Al-Qaeda's New Hideouts

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Since last year, hundreds of al-Qaeda terrorists of Arab nationality, richer and better at blending in, have vanished into Karachi, the megacity of 12 million on the Arabian Sea. Diplomats say that the Qaeda fugitives who reached Karachi late last year "were not living in slum areas" but preferred high-rent districts where money buys high-walled privacy. Some were believed to have hidden in posh safe houses for much of the winter. But since then, they have scattered again. Says a senior Pakistani official: "They don't like to keep in one place. They're in lower-class neighborhoods, middle class, everywhere." Karachi authorities say that raids of militants' hideouts and homes in recent weeks have uncovered huge stashes of Kalashnikovs, rockets and ingredients for bombs.

Pakistani intelligence officials believe al-Qaeda is attempting to regroup by linking up with Pakistani graduates from Afghan terrorist training camps who came home to continue their lethal struggle. Officials think al-Qaeda is now contracting out terror assignments to Pakistani militant groups, especially the banned extremist groups Lashkar-e-Jhangvi and Jaish-e-Muhammad. "These are branch offices. They are using Pakistanis as servants," says a Pakistani terrorism expert.

Karachi police chief Syed Kamal Shah told TIME that investigators believe the kidnapping and murder of U.S. journalist Daniel Pearl was patronized by "foreigners"--a standard code word for al-Qaeda. Pakistani investigators say al-Qaeda's fingerprints are hard to detect, but they believe that bin Laden's network may have been behind the May attack that killed 11 French technicians on a bus in Karachi and the June bombing of the U.S. consulate in Karachi that killed 12 Pakistanis.

Now U.S. and Pakistani authorities have begun to unravel a web of connections between the perpetrators of those attacks and the militants involved in the Pearl murder. Last Monday a Hyderabad court ordered the death penalty for Ahmad Omar Saeed Sheikh, a British-educated Islamic militant, and sentenced three accomplices to life in prison for their role in the American journalist's murder. Police have since detained new suspects, who will probably also be tried for Pearl's murder. One of the suspects, Fazal Karim, has allegedly confessed to beheading Pearl at a farmhouse on the outskirts of Karachi, although he has not been formally charged. Through wiretaps and the fbi's growing ring of informants ("Money talks," says a Pakistani official with a grin), investigators have tracked communications between Karim and two suspects arrested on July 8 for attempting to kill Pakistani President Pervez Musharraf in April. The two accused, Mohammed Imran and Mohammed Hanif, confessed they parked a pickup truck loaded with explosives along Musharraf's motorcade route through Karachi. The remote-control detonator failed. Eight weeks later the same explosive-rigged vehicle was used in the blast at the U.S. consulate.

Pakistani intelligence officials believe these bombers and Pearl's killers were carrying out the attacks as part of a broader strategy of terror that has the signature of bin Laden's network. "These terrorists are smart. They had fire walls between the different cells, so that if anyone got caught, the trail would stop there," says an investigator. "Some people provided them with money, the equipment and a plan. And we think those people are connected to al-Qaeda."

Bin Laden's network is far from finished. As an extremist detained by Pakistani authorities recently told his interrogators, "Al-Qaeda is nowhere, and it is everywhere. If Americans are after us, we are after them." That chilling threat is what makes the hunt for al-Qaeda's latest Pakistan hideouts so urgent.