D.C. Council member, Muriel Bowser, left, sits next to the empty chair of member, Harry Thomas Jr., at a council meeting Jan. 4, which he missed. Sources said he was working on a plea deal with federal prosecutors; Thomas’s lawyer denied it. (Matt McClain/FOR THE WASHINGTON POST)

D.C. Council member Harry Thomas Jr. is nearing a deal with federal prosecutors in which he would plead guilty to fraud and tax-related charges, probably serve time in prison and agree to give up his seat, according to people familiar with the talks.

As of late Wednesday, no agreement had been signed, and there were still obstacles to a deal, according to those people, who spoke on the condition of anonymity because of the sensitivity of the talks and because they were not authorized to discuss them. But Thomas and prosecutors had agreed in principle to the parameters of a plea.

Thomas is alleged to have steered $300,000 in city funds for youth sports programs to pay for personal expenses that included an Audi sport-utility vehicle. He has not been charged with a crime. But agents from the FBI and IRS raided his home last month and seized several personal items. The city’s attorney general outlined the allegations in a civil suit last year and referred the case to U.S. Attorney Ronald C. Machen Jr.

If a deal is finalized, prosecutors could file charges in a criminal information as soon as Thursday, and Thomas could appear in court Friday, officials said.

Thomas, his attorney, Frederick D. Cooke Jr., and prosecutors declined to comment on the status of the case, although Cooke confirmed that the two sides were talking.

People familiar with the talks said there are still sharp disagreements over what charges Thomas would plead guilty to. He does not want to plead guilty to stealing city funds, and pleading to a fraud charge might necessitate that.

Last week, Thomas began meeting with friends to apologize for the allegations hanging over his head. He told them that he expected to enter a guilty plea this week and to get a three-year prison sentence, according to friends of his. He told them that the charges would be tax-related, such as failing to report the funds as income.

If a deal is reached, however, any sentence would be up to a judge and be subject to federal sentencing guidelines based on the charges. A three-year sentence would be within federal guidelines for certain fraud and tax charges, but people with knowledge of the talks said the deal would allow Cooke to argue for less time.

There is no city law barring someone from running for office even after a felony conviction.

On Tuesday, Thomas missed a deadline for a $50,000 payment to the city as part of a settlement agreement with the attorney general’s office. Attorney General Irvin B. Nathan alleged in a civil lawsuit that Thomas had steered the funds through groups he controlled to a variety of personal expenditures, including golf trips and a luxury SUV. He did not admit wrongdoing, but the settlement agreement required Thomas (D-Ward 5) to deliver a $50,000 cashier’s check to Nathan’s office “on or before” Dec. 31. Because that day fell on a long holiday weekend, the deadline was extended until the close of business Tuesday.

Under the agreement, Thomas is required to make twice-yearly payments of $50,000 through 2013 and cannot start or operate a charity through 2016.

The missed payment and the chatter about an imminent plea deal come a month after the FBI and the Internal Revenue Service raided Thomas’s home. Agents seized a Chevy Tahoe SUV and a motorcycle, along with personal papers and other items.

Several council members declined to speak about Thomas, saying they had no information to share. Council Chairman Kwame R. Brown (D) said he has received no indication that Thomas may be leaving as part of a plea agreement.

“I have not heard anything at all. Nothing has changed,” Brown said, adding that he last spoke to Thomas last week.

In an interview, Mayor Vincent C. Gray (D) said he hasn’t spoken to Thomas since before Christmas and has received no indication that the council member plans to resign.

But Gray, who has known the Thomas family for decades, said he hopes that Thomas and federal prosecutors come to a quick resolution of the case for the sake of Ward 5 residents.

“This whole thing is an enigma to me. Just an absolute puzzle,” Gray said. “That is why I want to see the criminal justice system come to a conclusion.”

Council member Marion Barry (D-Ward 8) said Thomas should ignore the media chatter and keep fighting the allegations.

“I strongly believe you are innocent until proven guilty,” Barry said. “Mr. Thomas has not been charged or convicted of anything.”

Staff writers Tim Craig and Mike DeBonis contributed to this report.

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