World News

Cash, Cars and Contracts: IBM, HP and Oracle in the Crosshairs of Overseas Corruption Investigation

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In the buttoned-down world of government officials who oversee computer contracts, Poland’s Andrzej Machnacz cut a colorful figure. He enjoyed fine cigars and tooled around Warsaw on a motorcycle. Salesmen beat a path to his office, where the big-screen television was usually tuned to the fashion channel.

"Andrzej liked to look at pretty girls," one frequent visitor recalled. "There always had to be cigars and good alcohol in his office, mainly well-aged whisky."

 

Computer sales executives for local companies and global giants like IBM and Hewlett-Packard had good reason to cultivate Machnacz. As senior technology officer for Poland’s national police and, later, the nation’s Interior Ministry, he set the terms for hundreds of millions of dollars in technology contracts and decided which ones should be awarded without competitive bidding.

Today, Polish prosecutors have painted a damning portrait of the partnership between the colorful Machnacz and the eager salesmen, one that could have legal consequences for the American companies, including IBM, Hewlett-Packard and Oracle, the Redwood City, Calif. software company.

Machnacz, prosecutors say, received more than a $1 million in cash and brand-name gifts in exchange for steering government contracts to the three American companies, as well as to a Polish company called Netline. According to prosecutors, the gifts included a BMW motorcycle, a Nissan SUV, a Harmon Kardon home theater, a Sony 50 inch television, 12 HP laptops, several iPads and a refrigerator.

The bribing of overseas officials is barred under the U.S. Foreign Corrupt Practices Act, and as ProPublica has previously reported, the Justice Department and Securities and Exchange Commission have stepped up enforcement of that statute in recent years. It is unclear whether federal investigators in the U.S. have begun looking at the circumstances of the Polish technology contracts.

IBM and Hewlett-Packard said in statements that they were cooperating with Polish authorities. Hewlett-Packard noted that "no current HP employees are suspects in this case," while IBM pointed out that "press reports” on the case referred to a "former IBM employee." The company said in its statement that it "believes in the highest ethical standards for its employees and is committed to the principles of business ethics and lawful conduct."

Oracle, whose possible entanglement in the investigation had not been publicly known before today, would not comment for this article.

The first reports about the investigation by Polish news outfits surfaced more than a year ago, named IBM and HP, and did not make much of a splash. A report last week by Robert Socha of Poland’s TVN television network brought to light new details. (Watch a version with English subtitles here.)

The TVN report included footage of a Polish business executive describing the elaborate steps Machnacz would often take in order to do business in secret. The executive, whose face was obscured on camera, was not identified by name but was described as a former employee of Netline, the Polish company implicated in the case.

"I followed him in my car," the executive said of Machnacz. "Sometimes, he would go to great lengths to show how ingenious and great he was, and how he could lead all the agencies by the nose. We would meet, I would follow him by car, he would ride a motorcycle, making a show to check that we were not followed. I got to know all the underground stations, as very often we would meet at a different one."

The employee said he first met Machnacz at a conference in the United States that he’d been invited to by an IBM executive in Poland.

A spokesman for Poland’s Anti-Corruption Bureau, which has been investigating the case, told TVN and ProPublica his agency had so far been less than impressed with level of cooperation from the three American companies.

In an email to ProPublica, Jacek Dobrzynski said the companies had responded to requests for documents. But asked directly about the attitude displayed by HP, IBM and Oracle, he said had not seen "any initiative, any willingness" from them to "solve this case completely.”

"I think they should be the parties most interested in that," Dobrzynski said.

Machnacz’s lawyer did not respond to a request for comment. Prosecutors have announced that Machnacz has been released from prison and has agreed to cooperate and testify against others involved in the scheme.

Prosecutors have not specified which exact contracts were influenced by the alleged bribery. Polish officials say as many as 140 computer deals amounting to more than $500 million may have been tainted. Poland does not publish details of its government contracts.

The former Netline official said the technology systems bought by Machnacz were too expensive and sophisticated for the country’s needs. "Because of the rapid pace of change in the technology field, the technology Machnacz had purchased still needed to be updated every several years.

"It was like we built brand new highways and rode horse carts on them," the former Netline executive said. "It was money wasting.”

