Pakistani police say a round-the-clock hunt for kidnapped American reporter Daniel Pearl is making "significant progress" and a British-born Islamic militant freed by India in a hijacking two years ago has emerged as a key suspect.

The suspect, Ahmad Omar Saeed Sheikh, also known as Sheik Omar Saeed, attended private schools in Britain and later became involved with Islamic militants. He was jailed for five years in India for kidnapping three British tourists in Kashmir.

Now Pakistan police believe Saeed is the key figure in the abduction of Pearl, the 38-year-old Wall Street Journal reporter last seen Jan. 23 when he went to meet a Muslim extremist at a popular Karachi restaurant. Pearl apparently never made it: restaurant employees say they do not remember seeing him that night.

Police seeking to crack the case before President Pervez Musharraf visits Washington next week say a breakthrough came Tuesday with the arrests of three men in connection with e-mails sent last week that included photos of Pearl in handcuffs. The messages also contained demands for the return to Pakistan of prisoners held at the U.S. base in Guantanamo Bay, Cuba.

One of the men claimed he received the pictures from Saeed, police said. Police raided houses in the eastern city of Lahore and detained some of Saeed's relatives — a common tactic in Pakistan meant to pressure suspects into surrendering. Saeed remains at large, but police say they are closing in on him.

"All I can tell you is that we are making, we have made, significant progress, and we hope to recover him soon," Karachi Police Chief Sayed Kamal Shah said Wednesday.

"We are doing our best. We are working day and night, around the clock. When I say around the clock I really mean it. We hope to (resolve) the case soon, Inshallah (God willing)," Shah said.

Saeed, who was born in the East End of London, has been linked to two militant groups — Jaish-e-Mohammed and Harkat ul-Mujahedeen. The United States considers both groups to be terrorist organizations with links to Usama bin Laden's Al Qaeda terror network.

Saeed, 27, was shot during his 1994 arrest in India in connection with the Kashmir kidnapping, undertaken to demand the release of Islamic militants fighting Indian rule in the contested Himalayan region. The three British backpackers were freed unharmed.

Although never brought to trial, Saeed spent the next five years in jail. India released him along with two other Islamic militants on Dec. 31, 1999, in exchange for passengers on an Indian Airlines jet hijacked to Kandahar, Afghanistan.

George Paynter, who was Saeed's economics tutor at Forest School in Snaresbrook, East London, said Wednesday he was horrified by his former pupil's suspected involvement in Pearl's abduction.

"It is very difficult for us to understand because it isn't the Omar we knew," Paynter said. "He was a nice bloke and very respectful."

Another key suspect — Mohammed Hashim Qadeer — is believed to be a member of Harkat-ul Mujahedeen. Qadeer's family claims he was killed in Afghanistan, but police remain skeptical and say he was one of Pearl's contacts in the Islamic militant movement.

Jameel Yousuf, head of Karachi's police-citizens liaison committee, said he believed Pearl was trying to arrange an interview with Sheik Mubarak Ali Shah Gilani, leader of a small religious movement.

Pearl met Yousuf shortly before he left for his appointment at the restaurant. Yousuf believes Saeed laid a trap for Pearl.

"Dan asked only to meet Gilani. This way a trap was laid. Everyone thinks you are going to meet 'a' and 'b' takes you," Yousuf said.

Pearl had been working on various stories, including possible links between Pakistani groups and Richard C. Reid, accused of trying to blow up an American Airlines plane with explosives hidden in his sneakers. Reid was overpowered by flight attendants and other passengers during the Dec. 22 flight from Paris to Miami.

Yousuf said Pearl indicated he'd found evidence that Reid e-mailed someone in Pakistan, apparently seeking instructions, after he missed his first flight to the United States.