Missile Bust A Missed Opportunity?

(CBS/AP) While federal officials congratulate themselves on a successful "sting" of a suspected arms smuggler, a magazine is reporting the arrest was really a blown opportunity in the war on terrorism.

Hemant Lakhani, a Briton described by a federal prosecutor as a "significant international arms dealer," was ordered held without bond Wednesday. According to an FBI affidavit, Lakhani had arranged to sell a shoulder-fired surface-to-air missile he believed was intended to shoot down a commercial airliner, and planned to smuggle 50 more.

Experts said the weapons, which weigh about 40 pounds, are capable of shooting down a jetliner.

The international sting operation that led to the arrest should serve as a warning that U.S. intelligence is aggressively pursuing terrorist cells and black market weapons dealers, Homeland Security Secretary Tom Ridge said.

In an interview with CBS News Correspondent Peter Maer, Ridge said the sting should send a message to terrorists that "we'll just keep comin' at you — one terrorist, one arms dealer, one cell at a time."

Newsweek, however, reports top Justice Department officials are privately upset over a premature news leak of Lakhani's arrest that may have ruined a rare opportunity to penetrate Al Qaeda's arms-buying network.

"Efforts to 'flip' [recruit] the informant (Lakhani) were essentially aborted by a news leak, first to the BBC, that essentially ended any hopes of the FBI flipping the informant, because you can't use an informant who's been burned," Newsweek correspondent Michael Isikoff told CBS Radio News.

In Texas, President Bush said Lakhani's arrest undercuts criticism by Democrats that his administration was not doing enough to fight terrorism. "The fact that we're able to sting this guy is a pretty good example of what we're doing in order to protect the American people," Mr. Bush said.

But Newsweek reports federal officials are upset.

"This is not the way they wanted it to come down," Isikoff said, "so while it looks good for the TV cameras, and there was a lot of self-congratulatory rhetoric here, it was not exactly the kind of law enforcement operation they would have hoped for."

The affidavit says Lakhani, dealing with an undercover FBI agent he believed to be a Muslim terrorist, was also recorded as saying Osama bin Laden "did a good thing" on Sept. 11, 2001.

Officials say Lakhani is not a terrorist, and not affiliated with al Qaeda. But sources tell CBS News Correspondent Bob Orr the government has the dealer on tape bragging about the weapon's ability to shoot down planes.

Ridge said the threat is still there, and more missiles are on the market.

"We know there's a proliferation around the world," he said. "It is a threat to commercial aviation, one we take seriously."

Lakhani, 68, is charged with attempting to provide material support and resources to terrorists and acting as an arms broker without a license. Lakhani's lawyer, Assistant Federal Public Defender Donald J. McCauley, refused to comment.

"The terrorists who have threatened America lost an ally in their attempts to kill our citizens," Christopher J. Christie, the U.S. attorney for New Jersey, said after Lakhani's arraignment Wednesday.

Lakhani and two other men were arrested Tuesday after an 18-month investigation by the FBI's Joint Terrorism Task Force in Newark and Russian and British authorities.

"While the U.S. may be the primary target, we've got a lot of allies in the effort," said Ridge.

The most serious charge Lakhani faces carries a 15-year maximum prison sentence. Counts against the other men carry five-year maximum sentences.

"While this arms dealer may be a bad guy, he's not a terrorist and he's not the real purchasers and users of these kind of shoulder-fired surface-to-air missiles that can shoot down commercial airliners," said Isikoff.

Lakhani had agreed to deliver a missile to U.S. agents posing as buyers after he obtained it from Russian agents posing as sellers, Christie said.

One official said the understanding between Lakhani and the undercover FBI agent was that the missile had to be capable of bringing down a commercial airliner.

Moinuddeen Ahmed Hameed, 38, who was arrested Tuesday in New York, is charged with conspiring to operate a money laundering operation as part of the scheme to pay for the missiles. Hameed, an Indian citizen living in Malaysia, appeared in court with Lakhani and was ordered held without bail pending an Aug. 20 hearing.

Christie said Hameed had been summoned by Lakhani from Malaysia to launder a $500,000 down payment on an additional 50 missiles that undercover agents sought from Lakhani, after one missile was shipped at a cost of $86,000.

Hameed's lawyer, Cathy Fleming, said her client maintained his innocence.

Officials also announced money laundering charges against Yehuda Abraham, 76, of New York City, who Christie said handled the funds for the initial missile purchase.

Abraham was arrested in Manhattan with Hameed at what was described as a gem dealership off Fifth Avenue. His bail was set at $10 million during an appearance in federal court in Manhattan, where a judge ordered him extradited to New Jersey, where he faces an initial hearing Thursday before a U.S. magistrate in Newark.

Abraham's lawyer Larry Krantz told U.S. Magistrate Andrew Peck that his client is in poor health. Arguing for lower bail, Krantz noted the charge against Abraham does not say his client knew he was dealing with terrorists.

According to the FBI affidavit, the probe began in December 2001, when a "cooperating witness" under federal law enforcement control began talking to Lakhani about obtaining anti-aircraft guns and missiles.

Christie said evidence against Lakhani includes hours of audio and video recordings.

In April 2002 at a hotel in New Jersey, the cooperating witness told Lakhani he wanted one shoulder-fired missile to be used for "jihad" and to shoot down a plane, according to the affidavit. Lakhani confirmed he would work with the witness and offered as many as 200 missiles.

The two met again in New Jersey in September 2002, where Lakhani verified that the purpose of shooting down a commercial aircraft was to harm the U.S. economy, the affidavit says. "Make one explosion ... to shake the economy," Lakhani is quoted as saying.