After arriving in Pakistan, Headley began training with terrorists, eventually playing a key role in the 26/11 attacks that left 166 people dead in Mumbai in 2008, The New York Times reported quoting court records and interviews.
The October 2001 warning about 50-year-old Headley was dismissed, the authorities said, as the ire of a jilted girlfriend and for lack of proof, the paper said.
Less than a month later, those concerns did not come up when a federal court in New York granted Headley an early release from probation so that he could be sent to work for the US Drug Enforcement Administration in Pakistan.
It is unclear what Headley was supposed to do in Pakistan for the Americans, it said.
"All I knew was the DEA wanted him in Pakistan as fast as possible because they said they were close to making some big cases," Headley's former probation officer Luis Caso said.
The Headley case, the NYT said, raised questions about 'why the Americans missed warning signs' that their spy was involved with extremists groups and 'whether some officials chose to look the other way rather than believe
the complaints about him'.
New information suggests that US intelligence agencies failed to act on at least five instances of warnings since 2001 by Headley's two wives and other sources who had provided tip offs about his training with Pakistani terrorists for a "special mission" against India.
Indians were right to ask, "Why weren't alarms screaming?'" Bruce Riedel, a terrorism expert at the Brookings Institution and a former CIA officer, told NYT.
Officials, speaking on conditions of anonymity, told the NYT that the FBI discussed with Headley what his girlfriend had said in 2001 but he told them she was unreliable.
Headley also told the FBI that he had some philosophical affinity for some groups but he wasn't plotting against the United States.
"Also influencing the handling of the case, they said, was that he had been a longtime informant," NYT reported.
A September 1998 letter part of court documents showed that the government considered "reliable and forthcoming," that they sent him to Pakistan to "develop intelligence on Pakistani heroin traffickers."
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'.