IBM went some lengths to tout its successful collaboration with Machnacz, featuring a Polish project in a glossy 2009 brochure that spotlighted 16 innovative technology efforts around the world. The brochure included a glowing account of how IBM had worked with Machnacz to create a network of handheld computers that gave Poland’s police instant access to a vast array of data. With a few key strokes, cops could learn whether they were dealing with a stolen car or a wanted man, the brochure said.

The portable computers "practically eliminates errors and incorrect information," the brochure quoted Machnacz as saying. Marcin Figiel, the IBM sales executive in Poland with whom Machnacz worked, proudly asserted that no other country in Europe had deployed such an advanced network.

Prosecutors said that Figiel gave Machnacz nearly $60,000 in brand-name consumer products. Figiel no longer works for IBM; his lawyer did not respond to requests for comment.

Tomasz Ziolkowski, a salesman for HP, was alleged to have given Machnacz more than $600,000 in cash gifts "in exchange for helping Hewlett Packard Poland and Oracle obtain public contracts with the police and Interior Ministry." According to his profile on LinkedIn, Ziolkowski left HP in February 2010 for a job with Oracle’s Polish operation as a "consulting sales director." The profile says he left Oracle in July, 2011; his lawyer also did not reply to a request for comment.

The U.S. anti-bribery statute holds companies legally liable for bribes or payments by foreign employees, even if they acted without authorization from their employers in the U.S., according to Mike Koehler, a professor at Southern Illinois University School of Law and author of the blog FCPA professor.

IBM, Oracle and Hewlett-Packard have not publicly disclosed the case in their filings to the Securities and Exchange Commission. That decision likely reflects a judgment that the Polish inquiry will not affect the companies’ bottom lines or change investors’ views of their stock, experts said.

Hewlett-Packard and IBM have been investigated for bribery in government contracts in other countries.

In April, 2010, Hewlett-Packard disclosed that the Department of Justice, the S.E.C. and German prosecutors were investigating nearly $10 million in suspect payments related to a $45 million contract for a computer system bought by Russia’s chief public prosecutor. U.S. authorities were also looking at separate transactions in Serbia, Austria, Germany, Austria and the Netherlands, the company said.

A year later, the S.E.C. sued IBM in federal court in Washington, D.C., alleging that the company had provided shopping bags full of cash, gifts and travel expenses to officials in South Korea and China to secure computer contracts. The S.E.C. contended that "despite its extensive international operations, IBM lacked sufficient internal controls designed to prevent or detect these violations of the F.C.P.A.," the anti-bribery law.

"During the period 1998 to 2009,” the complaint said, "IBM had corporate policies prohibiting bribery and procedures relating to compliance with the FCPA; however, deficient internal controls allowed employees of IBM's subsidiaries and joint venture to use local business partners and travel agencies as conduits for bribes or other improper payments to South Korean and Chinese government officials over long periods of time."

The complaint accused the company of violating the provision of overseas bribery the law requiring it to keep accurate records and maintain "internal controls” to prevent payment of bribes.

The S.E.C. and IBM had agreed to settle the case for $10 million, but Richard Leon, the federal judge overseeing the S.E.C.’s action, recently refused to approve that deal. The case is still pending.

Robert Socha is a reporter with Poland TVN network.

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U.N. Think Tank Opening Office in Bahrain, with Bahraini Government Funding

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by Justin Elliott ProPublica

As Bahrain enters the third year of a crisis sparked by Arab Spring protests in 2011, the government continues to bar many human rights advocates and journalists from entering the country.

But one non-profit group is not only being welcomed into the tiny Gulf kingdom, it’s opening an office there. And it’s doing so with funding from Bahrain’s ruling monarchy.

 

The International Peace Institute, a New York-based think tank closely associated with the United Nations, announced last month an agreement to open the office to “promote development, peace and international security.”

The announcement comes at a time when Bahrain’s image-conscious government is still under international scrutiny amid continued pro-democracy protests. Human rights groups have criticized the government’s at times violent crackdown on the protests andfailure to follow through on promised reforms.

Institute President Terje Rød-Larsen, a veteran diplomat in the Mideast who is also a United Nations under-secretary-general, told ProPublica that the new office would be a positive force in Bahrain and the region.

