Eurico Guterres, leader of the Aitarak anti-independence militia, was made the head of a clandestine military-funded organisation earlier this year and supplied with guns and money, a source said yesterday.
Mr Guterres had been made a member of the Gada Paksi soon after it was created in 1994 by former president Suharto's son-in-law, Prabowo Subianto, under the direction of the army's Kopassus special forces.
The organisation's goal was to infiltrate the youth of East Timor, said the source, formerly a senior leader of anti-independence forces in East Timor.
Former Indonesian general Subianto provided a budget of 500 million rupiah (HK$450,000) to start the organisation, the source said.
The organisation helped young people set up small businesses at the same time as providing military and intelligence training in Jakarta.
In January this year, regional military commander General Adam Daimari - like Mr Guterres a target of United Nations human rights investigators - met Mr Guterres, made him leader of the Gada Paksi and offered him 50 million rupiah to re-organise the group, the source said.