By Sebastian Rotella
Saturday, October 16, 2010; 2:47 AM
Three years before Pakistani terrorists struck Mumbai in 2008, federal agents in New York City investigated a tip that an American businessman was training in Pakistan with the group that later executed the attack.
The previously undisclosed allegations against David Coleman Headley, who became a key figure in the plot that killed 166 people, came from his wife after a domestic dispute that resulted in his arrest in 2005.
In three interviews with federal agents, Headley's wife said that he was an active militant in the terrorist group Lashkar-i-Taiba, had trained extensively in its Pakistani camps, and had shopped for night-vision goggles and other equipment, according to officials and sources close to the case. The wife, whom ProPublica is not identifying to protect her safety, also told agents that Headley had bragged of working as a paid U.S. informant while he trained with the terrorists in Pakistan, according to a person close to the case.
Federal officials say the FBI "looked into" the tip, but they declined to say what, if any, action was taken. Headley was jailed briefly in New York on charges of domestic assault but was not prosecuted. He wasn't arrested until 11 months after the Mumbai attack, when British intelligence alerted U.S. authorities that he was in contact with al-Qaeda operatives in Europe.
In the four years between the wife's warning and Headley's capture, Lashkar sent Headley on reconnaissance missions around the world. During five trips to Mumbai, he scouted targets for the attack - using his U.S. passport and cover as a businessman to circulate freely in areas frequented by Westerners. He met in Pakistan with terrorist handlers, including a Pakistani army major accused of helping direct and fund his missions, according to court documents and anti-terrorism officials.
In March, Headley pleaded guilty to charges of terrorism in the Mumbai attacks and to a failed plot to take and behead hostages at a Danish newspaper. He is cooperating with authorities.
It is not clear from the available information whether a different response to the tip about Headley might have averted the Mumbai attacks. It is known that U.S. anti-terrorism officials warned Indian counterparts several times in 2008 about a possible attack on Mumbai, according to U.S. and Indian officials. The warnings included details, such as a threat to the iconic Taj Mahal hotel, which became a target, officials say.Former DEA informant
The handling of the Headley case calls into question the progress of American law enforcement and intelligence agencies in improving their coordination and ability to "connect the dots" and deter attacks. It also raises questions about a complicated relationship between American authorities and a confessed terrorist.
Court records and interviews show that Headley served as an informant for the Drug Enforcement Administration starting in the late 1990s. But a former senior U.S. law enforcement official said Headley's work as an informant ended before the Mumbai attacks in 2008. He could not say whether Headley worked for the drug agency during the years when he was helping to plan the attack.
"Headley was closed as an informant because he wasn't producing anything," the former senior official said. He said he believed Headley's relationship with the DEA ended "years" before Mumbai, but he did not have more precise information.
Federal officials refused to discuss the 2005 tip other than to confirm that the FBI conducted an inquiry into the allegations made by Headley's wife.
"We can confirm there was a lead based on his wife's tip," said an official who spoke on the condition of anonymity because of pending legal cases. "We can't get into details."
FBI officials said they could not comment on the agency's role in the case because of ongoing prosecutions in Chicago and overseas. A DEA spokesman declined to comment because of a policy against discussing informants. New York police officials confirmed the details of the arrest in the assault case, but they declined to discuss the terrorism inquiry.
Anti-terrorism officials noted that federal authorities in New York City are deluged with tips and warnings about suspected extremists.
"They get half-a-dozen leads a day like this," a U.S. anti-terrorism official said. "People ratting out family members, people with grudges. Something like this does not ramp up to the White House."
The tip came at a time of heightened fears about Pakistani terrorism. A month earlier, al-Qaeda suicide bombers trained and directed in Pakistan had struck the London transport system. In previous years, a group of militants in Virginia had been given life sentences for training with and supporting Lashkar. Former Lashkar trainees had also been prosecuted in foiled plots against New York, London and Australia.
Mumbai joins a list of cases in which plotters caught the attention of authorities beforehand: London in 2005, Madrid in 2004, the Sept. 11 attacks. Such advance glimmers are part of the landscape of counterterrorism. Facing many threats and limited resources, authorities must make hard choices, a British spymaster said recently.
"We appear increasingly to have imported from the American media the assumption that terrorism is 100 percent preventable and any incident that is not prevented is seen as a culpable government failure," said Jonathan Evans, chief of MI5, in a speech. "This is a nonsensical way to consider terrorist risk."'A fascinating study'
Official silence makes it hard to assess what happened in the Headley case. Court documents and interviews depict Headley, who is now 50, as a chameleon-like figure with a taste for risk and a talent for deception. Because of his sophistication and unusual profile, he was a valuable asset to police, spies, criminals and terrorists, officials say.