He compared the think tank to United Nations programs that operate in or receive funding from countries that are in crisis or face criticism.

“Problems related to peace and security are in difficult countries,” Rød-Larsen said.

Bahrain appeals to the institute as a location for an office because “along many dimensions it’s an open society,” he said, citing the status of women and “freedom of religion.”

Rød-Larsen said that taking money from Bahrain’s government would not compromise the institute’s work. He declined to say how much money Bahrain is providing.

Rød-Larsen has been a frequent visitor to Bahrain in recent years, regularly meeting with government officials both in his capacity as the institute’s president and as a U.N. official.

With New York offices across from the United Nations, the institute counts many former U.N. officials among its staff and Secretary-General Ban Ki-moon is honorary chair of its board. Rød-Larsen has also traveled with a U.N. staffer on some of his trips to Bahrain, the U.N. news site Inner City Press has noted.

During his visits Rød-Larsen has repeatedly been cited in Bahrain’s state media praising the government, though he disputes the accounts.

“Larsen lauded [the] return of calm to Bahrain which indicates the kingdom’s success in overcoming the crisis,” the official Bahrain News Agency reported in April 2011, just two months after the protests began.

“The U.N. official lauded the climate of freedom, democracy and institutional development in Bahrain,” said another November 2011 report on a meeting between Rød-Larsen and the foreign minister.

Rød-Larsen said that media outlets often attribute inaccurate statements to him on his diplomatic travels.

“If I should dispute all stories like this, it would be full time work,” he said.

Rød-Larsen said that, in reality, he believes Bahrain’s government has made mistakes.

As for what the International Peace Institute’s new office in Bahrain will do when it opens, Rød-Larsen on a recent trip discussed “plans for a renewed national dialogue in Bahrain,” according to the institute.

Khalil Almarzooq, a spokesman for the main opposition group al-Wefaq, told ProPublica that the group had not heard from Rød-Larsen anytime recently. Almarzooq said whether the institute will be a positive force in Bahrain all depends on how it uses the money the government is providing.

Organized as a nonprofit charity in New York, the institute had a budget of nearly $11 million in 2011 and Rød-Larsen received about $495,000 in compensation.

According to the group’s 2011 annual report, its major donors that year included the United States, several governments in Europe, as well as Bahraini regional allies Qatar and the United Arab Emirates. The institute’s international advisory council includes Prince Turki Al-Faisal, the former head of Saudi intelligence. Saudi Arabia sent troops to help put down the protests in Bahrain in 2011.

Bahrain’s Ministry of Foreign Affairs did not respond to requests for comment.

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CNN Vatican analyst: Pope Francis' name choice 'precedent shattering'

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(CNN) -- Cardinal Jorge Bergoglio of Argentina, the new pope, is breaking historic ground by choosing the name Francis.

It's the first time the name is being used by a pope, said CNN Vatican expert John Allen.

 

Pope Francis chose his name in honor of St. Francis of Assisibecause he is a lover of the poor, said Vatican deputy spokesman Thomas Rosica.

"Cardinal Bergoglio had a special place in his heart and his ministry for the poor, for the disenfranchised, for those living on the fringes and facing injustice," Rosica said.

 

St. Francis, one of the most venerated figures in the Roman Catholic Church, was known for connecting with fellow Christians, Rosica added.

Allen described the name selection as "the most stunning" choice and "precedent shattering."

"There are cornerstone figures in Catholicism," such as St. Francis, Allen said. Figures of such stature as St. Francis of Assisi seem "irrepeatable -- that there can be only one Francis," he added.

 

The name symbolizes "poverty, humility, simplicity and rebuilding the Catholic Church," Allen said. "The new pope is sending a signal that this will not be business as usual."

 

In 2010, Pope Benedict XVI recounted how St. Francis was born in 1181 or 1182 as the son of a rich Italian cloth merchant, according to the Vatican website.

 

After "a carefree adolescence and youth," Francis joined the military and was taken prisoner. He was freed after becoming ill, and when he returned to Assisi, Italy, a spiritual conversion began. He abandoned his worldly lifestyle.

