D.E.A. DEPLOYED MUMBAI PLOTTER DESPITE WARNING

WASHINGTON - American authorities sent David C. Headley, a small-time
drug dealer and sometime informant, to work for them in Pakistan
months after the Sept. 11, 2001, attacks, despite a warning that he
sympathized with radical Islamic groups, according to court records
and interviews. Not long after Mr. Headley arrived there, he began
training with terrorists, eventually playing a key role in the 2008
attacks that left 164 people dead in Mumbai.

The October 2001 warning was dismissed, the authorities said, as the
ire of a jilted girlfriend and for lack of proof. Less than a month
later, those concerns did not come up when a federal court in New
York granted Mr. Headley an early release from probation so that he
could be sent to work for the United States Drug Enforcement
Administration in Pakistan. It is unclear what Mr. Headley was
supposed to do in Pakistan for the Americans.

"All I knew was the D.E.A. wanted him in Pakistan as fast as possible
because they said they were close to making some big cases," said
Luis Caso, Mr. Headley's former probation officer.

On Sunday, while President Obama was visiting India, he briefed Prime
Minister Manmohan Singh on the status of his administration's
investigation of Mr. Headley, including the failure to act on
repeated warnings that he might be a terrorist. A senior United
States official said the inquiry has concluded that while the
government received warnings, it did not have strong enough evidence
at the time to act on them. "Had the United States government
sufficiently established he was engaged in plotting a terrorist
attack in India, the information would have most assuredly been
transferred promptly to the Indian government," the official said in
a statement to The New York Times. The statement did not make clear
whether any American agencies would be held accountable.

In recent weeks, United States government officials have begun to
acknowledge that Mr. Headley's path from American informant to
transnational terrorist illustrates the breakdowns and
miscommunications that have bedeviled them since the Sept. 11
attacks. Warnings about his radicalism were apparently not shared
with the drug agency that made use of his ties in Pakistan.

The director of national intelligence, James R. Clapper Jr., began an
investigation into Mr. Headley's government connections after reports
last month that two of the former drug dealer's ex-wives had gone to
American authorities between 2005 and 2008, before the Mumbai
attacks, to say they feared he was plotting with terrorists. Combined
with the earlier warning from the former girlfriend, three of the
women in Mr. Headley's life reported his ties to terrorists, only to
have those warnings dismissed.

An examination of Mr. Headley's story shows that his government ties
ran far deeper and longer than previously known. One senior American
official knowledgeable about the case said he believed that Mr.
Headley was a D.E.A. informant until at least 2003, meaning that he
was talking to American agencies even as he was learning to deal with
explosives and small arms in terrorist training camps.

The review raises new questions about why the Americans missed
warning signs that a valued informant was becoming an important
figure in radical Islamic groups, and whether some officials chose to
look the other way rather than believe the complaints about him. The
October 2001 warning from the girlfriend was first reported Friday by
ProPublica, the independent investigative news operation, and
published in The Washington Post.

Fuller details of how the government handled the matter were provided
to The Times by officials who did not want to be quoted discussing a
continuing inquiry. They disclosed that the F.B.I. actually talked to
Mr. Headley about the girlfriend, and he told them she was
unreliable. They said that while he seemed to have a philosophical
affinity for some groups, there was no evidence that he was plotting
against the United States. Also influencing the handling of the case,
they said, was that he had been a longtime informant.

The Indian government has been outspoken in its concerns that the
United States overlooked repeated warnings about Mr. Headley's
terrorist activities because of his links to both American law
enforcement as well as to officials in Pakistan's Inter-Services
Intelligence Directorate - a key ally of the United States in the
fight against terrorism.

Bruce O. Riedel, a terrorism expert at the Brookings Institution and
a former C.I.A. officer, said the Indians were right to ask, "'Why
weren't alarms screaming?"

Mr. Headley, 50, born in the United States to a Pakistani diplomat
and Philadelphia socialite, has pleaded guilty in connection with the
Mumbai plot and a thwarted attack against a Danish newspaper that
published cartoons of the Prophet Muhammad. As he has many times
before, he is cooperating with the authorities, this time hoping to
avoid the death penalty. Officials of the D.E.A., which has a long
history with Mr. Headley, declined to discuss their relationship with
him. The C.I.A. and the F.B.I. said that Mr. Headley had never worked
with them. Privately, the agencies point fingers at each other.

