Karzai's Brother Reportedly on CIA Payroll

Updated 2:28 p.m. EDT

The New York Times reported Wednesday that brother of Afghan President Hamid Karzai has been on the CIA payroll for at least eight years, according to American officials.

Ahmed Wali Karzai (at left) is a powerful figure in the southern Kandahar province with reported ties to Afghanistan's opium trade, which is owned and operated largely by the Taliban.

According to the Times' sources, who were not named, Karzai has received "regular payments" from the American foreign spy agency in exchange for his organizing a paramilitary force in Kandahar which operates at the CIA's behest.

Allegations that Karzai is involved in the drug trade have circulated in Kabul for months.

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But Karzai denied the reports, calling them "ridiculous."

"I work with the Americans, the Canadians, the British, anyone who asks for my help. They (CIA) do their own recruitment. I have no idea where they get their recruits. It's absolutely ridiculous," he told The Associated Press in Afghanistan.

The American government's alleged clandestine partnership with such a controversial figure, reports the newspaper, has complicated President Obama's decision on how to alter the U.S. war strategy in the country and created divisions within Mr. Obama's administration.

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As the senior U.S. military intelligence official in Afghanistan, Maj. Gen. Michael T. Flynn, told The Times: "If we are going to conduct a population-centric strategy in Afghanistan, and we are perceived as backing thugs, then we are just undermining ourselves."

White House spokesman Robert Gibbs refused to confirm, comment on or directly pass judgment on Karzai's relationship with the CIA, but suggested the Obama administration would not endorse that sort of arrangement.

"This administration is, as you know, conducting a comprehensive assessment as to where we are. And every participant in any meeting that's happened here as part of that assessment understands that we have to have and must have a partner that addresses governance issues as we move forward," Gibbs said Wednesday.

Speaking Wednesday to CBS "Early Show" co-anchor Harry Smith, Sen. John McCain, R-Ariz., said he had "heard that rumor before," and criticized the alleged cooperation with such a controversial figure.

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"I'm sure our military commanders there will disagree with it," said McCain, adding that it reveals a "possible lack of communication" between American military and intelligence operations in the Afghanistan.

"Karzai's brother should not be in the country," McCain added bluntly.

CBS News security analyst Juan Zarate told Smith that the timing of the New York Times report, "couldn't have been worse for the Obama administration."

"This undercuts any legitimate argument we were making about corruption in the Karzai regime," added Zarate.

According to the Times' report, Ahmed Wali Karzai has acknowledged cooperation with American officials, but denies receiving any payment from the Central Intelligence Agency, or involvement in the country's booming narcotics business.