Wali Karzai is described in the documents as "receives money from drug lords as bribe to facilitate their work and movement."
The documents, marked secret, appear to be part of a "U.S. military targeting assessment" produced in January 2005. The documents were downloaded from a computer flash disc sold at an Afghanistan street bazaar for $200.
Nine other prominent Afghanis are also listed as "problem makers" for a variety of reasons, including connections to opium drug lords.
Wali Karzai strongly denied the allegations in an interview with ABC News today in Kandahar.
"I was never in the drug business, I never benefited, I never facilitated, I never helped anyone with the transportation of any kind," he said.
There had been previous speculation of the presidential brother's alleged connection to drugs, but the U.S. military documents are the first indication of how seriously the charges are taken by American officials.
A Pentagon spokesman declined to comment on the content of the documents although one official said, "They do appear to be genuine."
The Los Angeles Times reported on similar documents discovered in a street bazaar in April, but did not report the allegations about Karzai.
U.S. officials say they continue to investigate how sensitive documents ended up in the street bazaar.
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