosecutors who picked their target before they knew the facts."

The Houston grand jury, which has been increasingly active in recent weeks, already has heard from Lay's bookkeeper and his children. Prosecutors have an outstanding request to review 50 to 60 boxes of Lay's personal financial records, Ramsey said. Those documents were turned over to regulators at the Securities and Exchange Commission several months ago.

Prosecutors have tried to build a case against Lay with assistance from a number of cooperating witnesses who themselves have pleaded guilty to crimes, including former chief financial officer Andrew S. Fastow and former corporate secretary Paula H. Rieker. Lay's lawyer previously has said he was unaware of the ways Fastow attempted to hide Enron's debt and disguise its losses through off-the-books partnerships.

"We are very conversant with all the facts and all the documents. I've seen nothing that will support a prosecution. I cannot conceive of anything Andy Fastow can say" that would hurt Lay, Ramsey said yesterday.

Lay, who had mostly concentrated on outside pursuits and public relations initiatives during the latter part of his tenure at Enron, returned as chief executive in August 2001 after the abrupt resignation of his successor, Jeffrey K. Skilling.

Lay stayed in charge of daily operations through an attempt to merge Enron with cross-town rival Dynegy Inc. Enron filed for bankruptcy protection after a deal fell through.

Investigators have focused in part on Lay's frequent use of a multimillion-dollar line of company credit and on his sales of Enron stock back to the company at a time when he needed to sell stock to repay loans to his brokers. From 1998 to 2001, Lay collected more than $209 million by selling Enron stock, according to a report by Enron's bankruptcy examiner. Ramsey has said the stock sales were legitimate, that Lay has broken no laws, and that Lay lost millions of dollars by holding onto Enron shares as the company fell apart. In the past, Lay has declined comment, invoking his Fifth Amendment rights on the advice of his lawyers at a 2002 congressional hearing.

The Justice Department's Enron Task Force and regulators at the SEC charged Skilling with 35 counts of fraud, conspiracy and insider trading earlier this year. Skilling is vigorously fighting the charges. To date, prosecutors have charged nearly 30 people in connection with Enron's collapse. Once the nation's seventh-largest company by revenue, Enron is expected to emerge from bankruptcy later this year as a far smaller company.