 

In a famous episode, Christ on the Cross came to life three times in the small Church of St. Damian and told him: "Go, Francis, and repair my Church in ruins," Pope Benedict XVI said, according to the Vatican's website.

 

"At that moment St. Francis was called to repair the small church, but the ruinous state of the building was a symbol of the dramatic and disquieting situation of the Church herself," Pope Benedict XVI said. "At that time the Church had a superficial faith which did not shape or transform life, a scarcely zealous clergy, and a chilling of love."

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Cardinals Convene for 2nd day of Conclave to Pick Next Pope

Article sponsored by Vincent Crotty Memorial Foundation

Rome (CNN) -- All eyes are glued to the chimney on the roof of the Sistine Chapel on Wednesday, as the cardinals take part in the second day of the secretive conclave to elect a new pope.

The 115 voting eligible church leaders filed into the chapel chamber, renowned for its ceiling fresco painted by Renaissance master Michelangelo, at 9:30 a.m. local time (4:30 a.m. ET).

 

They will have four opportunities to vote, twice early in the day and twice later.

A two-thirds majority is required to confirm a new pontiff to step into the shoes left empty by the historic resignation of Benedict XVI at the end of last month.

 

Whoever it may be will take on the leadership of a church that has been rocked by child sex abuse scandals and corruption claims in recent years.

 Article sponsored by Vincent Crotty Memorial Foundation

White or black smoke?

If a pope had been elected in the first vote of the day, white smoke would have been expected at about 5:30 a.m. ET but there has been no sign of any smoke yet.

Anticipation and ancient conclave rituals

If the first vote does not produce a new pontiff, no smoke will appear from the roof of the Sistine Chapel. The cardinals will then vote again.

Priest shares view on conclave

If the second vote also produces no result, black smoke will appear about 7 a.m. ET.

Sex abuse settlement during papal conclave

The smoke comes from two furnaces set up in the Sistine Chapel especially for the vote. Chemicals are added to make the color of the smoke more obvious.

If a pope has been elected, the cardinals burn the ballots immediately. If not, the cardinals hold on to them and proceed to a second round of voting.

Cardinals once took 3 years to name pope

They burn the ballots from both rounds together after the second round.

In the past, discerning the color has been difficult at times, as it has appeared gray. But there is a second, unmistakable sign: If the smoke is indeed white, the Vatican church bells ring to celebrate the choice.

 

The wait for the announcement of a new Church leader should not be too long. The longest papal conclave in the past century took just five days.

 Article sponsored by Vincent Crotty Memorial Foundation

Two-thirds majority

Black smoke billowed from the chimney of the Sistine Chapel on Tuesday night, after the cardinals failed to choose a new pope in the first day of their conclave.

 

Huddled under umbrellas as rain came down, crowds of onlookers watched the chimney and big screens set up in St. Peter's Square.

 

The secret process got under way earlier Tuesday on a day rich with symbolism as the scarlet-clad cardinals entered the Sistine Chapel in solemn procession, chanting prayers.

Led by the conclave's senior cardinal, Giovanni Battista Re, each of the cardinal-electors -- those under age 80 who are eligible to vote -- then swore an oath of secrecy and all those not involved were ordered to leave.

 

The cardinals will remain locked in isolation until one candidate, almost certainly from among their number, garners a two-thirds majority, or 77 votes, and is named the new spiritual head of the world's 1.2 billion Roman Catholics.

 

Until that moment, the cardinals are barred from communicating with the outside world in any way. Jamming devices have been installed to prevent the use of cell phones or other devices.

Article sponsored by Vincent Crotty Memorial Foundation

The cardinals stay in the Casa Santa Marta, a Vatican City hotel, for the duration of the conclave, moving from there to the Pauline Chapel to pray or the Sistine Chapel to vote.

 

Applause echoed around St. Peter's Basilica on Tuesday as Cardinal Angelo Sodano, dean of the College of Cardinals, offered thanks for the "brilliant pontificate" of Benedict, whose unexpected resignation precipitated the selection of a new pope.

 

When cardinals elected Benedict in 2005, after a conclave that ran into a second day, the white smoke signaling the decision came about six hours after an earlier, inconclusive vote.

