Times of India, quoted New York Times report which said that Headley alias Daood Gilani was arrested in 1998 for smuggling heroin from Pakistan to US.
But Headley was released with 2 years of minor sentencing for his decade long activities of drug trafficking after he provided detailed information on the Pakistani suppliers.
He was later sent to Pakistan to conduct undercover surveillance operations for the Drug Enforcement Administration (DEA).
With reports of Headley being an undercover agent coming up it has been speculated that Headley could be the American sleuth whose information helped in thwarting LeT attack on Mumbai in Sep 2008.
Though the theory of Headley being an undercover agent is yet to be confirmed, the possibility of US agents keeping him away from Indian investigators to save their face is not being ruled out.