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The American Behind India’s 9/11—And How U.S. Botched Chances to Stop Him

Chapter 6: Target Mumbai

Headley spent most of the next two years in Mumbai developing a blueprint for terror.

Funded by $25,000 from Major Iqbal, he opened an office of Rana’s firm as a front. Like many Pakistanis, Headley had a conflicted relationship with India, according to an Indian counterterror official familiar with his questioning by Indian investigators in Chicago last year.

“He told us: ‘I like everything about India,’” the official said. “‘I like the food, the people. But I don’t like India.’”

Headley had fun in the city he was planning to devastate. He joined an upscale gym, befriending a Bollywood actor who introduced him to the elite party scene. He hung out in the Colaba area of south Mumbai, where he tried to romance a 25-year-old who owned a café, according to Indian investigators. He stayed at the Taj Mahal Palace Hotel, the prime target designated by his handlers. It was a landmark on the waterfront by the Gateway to India monument. He charmed employees, praising the opulent architecture, going on in-house tours and shooting hours of video.

In 2007, things got more complicated on the domestic front. Headley met a young Moroccan in Lahore and soon married her. Faiza Outalha was a medical student and Western in outlook, but Headley had her dress in traditional Muslim style. This created a problem when she insisted on accompanying him to Mumbai, because he was posing as a non-Muslim American. A stay at the Taj ended in a tearful spat, and he sent her back to Lahore.

Mir and Major Iqbal later scolded Headley about endangering his cover, according to investigators. Headley soon broke up with Outalha. In December 2007, she got into an altercation outside Headley’s house with his servant. She filed assault charges against Headley, who spent eight days in jail in Lahore. Major Iqbal intervened to free him, according to an Indian investigative report.

Outalha did something more drastic. She reported him to the U.S. embassy in Islamabad. During interviews in December, January and April, she met with agents of the State Department’s security bureau and U.S. Immigration and Customs Enforcement. Outalha described his involvement with Lashkar and visits to India, saying he was on a secret mission. She told them she had stayed at the Taj hotel with him. She called him a drug dealer, terrorist and spy, according to officials.

In a later account to an investigator, Outalha admitted that she had mixed the truth with false and emotional accusations. But she said the agents had an inch-thick file about Headley on the table when she talked to them. When she mentioned his training at Lashkar camps, the Americans told her they already knew about that, according to her account.

As with past tips, U.S. officials say her warnings were not specific enough and that angry spouses often make bogus allegations. But officials have not clarified a key point: whether the embassy officials learned about the previous FBI inquiries, which would have reinforced her credibility. The prior cases, combined with her allegations, could have led investigators directly to Headley’s reconnaissance work.

The State Department security agent communicated the wife’s warning in an information package to the CIA, FBI and DEA, according to U.S. officials. It’s not clear whether anyone did anything further. The DEA senior official says he has not seen any record that his agency was informed.

Headley learned about Outalha’s tip to the embassy, but it did not have much of an impact on him, according to testimony and U.S. officials.

In the 10 months before the attacks in November 2008, the FBI and CIA issued half a dozen increasingly urgent and specific warnings to Indian counterparts, according to Indian and U.S. officials. The U.S. agencies warned that Lashkar was plotting to attack Mumbai, that Westerners and foreigners would be targeted and that the Taj hotel was a target. As a result, the Taj beefed up its security defenses in September.

U.S. officials have not disclosed the sources of the warnings. Indian security chiefs are convinced the information came partly from Headley. They think he was still a U.S. informant.

“You would call him a double agent,” said former Home Secretary Pillai. “If they went deep into the records, I think they would find there was enough evidence to show that he was involved in some planning or an attack in India. And I think at some level in the United States, some agencies decided that can be kept under wraps because he’s doing something for [them].”

A senior Indian counterterror official admitted that Indian agencies must share the blame because they failed to respond effectively to the U.S. warnings. He and other Indian security officials praised U.S. cooperation on aspects of the case. But he said he is suspicious.

“I think he was a U.S. agent,” the official said. “Maybe this information came from him. Maybe he was telling them part of what he knew but not all of it. … It’s good to develop informants like that and infiltrate organizations. That is what intelligence agencies are supposed to do. But they could have taken us into confidence and told us about him.”

In response, U.S. counterterror officials insist that Headley was not a double agent and that they did not have prior knowledge of his involvement in the plot.

“I know where those warnings came from,” a U.S. official said, “and they didn’t come from Headley.”

On the other hand, three counterterror sources described a different scenario to ProPublica. The sources said they do not think Headley was a double agent at the time of the attacks. But they said U.S. officials learned enough about his activities to become concerned, monitor him intermittently and pick up fragments of intelligence that contributed to the warnings to India. Investigators did not realize he was a central figure in the plot until later, the sources said.

If that scenario is true, it remains a tightly guarded secret.