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Four Disturbing Questions About the Mumbai Terror Attack

The 35-year prison sentence imposed on David Coleman Headley, a terrorist scout and Pakistani spy convicted in the 2008 Mumbai attacks, has closed the U.S. chapter of a case with explosive international implications.

But justice remains elusive. Neither the U.S. nor Pakistani governments have fully answered critical questions about the case — including why most of the accused masterminds remain at large in Pakistan despite evidence implicating them.

 

Headley, 52, pleaded guilty to doing surveillance for the three-day terrorist rampage in Mumbai that killed six Americans and 160 others. His sentencing last month in Chicago made the Pakistani-American businessman the highest-ranking conspirator to be punished. Last year, India executed the surviving gunman of the attack squad sent by Pakistan's Lashkar-e-Taiba militant group.

The investigation of Headley revealed evidence that Pakistani security forces played a direct role in terrorism against the West. His testimony at the trial of an accomplice gave an unprecedented look inside operations of Pakistan's Inter-Services Intelligence Directorate (ISI), Lashkar and al-Qaida. Yet the U.S. and Pakistan have been relentlessly secretive about Headley, who had worked as an informant for the U.S. Drug Enforcement Administration.

What follows is an analysis of four major questions about the Mumbai plot that includes new information and material ProPublica has not yet published in the three years we have spent examining the attack and its aftermath.

Sources include court files, investigative documents and interviews with witnesses, victims, experts and others in the United States, Europe, India and Pakistan, as well as law enforcement and intelligence officials whom we agreed not to identify because they were not cleared to speak publicly about the case.

Q. Why doesn't Pakistan capture Sajid Mir?

A. U.S. prosecutors indicted Mir, a Lashkar chief and the accused lead planner of the Mumbai plot. But despite overwhelming evidence — notably phone intercepts that recorded Mir directing the slaughter — Pakistani authorities have not pursued him.

Some investigators believe he is or was an ISI officer. Others think he merely works with the ISI and has powerful protectors. Nonetheless, his trajectory confirms a former French operative's comment that he is "untouchable in Pakistan."

Information recently obtained by ProPublica reveals that Pakistani authorities questioned and released Mir after the Mumbai attacks in late November 2008. Mir spent three days in a Karachi command post overseeing the attacks by phone, then returned to a Lashkar compound of residences, offices and training areas in Muzaffarabad, according to a captured Indian militant who assisted at the command post.

On Dec. 1, a team from Pakistan's Federal Investigative Agency (FIA) showed up at the compound known as Beit-ul-Muhajadeen. The investigators arrested Zaki-ur-Rehman Lakhvi, the group's military chief, and a few others. But they did not arrest Mir, another mastermind named Abu Qahafa or the Indian militant, 31-year-old Syed Zabiuddin. The three militants slipped out a back gate, according to Zabuiddin's confession after his arrest last summer.

In mid-December, FIA investigators questioned Mir and Qahafa in Islamabad. But the two Lashkar chiefs "were let off two days later," Zabiuddin told Indian investigators. It is not clear why the Pakistani investigators released Mir, the most-wanted accused mastermind, while keeping other suspects in custody.

In the months after Mumbai, Mir worked on new plots against India and sent Headley to do reconnaissance for an attack on a Danish newspaper that had published cartoons of the Prophet Muhammad. In spite of his wanted status, Mir was so sure of his clout that he visited Lakhvi at least twice at the Adiala jail in Rawalpindi.

Headley told Indian and U.S. interrogators about a jailhouse visit by Mir in early 2009. Zabiuddin has revealed a second visit. He said that in September 2009 he accompanied Mir to the jail, where the Lashkar defendants are housed together in comfortable quarters, according to Indian counterterror officials. The militants ate sweets while Lakhvi told them "he had struck a deal with the government and as such no further arrests ought to be made," Zabiuddin later told investigators.

Mir survived Headley's arrest in Chicago in late 2009. Headley told FBI agents all about his Lashkar handler and even helped in a failed bid to lure Mir out of Pakistan. In 2010, Mir began another bold plot: a plan to attack the Nashik Police Academy about 120 miles east of Mumbai, Indian counterterror officials said. Mir cultivated at least two operatives, one of whom was arrested in Nashik that October, according to the Indian counterterror officials.

