Headley ended up joining and training with L.e.T. Pakistan claimed he was a non-credible double agent. (Official response here.) The Times of India asked the same thing.
The report questions whether the attacks could have been prevented if the governments who had Shah under surveillance had connected the dots.
Since the report doesn't include the actual documents it is relying on, I can't tell what information India and the UK had before the attacks and what they learned shortly after. Here is one of India's dossiers, which in the section on Technical evidence (pp. 35 to 38), explains the VOIP, telephone and internet evidence. Here's a news article on the money exchangers, who were in Italy. Here's a 2009 Telegraph article on the British surveillance. Here's an earlier Pro Publica report on Headley, and another on how the U.S. failed to catch him. The U.S. initial Complaint against Headly and codefendant Rana is here.
I'm more interested in why Headley's handler, the ISI officer "Major Iqbal" (not to be confused with Chicago co-defefendant Mazhar Iqbal, alias Abu al Qama) who financed Headley's scouting and surveillance of Mumbai locations, has still not been captured. There are press reports he was identified as Chowdery Khan. The wife of Headley's convicted co-defendant, Tahawwur Rana, has said Rana knew Major Iqbal from his army days.
Pakistan's ISI was clearly involved in the Mumbai attacks. Zarrar Shah and Zakir Rehman Lakhvi,were arrested in 2008 and indicted there in 2009. Zarrar Shah reportedly confessed. The U.S. added Ilyas Kashmiri, Hafeez Saeed, Mansor Iqbal, Major Iqbal, Sajid Mir and some other to its case -- but not Zakir Rehman Lakhvi for some reason.
Last week, after 6 years in custody, the Pakistan court granted bail to Lakhvi, which caused a big fuss in India. Now Pakistan has said it will appeal the decision, so it may be a few months before he is really freed. I read that Shah aka Wajid also has a bail application pending.
LeT honcho Hafeez Saeed has not been charged in Pakistan, although he and Major Iqbal as well as Sajir Mid have been charged in the Chicago case, along with Ilyas Kashmiri, who really does appear to be dead this time (as compared to 2011.)
Zarar Shah, a top operational commander of Lashkar-e-Tayyiba, and Zakir Rehman Lakhvi, whose arrest had been reported Tuesday, were among the militant figures rounded up in recent days, Prime Minister Yousuf Raza Gilani told reporters.
The evidence may be too weak against Shah and Lakhvi to convict them. The bomber who gave evidence against them was hanged for his role in the offense. You can read the 400 page Indian appellate decision upholding the conviction here. (It also has many details of the telephone and internet usage.) And here's a write up of an earlier Pro-publica report discussing the connections.
I followed this case long enough to write 50 posts on it, most of them detailed and available here.) I don't know that I'm still interested in the surveillance issue. I want to see Pakistan arrest Major Iqbal. Interpol has has an alert out for him for years.