Leading daily El Pais and its conservative rival El Mundo, citing sources with knowledge of the matter, reported on Tuesday that Urdangarin and his former business partner Diego Torres were considering offering to plead guilty and pay damages in return for being spared jail.
Urdangarin, a 44-year-old ex-Olympic handball player who acquired the title of Duke of Palma when he wed the king's youngest daughter Cristina in 1997, is suspected of embezzling public money, some of it from the Balearic government when the Partido Popular's Jaume Matas was President, paid to a non-profit institution under his control.
He is accused of siphoning off money paid by regional governments for staging sporting events to the Noos Institute, a charitable organisation he chaired from 2004 to 2006.
The money allegedly went to for-profit companies under his control.
Urdangarin has denied wrongdoing. The king is widely admired for guiding Spain to democracy after the death of General Francisco Franco in 1975 but the royal family has been hit by a series of scandals in the past months.
The 74-year-old monarch made an unprecedented apology last month after it emerged he had enjoyed a luxury African holiday shooting elephants in Botswana at a time of recession and high unemployment back home.
The safari came to light only after the king had to be rushed to a hospital in Madrid because he fell over and broke his hip.
In the same month, the king's 13-year-old grandson Felipe Marichalar Borbon shot himself in the foot, literally, sparking a scandal because he is below the legal age for using a firearm.
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