"I believed [Mir] was constantly making efforts to station (Lashkar) cadres to target Nashik Police Academy," Zabiuddin said.

In November 2010, a two-part ProPublica series put Mir on the front page of The Washington Post. Weeks later, he again consulted the Indian militant about the Nashik plot, according to Indian counterterror officials. Mir asked if he thought a Pakistani named Hafiz Usman could function undercover in India effectively enough to strike the police academy, the counterterror officials said.

Today, investigators say Mir remains operational and that his whereabouts are known to Pakistani security. They say his alliance with the ISI and his determination to kill Indians, Americans, Europeans, Jews and other Westerners make him a threat.

Q. What was the full extent of the role of Pakistani intelligence in Mumbai?

A. The case marks the first time U.S. prosecutors have charged a serving Pakistani intelligence officer in a terrorist attack.

Given the delicate U.S.-Pakistan relationship, the Justice Department and FBI did not reach the decision lightly. They were convinced that the ISI officer, known only as Major Iqbal, plotted in tandem with Mir. Pakistani officials deny that Major Iqbal is an ISI officer. But there is compelling evidence that Iqbal was Headley's ISI handler, that he provided direction, funding and training for the Mumbai attacks and that he helped launch the Denmark plot.

U.S. investigators have a good idea of who and where Iqbal is. He has rotated to a new ISI assignment, according to U.S. and Indian counterterror officials.

Zabiuddin's account offers further corroboration of Headley's story. Zabiuddin gave investigators the first look inside the operation's control room, according to Indian counterterror officials, and he linked the location to the ISI.

Lashkar militants set up the command post in a house in the Malir neighborhood of Karachi, according to Zabiuddin. Indian counterterror officials have obtained the GPS coordinates of the site. The house usually functioned as offices for a fishing business; the Indian saw life vests and fishing nets on the premises. The fishing business, a front, was run by the chief of Lashkar's air and sea operations, a militant named Yaqoob. An ISI officer named Major Sameer Ali worked with Yaqoob in the front company, according to Zabiuddin's account.

This echoes Headley's description of Yaqoob and ISI officers using fishing vessels for operations, including sea deployment of the 10-man Mumbai squad.

Headley identified Major Ali as a colleague of Major Iqbal and fellow liaison to Lashkar. On the afternoon of Nov. 26, 2008, Zabiuddin said he saw Major Ali arrive in a Toyota HiLux at the Lashkar command post just a few hours before the attackers landed ashore in Mumbai. Major Ali met with Lakhvi, the Lashkar military chief, at the safe house for half an hour, according to Zabiuddin.

The ISI reassured militants they could rest easy after the attack, Zabiuddin told investigators. In January 2009, he said a high-ranking Lashkar boss named Muzzammil took him to a factory in Muzaffarabad, where they met with an ISI officer named Colonel Hamza and his personal assistant, Subeder Abdul Sabir.

"Both of us came out with assurances from Col. Hamza on my protection from arrest," Zabiuddin told Indian investigators.

U.S. and Indian investigators believe Col. Hamza is a spymaster whom Headley also met and identified as "Lt. Col. Hamza," Major Iqbal's commanding officer.

Indian leaders accuse the ISI leadership of direct involvement in Mumbai. In all, Headley and others implicated a brigadier, two colonels, at least three majors, a Pakistani Navy frogman and noncommissioned officers. Headley described an almost symbiotic bond between Lashkar and ISI chiefs, though he also said he did not think the ISI director knew about the plot.

Q. What risk does Lashkar-e-Taiba pose in the future?

A. Pakistani authorities insist they have cracked down on Lashkar. They have prosecuted suspects for Mumbai, shut down militant outposts and prevented major new attacks against India and the West.

Yet the crackdown has been a strange dance. It gives the sense of a deal negotiated in the shadows. The power of the ISI and of Lashkar, which is a military, political, social and religious force in Pakistan, has ensured impunity.

In contrast to al-Qaida trainers dodging U.S. drone strikes in remote secret compounds, Lashkar camps are large, well-appointed and well-known. Mountain training complexes have churned out thousands of fighters over the years. The group's air and sea wings display its ambitions. Zabiuddin said Lashkar stockpiled hundreds of cartons of paragliding kits and trained with the paragliders, which the militants "envisaged using in an attack," an Indian counterterror official said.

