The London boy hunted as Bin Laden terrorist

He was the very model of a London public schoolboy. Ahmed Sheikh was courteous, a brilliant student and a source of immense pride to his hard-working and successful immigrant parents. Today he is the focus of one of the biggest manhunts so far launched in the campaign against terror as he is identified as one of Osama bin Laden's key operatives.

Sheikh brings the terrorist trail that led to the 11 September atrocities right back to London. He is being sought in Pakistan for the kidnap of American reporter Daniel Pearl, a crime now believed to have been planned as a cash-raising exercise for Bin Laden's al Qaeda terror network. But his involvement in al Qaeda goes far beyond the kidnap and links him to the very heart of Bin Laden's war against the West.

It all seems incredible to friends and classmates who knew Sheikh at Forest School in Snaresbrook, a favourite choice for professional and affluent parents on London's eastern fringe. Nasser Hussain, the England cricket captain, was a school contemporary and others who knew Sheikh talk of a charming and highly intelligent boy who loved arm-wrestling and once competed in the professional world championships. He excelled at chess and his economics tutor George Paynter said of him: "A jolly good brain. Willing and capable."

Sheikh had a gift for mathematics and computers, something that would later take him to the top of Bin Laden's terror organisation. His Pakistani parents came to Britain in the 1960s. They established a prosperous East End clothing business, settling in a large house in Wanstead. At their showroom in the Commercial Road rag trade quarter Sheikh's brother Owais, 23, refused to say whether they were still in touch. He said: "The family's position is that we haven't made a comment about him. We will not be drawn on it."

In 1992, at 18, Sheikh achieved four Alevels; two at grade A and two at grade B. He was accepted at the London School of Economics and seemed set for a glittering career. A year later everything changed. Intelligence files show that during this period the LSE was targeted by Islamic extremists intent on recruiting students to the cause on Muslim revolution, who were linked to two organisations: Jaish-e-Mohammed and Al-Muhajiroun. A man who enrolled for a computer course is suspected of drawing Sheikh into extremism.

Through this individual, Sheikh joined an Islamic aid expedition to Bosnia where Christian Serbs were waging a cruel war against native Muslims. At that time, Bosnia was a magnet for idealistic young men from Islamic countries, fighting alongside the Bosnians and bringing in desperately-needed arms and supplies. It was also the scene of some of the worst horrors perpetrated in Europe since the Second World War. Sheikh returned a changed man. Friends remember he had grown a long beard and seemed withdrawn. He soon abandoned his studies and disappeared.

It is now known that in December 1993 he flew to Pakistan where he was enrolled into the Harkat-ul-Ansar militant group. It sent him with other recruits to a training camp at Khost in Afghanistan. This camp became an important headquarters in Bin Laden's al Qaeda organisation and when Sheikh graduated from covert warfare training he was assigned an important mission by terror chiefs running Islamic groups in Indian-occupied Kashmir.

He was barely 20 but he was about to demonstrate how effective he could be. The assignment was a tricky one; very risky and requiring a high level of treachery. The targets were three British tourists and an American, all on holiday in India.

The four travellers were charmed by the articulate and educated Briton who befriended them and invited them to stay with him at his house in Delhi. When they arrived armed men took them captive. They had been lured into a trap by the smiling young student.

Their new friend helped chain them to stakes driven into the ground. "We were kept like animals," one of the hostages, Briton Paul Ridout, said later. The hostages spent two weeks in captivity. At one point their captors threatened to behead them one by one if the Indian authorities did not release members of Islamic terrorist groups held in Indian jails.

The four Westerners feared they would never leave alive, but Indian police located the hide-out and staged a daring rescue. In a gun battle that lasted half an hour, Sheikh was captured, then he was shot in the shoulder during a scuffle with police guards. He spent five years in jail in India and would probably still be there if al Qaeda had not decided it needed him.

In December 1999 Islamic militants hijacked an Air India flight from Kathmandu to Delhi. In what was to become a blueprint for the 11 September Pennsylvania hijacking they slashed a passenger with knives and forced the others on the flight to watch him bleed to death.

The hijackers warned the Indian government that all 155 passengers and crew would die if their demands were not met. Uppermost among these was the release from jail of Sheikh. India caved in and flew him and two other militants to Afghanistan. The Air India Airbus was flown to Kandahar and the three terrorists were exchanged for the people on the hijacked plane.

Once inside Afghanistan Sheikh disappeared into Bin Laden's organisation, protected by the ruling Taliban regime of Mullah Mohammed Omar. Western intelligence agencies believe he was charged with setting up a coded e-mail system through which al Qaeda cells throughout the world could communicate.

This network was vital to Bin Laden's plans. He knew sophisticated electronic eavesdropping could intercept telephone line and wireless transmissions. It was vital that the cyphers held up against Western secret service code-breakers.

Only in the wake of the 11 September attacks were the security services able to track back this electronic traffic. It bears evidence that ties Sheikh firmly into the most trusted echelon of Bin Laden's operation. He has been clearly identified as a key player in the 11 September plan. It is now known that Sheikh took charge of $100,000 (about £71,000), raised as part of a ransom for millionaire shoe magnate Partha Roy Burman, kidnapped in India in July last year.

The money was smuggled to Sheikh through the underground Hawala system and he sent it on to the United States. The man who received it was Mohammed Atta, leader of Bin Laden's hijack gang.

Now, the security services believe, Sheikh, 28, is once again trying to raise money for al Qaeda, this time through the kidnap of American reporter Daniel Pearl. Mr Pearl disappeared in Karachi on 23 January while trying to make contact with militants linked to Bin Laden.

In a number of e-mails sent by the kidnappers a $2million ransom (about £1.4 million) has been demanded, along with the release of al Qaeda suspects held at the US camp in Guantanamo Bay, Cuba.

According to police in Pakistan a sophisticated trace on the e-mails and mobile phone traffic implicates Sheikh in the kidnap. His capture has become a top priority in the campaign against terror. Intelligence sources in Pakistan believe he is almost certainly trying to raise funds for another terrorist spectacular and the FBI is pouring resources into the hunt.

The FBI's chief, Robert S Mueller, has made a visit to the region to talk to security officials and dozens of American agents have been drafted in help locate 38-year-old Mr Pearl and track down Sheikh.

"While he is still out there," a source close to Pakistan's ISI military intelligence said, "no one can sleep easy."

Additional reporting by Nigel Rosser and Alex Hannaford.