By AMIR EFRATI

Federal prosecutors, after a two-year investigation, may soon decide not to charge American International Group Inc. executives for their role surrounding financial contracts that nearly brought down the company, according to people familiar with the matter.

Recently obtained evidence has prosecutors leaning against pursuing charges, though no final decision has been made by Justice Department prosecutors in Washington, these people said. A Justice Department spokeswoman declined to comment.

The high-profile probe has centered on Joseph Cassano, people familiar with the matter have said. Mr. Cassano headed a London-based unit of the giant insurer called AIG Financial Products. The unit entered into insurance-like contracts with other financial institutions that ended up being financially disastrous for AIG.

When the mortgage market imploded, AIG had to hand over tens of billions of dollars worth of collateral to financial institutions that had entered into the contracts, known as credit-default swaps, with AIG. These collateral calls nearly felled the company and led to a massive government bailout that's generated intense public outrage and political scrutiny.

At issue in the investigation was whether, starting in 2007, Mr. Cassano and his colleagues deceived investors and the firm's outside auditor about AIG's financial exposure from those contracts, which were tied in part to mortgages, people familiar with the matter have said.

As of last fall, the Justice Department had been planning to empanel a grand jury in Brooklyn, N.Y., to consider an indictment of Mr. Cassano, people familiar with the matter have said. But information obtained in recent months from AIG's outside auditor, PricewaterhouseCoopers LLP, has suspended those plans, these people said.

Mr. Cassano, who no longer works at AIG, is expected to meet with prosecutors this upcoming week to discuss his reasoning behind making the accounting adjustment and other issues related to the swaps, according to a person familiar with the matter.

Representatives for Mr. Cassano and PwC declined to comment. Mr. Cassano's lawyers have maintained he did nothing wrong.

CBS News reported on Friday that Mr. Cassano would meet with prosecutors next week and that prosecutors likely wouldn't charge him.

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