Near North said that owner, Michael Segal, has signed a letter of intent to sell the brokerage operation to Frontenac, a $1 billion private equity investment firm.

Mr. Segal was arrested in Jan. 2001 by the F.B.I on charges of insurance and mail fraud. He was charged with embezzling $20 million from the firm's premium fund trust account.

His trial is scheduled to begin April 7.

John Harney, Near North's chief executive officer, in a statement, called the discussions "a natural step in Near North's progression." He added that the firm is "excited" over the possibilities the merger would bring to the insurance broker.

For its part, Frontenac's Rodney L. Goldstein, managing partner, stated that Near North fits in with the investment firm's strategy to serve middle market insurance clients. He added that Frontenac plans to grow this segment of its business by acquisition of "significant size, scale and quality in property ? casualty, employee benefits and voluntary benefits" firms.

If the deal is completed, the new firm would be headed by Dick Riley and Robert Goss, two former executives from Chicago ? based insurance broker Aon. They would be named chief executive officer and chief financial officer, respectively.

Frontenac said discussions about the merger began in late 2002 after "a conversation" between Mr. Goldstein and William Bartholomay, president of Near North.

The two said they are currently in the due diligence phase of negotiations, and indicated that the close of the sale is imminent.

In addition to Chicago, Near North has offices in Dallas, Las Vegas, Los Angeles, New York, Tampa, Washington, D.C. and London. It's Los Angeles arm is noted for brokering entertainment coverage, most recently securing cover for the half-time show for Super Bowl XXXVII.

Terms of the deal were not disclosed.

Natalie Rofalikos, a spokeswoman for Near North said the firms could not comment further at this time due to confidentiality agreements.