There were clearly tensions between elements of the Pakistani government and Lashkar after the Mumbai attacks. The FIA, a relatively small agency with the daunting task of investigating terrorism in Pakistan, showed aplomb in arresting Lakhvi and several others at their headquarters. Soon afterward, the Pakistani Army fired shells and rockets at the Bait-ul-Mujahadeen complex, wounding a Lashkar fighter and drawing retaliatory fire, according to the account of Zabiuddin. He said the Army occupied the complex for three months.

The crackdown only came, however, after Lashkar had been given advance warning and removed equipment from harm's way, the Indian militant told investigators. Zabiuddin described a methodical reaction: Lashkar operatives leased 10 or 12 acres and brought in excavation gear owned by the militant group to build a replacement complex near Dolai. The new facility was up and running by July 2009, Zabiuddin said. Training and plotting shifted to this and other venues, according to Western and Indian counterterror officials.

FIA investigators have told U.S. agents they do not plan to arrest other plotters, according to U.S. counterterror officials. A trial of Lakhvi and fellow defendants in Pakistan drags on, plagued by procedural delays and disputes with India.

Lakhvi's custody arrangements are a topic of derision among Western and Indian counterterror officials. Headley told interrogators an anecdote: After Lakhvi's arrest, FBI agents asked to question him for their investigation into the six American deaths. The ISI refused, telling the FBI instead to submit questions. ISI officers then sat down with Lakhvi and "came up with answers" for the FBI, according to Headley's account.

Lakhvi's three wives visit him in custody. One wife had a child in 2010, according to Zabiuddin's statement. In addition, imprisonment does not prevent Lakhvi from calling shots as Lashkar military commander. As ProPublica reported, Gen. Ashfaq Parvez Kayani, chief of Pakistan's armed forces and a former ISI director, rebuffed a face-to-face appeal from a senior U.S. official in 2011 to prevent new attacks by confiscating the Lakhvi's cellular phone.

By phone and in person, Lakhvi oversees operations in Afghanistan, where his militants fight U.S. troops alongside other Islamic groups. Lashkar fights on traditional fronts too: attacking India in the contested Kashmir region and directing proxy Indian terrorist groups.

Upcoming elections in Pakistan may shape the group's future. Lashkar has a huge treasury: a mix of donations and tens of millions of dollars allegedly provided by the ISI. The group owns companies, schools, hospitals and charities and could develop a more overt political role, comparable to Hezbollah in Lebanon. Hafiz Saeed, Lashkar's spiritual leader, has raised his profile. He gave a rare interview to The New York Times this month in which he denied involvement in terrorism. Although the U.S. has issued a $10 million reward for Saeed's capture, Pakistani police guarded the compound where he gave the interview.

As U.S.-led military forces pull out of Afghanistan, combat-hardened Lashkar militants could push for attacks on India and the West, some experts warn.

"There are multiple potential pathways for the group," said Stephen Tankel, an American University professor who's written a book about Lashkar. "Depending on how things play out in Afghanistan as well as with the India-Pakistan peace process we could see an uptick in internal tension in the group. If so, that could mean trouble for Pakistan, for the region and possibly for the West as well."

Q. Why didn't U.S. authorities stop Headley sooner?

A. ProPublica has explored in detail the repeated warnings about Headley to the FBI and the missed opportunities to stop him between 2001 and 2009.

Reacting to ProPublica's reports, in late 2010 the Director of National Intelligence ordered a multiagency review of Headley's contacts with the U.S. government. The conclusions were kept secret. In addition, Rep. Frank Wolf, R-Va., chairman of a House appropriations subcommittee, responded to ProPublica articles by submitting a long list of questions to the FBI and DEA about Headley's work as an informant and six FBI inquiries into his extremist activity. Wolf has declined to disclose the responses.

The secrecy makes it hard to assess the government's failure to detect the threat from Headley. But the FBI's tepid approach contrasts with other cases, according to lawyer Charles Swift, who defended Headley's accomplice in Chicago and specializes in terrorism cases.