"Headley's a fascinating study," the U.S. anti-terrorism official said. "I see him as a mercenary, not ideologically driven. He's not an Islamic terrorist in the classic sense."
Headley was born Daood Gilani in Washington, D.C. His Pakistani father was a renowned broadcaster. His mother, whose maiden name was Headley, came from a wealthy Philadelphia family.
Gilani moved to Pakistan as an infant and attended an elite military school. Returning to the United States at 17, he married, divorced and slid into the drug underworld and heroin addiction, court records say. He had a fast-talking charm and, strikingly, a green eye and a brown eye. In addition to Urdu and English, he told associates he spoke Pashtun, Farsi and some Arabic.
In 1988, the DEA arrested him in Germany for smuggling heroin from Pakistan, court records show. He cooperated and was sentenced to four years in prison while his co-defendant received 10.
In 1997, three years after Gilani moved to Manhattan to run two video stores purchased by his family, the DEA arrested him for another heroin deal. Agents soon obtained his release and he became a prized informant, records show.
"He . . . helped the DEA infiltrate the very close-knit Pakistani narcotics dealing community in New York," prosecutors said in a 1998 letter recommending a lenient sentence. He also "traveled to Pakistan . . . to develop intelligence on Pakistani heroin traffickers."
Gilani was sentenced to 19 months in prison, but was freed on probation in less than a year. Records show that while he was on probation he got permission in 1999 for a trip to Pakistan for an arranged marriage. Previously casual about his Muslim faith, he became radicalized. He sought out new recruits, raised funds for Lashkar and began preparing for its mountain training camps, getting corrective eye surgery and taking horse riding lessons, according to a person close to the case who spoke on the condition of anonymity.
Gilani's mix of extremism and Pakistani nationalism pushed him toward Lashkar because of its popularity in Pakistan and its fight against India, anti-terrorism officials say. Although Lashkar is a longtime al-Qaeda ally, it still functions largely unscathed in Pakistan, officials say.
After the Sept. 11 attacks, Gilani told associates that he planned to train with Lashkar as part of a secret mission for the U.S. government, the person close to the case said.
"The FBI and DEA have joined forces and I am going to work for them," this person quoted him as saying. "I want to do something important in my life. I want to do something for my country."
Federal officials say Gilani was never an FBI informant, however. The DEA and FBI work together on task forces, and the DEA sometimes shares informants with other law enforcement and intelligence agencies.
The unusual circumstances of Gilani's departure for Pakistan reinforce the theory that he may have been working with the government in some capacity at that time. A federal court discharged him from probation in December 2001, well before the scheduled end date in 2004, court records show. Within two months he was training in Pakistan with Lashkar, which had just been designated a terrorist organization by the United States and Pakistan, documents say.
Gilani did five stints in the Lashkar camps over three years, learning about ideology, firearms, combat, countersurveillance and survival skills, court documents show. He underwent more advanced training than many Western recruits, with one course lasting three months. He reported on his progress at a mountain complex near Muzaffarabad during calls, e-mails and visits to New York and his family home in Lahore, praising the bravery of fellow militants and the medical care he received for an ankle injury, according to the person close to the case.Wife contacts task force
In December 2002, Gilani married his girlfriend of eight years in New York. He used return visits to buy ropes, hiking boots and military books, and to research prices for night-vision goggles. He also continued to claim he was a paid U.S. informant, the person said.
The court documents that outline Gilani's odyssey do not mention the domestic dispute that led his wife to contact authorities in August 2005. She had demanded a divorce after learning he had a wife and children in Pakistan. They argued at his store and on Aug. 25 she filed an assault complaint, alleging that he "struck her several times in the face," according to officials and a law enforcement document.
On Aug. 26, she phoned a tip line of the Joint Terrorism Task Force in New York, an FBI-led, multi-agency unit with hundreds of investigators. Her tip was assigned an FBI lead number under guidelines developed after Sept. 11, 2001, to improve the response to potential threats. Procedure requires an FBI supervisor to begin an inquiry, decide in 90 days whether it merits a preliminary or full investigation, and report the outcome.
On Aug. 31, New York City police arrested Gilani for alleged misdemeanor assault, according to police officials. He was released on bond and was never prosecuted for reasons that remain unclear, officials say.
Not long after the arrest, task force investigators met three times with his wife. In addition to a detailed account of his activity with Lashkar, she showed them audio cassettes and ideological material and described his e-mails and calls from Pakistan and to individuals whom she thought to be extremists, according to the person close to the case. It is not known if the investigators ever questioned Headley about his wife's revelations.
