CHICAGO The son of a Pakistani diplomat and an American night club owner, Mumbai terror suspect David Headley stands accused of using his Western upbringing to help him wreak havoc in the East.

Headley, 49, pleaded not guilty on Wednesday to charges that he helped plan the 2008 Mumbai attacks and plotted to attack a Danish newspaper that published cartoons of the prophet Mohammed.

A large man with greying hair and a relaxed manner, Headley stood tall in an orange prison jumpsuit after shuffling into a Chicago courtroom, his ankle shackles clinking.

He said little in his first appearance since his October 3 arrest, but court documents, the statements of family and former acquaintances and media reports paint a portrait of a double life led by a man with a troubled past.

Prosecutors allege that Headley is a fundamentalist who changed his name from Daood Gilani in 2006 so he could hide his Muslim and Pakistani identity and slip more easily into his American businessman cover story while scoping out targets.

He allegedly told investigators he had been working with Lashkar-e-Taiba (LeT) since 2002.

Headley, who raised four children with his Pakistani wife in a Chicago apartment, also reportedly had an American girlfriend in New York and dated a Bollywood actress while casing out targets in Mumbai.

'Most people have contradictions in their lives, but they learn to reconcile them,' William Headley, an uncle who owns a day care centre in Nottingham, Pennsylvania, told the New York Times.

'But Daood could never do that. The left side does not speak to the right side. And that's the problem.'

Headley was born in Washington in 1960, but his parents soon moved to Pakistan. The marriage eventually fell apart and his mother moved back to the United States without her son and daughter.

Serrill Headley bought a 100-year old tavern in 1973 and turned it into a popular bar called Khyber Pass, which she decorated with Pakistani wedding tents, the Philadelphia Inquirer reported.

Four years later, she managed to pull Headley out of a Pakistani military academy and bring him to Philadelphia, where his culture shock was described in the Inquirer.

'He has never been alone with, much less had a date with, a girl, except the servant girls of his household,' a 1977 column said.

'But he has just this day found a cricket team to join. And he has just this day, after watching American TV, said to his mother in his soft Urdu-English that she is to him like the Bionic Woman.'

While he reportedly had a rather wild adolescence, the young Headley also reportedly struggled with his mother's free lifestyle and began to express anger at all non-Muslims.

'He would clearly state he had contempt for infidels,' Lorenzo Lacovara, who worked with Headley at the bar before the family was forced to sell it, told the Times.

'He kept talking about the return of the 14th century, saying Islam was going to take over the world.'

Headley reportedly moved to New York in the late 1980's where he ran a video store and got involved in drug smuggling.

Headley was sentenced to 15 months in jail in 1997 for heroin trafficking, court records show, and the Times reported that he cut a deal with prosecutors in which he ended up going to Pakistan to conduct undercover surveillance for the US Drug Enforcement Agency.

Prosecutors said Headley is cooperating with the investigation into the Mumbai siege, which killed 166 people, and the plot to kill a Danish cartoonist and editor and attack their newspaper offices, but his lawyer declined to say whether he was working on a plea deal.

Headley could face the death penalty if convicted of all 12 charges laid against him.

His half brother Danyal Gilani - who works as a public relations officer in the Pakistani Prime Minister's office - insisted that his family had little contact with Headley.

'Because of his involvement with issues related to drugs my father wanted the rest of the family to stay away from his influence,' Gilani wrote in a statement.

He stayed in touch with his old friends from a military academy outside Islamabad, including Tahawwur Hussain Rana, who owns the Chicago-based First World Immigration Services that Headley allegedly used as a cover.

Rana has pleaded not guilty to charges of providing support to terrorism.

Both have been held in federal custody since their arrests.