"What has struck me is the FBI's doggedness in tracking anyone who has potential information," Swift said. "I have clients who the FBI has flown across the country to interview at airports. I have had clients stopped for four hours of questioning by the Joint Terrorism Task Force at airports. It's unthinkable they didn't do more regarding Headley."

Federal agents opened six inquiries about Headley between 2001 and 2008, but only questioned him once. That interview took place in a DEA office three weeks after the Sept. 11 attacks because of a report that he praised the al-Qaida strike and wanted to fight jihad in Pakistan.

Headley's defense was partly true: that he was a DEA informant and had been gathering intelligence on Islamic extremists. Yet strangely, his DEA handlers did not write a report about the FBI inquiry or look into a claim Headley made that he was related to a Pakistani spymaster. DEA officials insist that they did not know that Headley was already an active militant in Lashkar.

There also is no convincing explanation of why a federal court abruptly ended Headley's probation for a drug conviction three years early, or why the DEA deactivated him soon after he signed a one-year informant contract in September 2001. The official silence and contradictions reinforce suspicions that he kept working as a U.S. informant in some capacity while he trained with terrorists in Pakistan.

Official explanations are incomplete about other inquiries into Headley. Why didn't FBI agents interview Headley in 2005 after his wife had him arrested for domestic abuse and accused him of being a Lashkar militant? Interviews with her and a DEA handler indicated that he was at least a potentially valuable intelligence source. What explains Headley's contact with the DEA soon after that inquiry? According to a DEA timeline prepared in response to a ProPublica request, in February of 2006 "the DEA received an impromptu phone call from Headley. The call lasted between five and 10 minutes and was social in nature. Operational and investigative matters were not discussed."

According to the DEA, this was the agency's last contact with Headley until his arrest for the Mumbai attacks. The timing of his social call to the DEA is perplexing. In early 2006, Headley was doing surveillance in Mumbai, changing his name to perfect his cover, and becoming a spy for the ISI.

The next warning was the closest U.S. agencies came to discovering the Mumbai plot. In meetings in late 2007 and 2008, another of Headley's wives went to the U.S. embassy in Pakistan and accused him of being a spy and terrorist. Embassies get many "walk-ins" who make wild accusations. The wife later admitted to an investigator that she was emotional and mixed lies with the truth. Still, she told U.S. agents about Headley's Lashkar activity, his suspicious travel to India and her belief he was involved in attacks.

She said she showed U.S. agents photos of her with Headley at the Taj Mahal Hotel, his main target. She phoned an agent several times with more information, according to her account. She said the agents had a file on Headley and knew about his Lashkar training. Yet officials say Headley was not interviewed or monitored. The key unanswered question: Did U.S. agents learn at this time of the three similar previous warnings that bolstered the wife's credibility?

The final inquiry into Headley also remains murky.

Days after the Mumbai attacks, an associate of Headley's mother alerted FBI agents in Philadelphia about her suspicions that Headley was involved with Pakistani militants. It is disconcerting that Headley's cousin in Philadelphia succeeded in lying to FBI agents, claiming Headley was in Pakistan and then calling him at home in Chicago to warn him. It is surprising that the FBI did not locate Headley, who weeks later left the country and did extensive terrorist surveillance in Denmark and India, returning to the scene of the crime.

Lashkar was now an urgent threat. Agents learned about the previous FBI inquiries, which connected Headley to Lashkar and Mumbai. But U.S. authorities did not warn Indian law enforcement or issue a travel alert for him. It took another seven months and a tip from British intelligence to open the investigation that resulted in his capture.

"It is a puzzling question," said Patrick Blegen, Swift's co-counsel in the Chicago case. "It could be explained by ineptitude. Or it could be that the federal agencies had some comfort with him, they didn't think he was a threat because he had been an informant in the past."

Top Indian officials allege that Headley was a double agent for the U.S. government at the time of the Mumbai plot. After extensive reporting, ProPublica has found no proof for that allegation. As U.S. officials insist, Headley may have simply slipped through the cracks of the counterterror system. Until more is revealed, however, legitimate suspicions will persist.

"Headley proved that for all our changes in security, we are not much safer," Swift said. "It was too easy. When the real big bad terrorist showed up, no one saw him."

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