A deal could include AIG paying for any future settlement of charges brought against Mr. Greenberg in 2005 by the New York Attorney General's Office, whose accounting investigation precipitated Mr. Greenberg's departure.
AIG and its longtime leader were talking on Friday but hadn't reached a deal. It is possible that no agreement will be struck, said one of the people. Mr. Greenberg and AIG's CEO, Robert Benmosche, were both attending the talks, the person said. AIG directors got an update about the talks during a board call Friday, but weren't asked to approve a deal, according to another person familiar with the matter.
Any truce would represent an about-face after years of fighting between AIG and Mr. Greenberg. It also could open the door for Mr. Greenberg to become a more-influential voice in tackling the problems facing AIG in the wake of last year's taxpayer bailout.
After Mr. Greenberg, 84 years old, left AIG in 2005, the company reached a settlement with the New York attorney general in 2006. Mr. Greenberg denied the charges, some of which have been dropped, and he has been fighting the case. A spokesman for the attorney general didn't comment.
The attorney general and Mr. Greenberg had reached an oral agreement to settle the case, but that deal fell apart as AIG spiraled downward and had to be rescued in September 2008, a lawyer for the attorney general said last November.
It isn't clear how much money would come out of AIG's pocket if AIG did agree to cover some of the costs of past and future settlements by Mr. Greenberg. It is likely that AIG's insurance policy for its own directors and officers would cover the "preponderance" of any deal, one of the people said. Whatever payments AIG has to make on its own could be a politically delicate matter, given that AIG owes the government more than $80 billion.
In addition to covering any settlement in the New York case, a deal could involve resolving a $1 billion claim AIG has pending in a civil suit against Mr. Greenberg and another former AIG executive.
Also, AIG could end up essentially reimbursing Mr. Greenberg for some of the millions of dollars he has agreed to pay in recent years to settle various other cases related to his AIG tenure, including with the Securities and Exchange Commission.