Veteran anti-terrorism officials described various ways in which the New York task force might have handled the tip. Investigators could have decided it simply wasn't worth pursuing, perhaps because Lashkar was seen primarily as a threat to India at that time.
Others think investigators learned Gilani was still an informant for the U.S. government so they deferred to the existing operation. But federal officials speaking on background say that to their knowledge Gilani was no longer an informant at that point.
Another scenario: Investigators may have opened a case and put Headley under surveillance. If he were an informant, his U.S. handlers could also have tracked his travels and intercepted his communications if they suspected wrongdoing, then opened an investigation, officials said.
The tip from Gilani's wife came at a crucial moment: after he had finished training and soon before he met with terrorist bosses in Pakistan and launched into the Mumbai plot, court documents say.A new identity
To conceal his Pakistani Muslim background, he went to Philadelphia and legally changed his name to David Coleman Headley in February 2006. Then the ex-convict with the new name traveled to Pakistan, India, Dubai, Europe and elsewhere, documents show.
In June 2006, a friend who owned a U.S. immigration consulting firm helped Headley open a Mumbai office of the firm as a cover, court documents say. During the next two years, Headley scouted and videotaped targets, the documents say. He joined an upscale gym, befriended a Bollywood actor and stayed with a Moroccan girlfriend at the Taj Mahal hotel, a prime target of the plot, according to documents and officials.
Headley reported to his handlers, including a suspected Pakistani Army major, at debriefings in Pakistan, according to court documents and officials.
As the plot took shape in 2008, U.S. anti-terrorism agencies warned Indian counterparts at least three times about a suspected Lashkar plan to attack Mumbai, according to Indian and U.S. officials. There has been speculation in news reports and among anti-terrorism officials that the United States got that information by monitoring Headley, either as an informant, an ex-informant or a suspect.
Officials have not disclosed any link between Headley and the warnings, and there might be no connection. But some of the warnings coincided with Headley's trips to Mumbai and Pakistan.
The first U.S. warning to India came in early 2008 and described general intelligence about Lashkar wanting to strike Mumbai, according to an anti-terrorism official with knowledge of the warnings. After a scouting trip to Mumbai in April 2008, Headley went to Chicago in May and told his accomplice about an evolving plan for seaborne gunmen to land in front of the Taj Mahal hotel, which he had scouted extensively, court documents show.
Also in May, U.S. officials told their Indian counterparts that Lashkar's potential targets included the Taj Mahal hotel and nearby sites frequented by foreigners and Americans, according to the anti-terrorism official. In September, a U.S. warning caused Indian anti-terrorism officials to meet with officials at the hotel, which beefed up security, according to the official.
In early November, Headley met with his Lashkar handler in Karachi, where militant bosses were making final preparations of the 10-man attack squad, documents say. And on Nov. 18, U.S. officials advised India about a suspicious vessel related to a potential maritime threat to Mumbai, the official said.
Four days later, the gunmen left Karachi by boat. On Nov. 26, they struck the Taj Mahal and Oberoi hotels, a Jewish center, a cafe and a train station. The gunmen singled out Americans, Britons and Jews. The three-day slaughter caught Indian security forces unprepared despite the warnings.
Afterward, Lashkar deployed Headley on a plot against a Danish newspaper that had published cartoons of the prophet Muhammad. In January 2009, he visited the newspaper to ask about advertising and shot reconnaissance video, documents say.
Lashkar soon put the plot on hold, so Headley turned to Ilyas Kashmiri, an al-Qaeda kingpin in Pakistan, documents say. Kashmiri offered militants in Europe to Headley for a plan to decapitate hostages at the newspaper and throw their heads out of windows, documents say.
When Headley contacted the militants that summer, British intelligence detected him, officials say. He was arrested by the FBI last October and is now in a federal prison in Chicago. Anti-terrorism officials say he has become a treasure trove of information about Lashkar and al-Qaeda, whose recent suspected Mumbai-style plots in Europe have been linked to Kashmiri. Last week Interpol announced that it had issued worldwide Indian arrest warrants for Kashmiri and four other top suspects in the Mumbai and Denmark cases, all of whom have been identified by Headley, officials say.
Parts of the story contain nagging gaps. Headley's motivations are part of the mystery.
"I think he did it for the juice," the person close to the case said. "Everything he did was for the excitement."
ProPublica researchers Nicholas Kusnetz and Lisa Schwartz contributed to this report. ProPublica is an independent, nonprofit newsroom that produces investigative journalism in the public interest. ProPublica is supported entirely by philanthropy and provides the articles it produces, free of charge, both through its Web site and to leading news organizations.