The transcript of a Nov. 16, 2001, probation hearing in federal court
in New York shows the government took great pains not to identify
which agency was handling Mr. Headley, or whether he worked for more than one.

Mr. Caso, his former probation officer, recalled that Mr. Headley had
been turned over to the D.E.A. Another person familiar with the case
confirms this account. It was a world Mr. Headley knew well. After
arrests in 1987 and 1998, he cooperated with the drug agency in
exchange for lighter sentences. He specialized in the ties between
Pakistani drug organizations and American dealers along the East Coast.

A September 1998 letter that prosecutors submitted to court after an
arrest then showed that the government considered Mr. Headley - who
had admitted to distributing 15 kilograms of heroin over his years as
a dealer - so "reliable and forthcoming," that they sent him to
Pakistan to "develop intelligence on Pakistani heroin traffickers."

The letter indicates that Mr. Headley, who faced seven to nine years
in prison for his offense, was such a trusted partner to the drug
agency in the 1990s that he helped translate hours of tape-recorded
telephone intercepts, and coached drug agency investigators on how to
question Pakistani suspects. The courts looked favorably on his
cooperation, according to records, sentencing Mr. Headley to 15
months in prison, and five years' probation.

While he was on probation, in October 2001, a woman told the F.B.I.
that she believed her former boyfriend, Mr. Headley, was sympathetic
to extremist groups in Pakistan, according to a senior American
official who has been briefed on the case. The government was flooded
with thousands of such tips at that time, in the aftermath of the 9/11 attacks.

William Headley, an uncle, recalled that agents called his sister to
ask if her son had terrorist leanings. "She didn't seem upset at all
by the call," William Headley said. "And I didn't think much of it
either because at that time, I thought the government was checking
out anyone who had ties to Pakistan."

It is unclear how widely disseminated the warning was. But in that
probation hearing one month later, the government enlisted Mr.
Headley's help again, suspending his sentence in exchange for what
court records described only as "continuing cooperation." According
to the transcript, it was a rushed affair. The probation officer
apologized for not being properly dressed, and the lawyers explained
that they had not been able to make their case in writing. Mr.
Headley was a potential gold mine, according to an official
knowledgeable about the agreement to release him from probation. One
person involved in the case said American agencies had "zero in terms
of reliable intelligence. And it was clear from the conversations
about him that the government was considering assignments that went
beyond drugs."

American authorities have not disclosed what happened after Mr.
Headley resumed his role as an informant. But in December 2001, the
same month Mr. Headley departed for Pakistan, the United States
designated the Pakistani group Lashkar-e-Taiba as a terrorist
organization. Less than two months later - in February 2002 - Mr.
Headley began training with the group on "the merits of waging jihad."

Between 2002 and 2005, Mr. Headley attended at least four additional
Lashkar sessions, including training on surveillance and small-arms
combat. Then in 2007, he began scouting targets for the group to
attack in Mumbai, staying at least twice at the Taj Mahal Palace and
Tower hotel, and hiring fishermen for private tours of the port that
helped him identify where the sea-traveling attackers could land. It
is unclear when and why his connections to the United States government ended.

After the Mumbai attacks, Mr. Headley apparently turned his attention
to Europe, according to recently released transcripts of his
questioning by the Indian authorities. He contacted Ilyas Kashmiri,
widely considered one of Al Qaeda's most dangerous operatives, and
begin plotting the attack against the Danish newspaper, according to
his own account. Mr. Kashmiri put Mr. Headley in touch with Qaeda
operatives in Europe who would help. He traveled to Britain in August
2009, then to Stockholm.

British intelligence authorities alerted the United States to Mr.
Headley's August meeting in Britain, saying that they believed he was
involved in a plot against the Denmark newspaper. He was arrested in
connection with the Denmark plot last October.

American authorities had no idea that he was also involved in the
Mumbai attacks until he told them. Since then, he has been in federal
custody in Chicago.

An American counterterrorism official said that agents who had
questioned Mr. Headley called him "dangerously engaging." The
official said Mr. Headley was "a very charming individual who clearly
knows how to manipulate the system to get what he wants" and added
that agents steeled themselves before meeting with him so as not to
"get sucked into his mind games."

Barclay Walsh contributed reporting from Washington, and Ravi Somaiya
from London.