CHICAGO—Confessed terrorist David Coleman Headley was so eager to cooperate after his 2009 arrest that he worked with FBI agents to try to engineer the capture of a suspected mastermind of the 2008 Mumbai attacks and proposed setting up another kingpin for a missile strike, according to testimony in federal court Tuesday.

Headley, a Pakistani-American businessman who has pleaded guilty in the Mumbai case and a plot against Denmark, testified that during two weeks of interrogation in October 2009 he worked with FBI agents to try to lure Sajid Mir, a member of the Lashkar-i-Taiba militant group and a suspected mastermind of the Mumbai attack, out of Pakistan so he could be arrested. The attempt failed, Headley testified, and Mir remains a fugitive.

Headley also offered to travel undercover to the tribal areas of Pakistan and present Ilyas Kashmiri, an al-Qaida-connected leader indicted in the Denmark plot, with an ornate sword that Headley suggested could be outfitted with a homing device to set up a U.S. missile attack, according to his testimony.

Headley revealed Tuesday that Kashmiri wanted to assassinate the chief executive officer of the Lockheed Martin Corp, which he said manufactures the Predator drone, as retaliation for the missile strikes that have killed scores of militants in Pakistan. (Lockheed does not, in fact, make the Predator drone. But it does make the Hellfire missiles it uses.)

“Kashmiri was working on a plan,” Headley testified. “He said he knew people who had already done surveillance. And he asked if weapons were available in the U.S.”

Headley, who did not further describe the details of the plot, met with Kashmiri twice in Pakistan in 2009, according to his confession. Officials with the FBI and the Justice Department declined to comment on Headley’s mention of a plot targeting Lockheed CEO Robert J. Stevens. Lockheed officials also declined comment, citing a policy of not discussing specific threats against the company.

Kashmiri was behind a plan last fall to carry out Mumbai-style shooting attacks in Britain, France, Germany and Denmark, counter-terror officials say. Kashmiri has a far-flung network and is one of the most feared terrorist leaders today, especially in the vacuum left by the killing of Osama bin Laden. But it would be a new and troubling development if Kashmiri had directed operatives to work on a bona-fide plot to assassinate a prominent figure in the United States.

Tuesday was Headley‘s last day as the star witness against his boyhood friend Tahawwur Rana, who is charged with material support of terrorism for allegedly aiding Headley’s reconnaissance in Mumbai and Denmark. The trial has drawn international attention because of Headley’s account of a close alliance between Lashkar and Pakistan’s Inter-Services Intelligence Directorate (ISI) and his allegations that Pakistani officers helped plan the Mumbai attacks, which killed 166 people, six of them Americans.

During cross-examination, Headley testified that he did not think the top brass of the Pakistani spy agency knew about the Mumbai plot, which he said was planned by his ISI handler, known only as Major Iqbal, in coordination with Lashkar chiefs.

“My belief is that all of ISI did not know,” Headley said. “I would imagine [Major Iqbal’s] colonel would know it. And the group he belonged to.”

That testimony tracks with Headley’s statement to Indian investigators last year that the director general of the ISI, Ahmed Suja Pasha, had been surprised by the attacks. Pasha visited Lashkar’s jailed military chief in 2009 to learn more about the plot, Headley told Indian investigators.

Pakistani officials deny any ISI involvement in the attacks. Some U.S. officials believe only a few mid-level Pakistani officers took part. But other U.S. officials—and Indian government leaders—have said the scope of the plot makes it hard to believe that top spymasters did not approve of the operation. Western counter-terror officials say the ISI’s leadership gives individual directorates considerable autonomy and that some retain close alliances with Lashkar and other militant networks.

Tuesday’s cross-examination featured excerpts of Headley’s videotaped interrogation by FBI agents after his arrest in October 2009. In contrast to his restrained demeanor on the stand, Headley was animated, almost frantic, as he told the agents he wanted to help them make arrests in the case, the video showed.

During the two-week interrogation after his arrest, he worked with the agents to communicate with Mir in a failed attempt to draw the suspected Lashkar mastermind out of Pakistan and enable his arrest, according to his testimony. He also offered up a German extremist he knew and proposed a rather fanciful scheme to set up Kashmiri for a missile strike by giving him a gift containing a homing device. Headley said he told the agents he knew he needed a “home run” or a “Hail Mary pass” because he was facing the death penalty.

Headley denied the defense’s assertion that, after insisting for days that Rana was innocent, he changed his story and falsely implicated his old friend out of desperation. He also endured a withering series of questions in which Patrick Blegen, Rana’s lawyer, accused him of lying repeatedly to prosecutors, judges, his wife, Rana and others during the case and in the past.

Although Headley had stated under oath that he had never been treated for a mental disorder, Blegen confronted him with evidence that he had undergone psychological treatment and been diagnosed in 1992 with mixed personality disorder. That condition combines symptoms of several disorders and generally involves difficulty in controlling impulses, using judgment and dealing with other people.

The prosecution is expected to wrap up its case against Rana tomorrow with testimony from FBI agents and civilian experts.

ProPublica’s Sergio Hernandez contributed to this report.