Update: Bernard Kerik Investigation

The federal investigation of Bernard Kerik, former New York police commissioner and Rudy Giuliani sidekick, appears to be edging toward a denouement. But legal sources familiar with the inquiry, who asked for anonymity when discussing an ongoing investigation, say that news reports suggesting Kerik could face indictment as early as next month may be premature. Kerik has agreed with prosecutors to extend the statute of limitations for investigating his 2000 tax return until Nov. 15, and he could agree to extend it further. Over the next month, Kerik's lawyer, Kenneth Breen, expects to meet with federal prosecutors in New York and tax-division officials at Justice Department headquarters in Washington. The principal issue: does the evidence justify criminal tax charges, or could the case be resolved, like many other tax cases, with a civil settlement?

The investigation into Kerik began in 2004 after ethics questions derailed his nomination as U.S. Homeland Security secretary. A few months later, New York investigators subpoenaed publisher HarperCollins for records relating to two books Kerik had produced, including his autobiography, "Lost Son." Days after serving the publisher with the subpoena, according to confidential investigative documents examined by NEWSWEEK, city gumshoes interviewed Judith Regan, the HarperCollins editor who handled Kerik's autobiography and was also briefly his girlfriend. The Feds are looking at "all income and expenditure items" reported by Kerik in 2000, and his book dealings are part of this examination, a legal source said. HarperCollins general counsel Chris Goff had no comment. Breen wrote in a statement, "If the prosecutors … make the fateful decision to charge Bernie Kerik, we will fight it in court, and he will win." A legal source noted that the longer Kerik tries to persuade prosecutors not to charge him, the more likely it is that a federal indictment could come at a particularly awkward moment: right in the middle of Giuliani's campaign for president.