NEW YORK (CNN/Money) - Arthur Andersen LLP suffered more setbacks Friday when the Justice Department rejected its latest settlement offer and a federal judge denied the firm's request to delay the start of the May trial that will resolve the criminal charge against it for shredding Enron Corp. documents.

Federal prosecutors denied a proposal from Andersen to resolve the one-count indictment against the auditor, attorney Rusty Hardin, who is leading Andersen's defense team, confirmed Friday.

"Justice rejected our latest response," Hardin told CNN/Money. "It's reasonable to say that neither side will continue to talk to each other about a resolution."

Judge Melinda Harmon, who is overseeing the Andersen criminal case as well as the Enron shareholder litigation, also denied Hardin's plea to delay the trial a month.

Hardin, in a pre-trial conference late Friday, argued that the firm had been besieged by too much publicity and that any potential jurors had already formed an opinion in the case.

Hardin's argument marked a significant change in the trial. The Houston attorney had originally wanted a speedy trial and had planned to push the DOJ to produce the employees it believes were responsible for the shredding and specify their actions.

But Hardin Friday claimed that the media publicity and the constant leaks were damaging Andersen's case. Justice Department Attorney Andrew Weissman, whose own sealed affidavit was leaked to the media, pointed to the full page ads Andersen has taken out in major newspaper proclaiming their innocence.

Harmon reacted swiftly Friday and ordered the case to remain on schedule. "The publicity won't die down in the next month," she said.

The two sides are now preparing for the start of the May 6 trial on the one-count charge against Andersen. The Chicago-based accounting firm allegedly obstructed justice when it destroyed "tons" of Enron documents when it was on notice of a federal investigation.

Last week, Andersen broke off talks with the Justice Department after the accounting firm could not comply with a deadline given by federal prosecutors. Andersen earlier this week sent a proposal to Justice that responded to the government's request.

Hardin declined to give details of the Andersen proposal but said the firm set out conditions it could live with under a deferred prosecution agreement.

"The DOJ rejected that latest response. They wanted different conditions," Hardin said.

The Justice Department spokesman said only that the agency had issued a response to Andersen's letter.

The failure of Andersen's settlement attempt comes as the firm could be accused of more than just obstruction of justice for shredding Enron documents. A sworn statement by government prosecutor Weissman reveals that a special Enron grand jury is investigating potential fraud, perjury and false statement charges against the accounting firm, the Wall Street Journal has reported.

The DOJ has also sought evidence from at least two Andersen employees who did not destroy Enron documents, the Journal said Friday. Andersen partner Timothy McCann and manager Shane Philpot did not comply with instructions to destroy Enron documents, the newspaper said, citing the Weissman affidavit.

But a person with knowledge of the situation tells CNN/Money that the employees were never specifically asked to shred documents. McCann, an Andersen partner in the Portland office, and Philpot, a manager in the same office, did not work on the Enron account directly but performed audit work for a subsidiary, the source said.

McCann and Philpot received a voicemail from Houston that asked them to make sure that their files were "in order" and to dispose of any unnecessary documents. The two executives, after consulting with superiors in their regional office, decided that there were no files to destroy, the person said.

But McCann and Philpot were never asked to shred documents, the person said.

Attorney George Niespolo, who is representing McCann and Philpot, declined comment. "If called at trial, they will testify that they put a procedure in place to ensure the retention of all documents and papers related to their audit work for an Enron subsidiary," Niespolo said. "This action was consistent with their interpretation of the document retention policy as it applied to the circumstances that existed at the time."

Andersen has not seen Weissman's sworn affidavit, Hardin said Friday. A DOJ spokesman said Thursday that the affidavit could not be made public because it is a "sealed" document.

"[The affidavit] is sealed from everyone but the Wall Street Journal, the court and the government," Hardin said. "We would just like to see what the Journal has seen."

Judge Harmon, during the pretrial conference Friday, said that the clerk's office, for the U.S. District Court for the Southern District of Texas in Houston, had accidentally released the document.

Separately, PricewaterhouseCoopers, the world biggest accounting firm, could be joining the bidding war for Andersen's tax practice. Deloitte & Touche is already in talks to buy a significant portion of the business.

"We're certainly interested in speaking to Andersen people and parts of their practice," said PwC spokesman Dave Nestor, who declined further comment.

A Deloitte spokeswoman said that the firm is proceeding with due diligence for the tax business and expects to finish that process by the end of the month.