Paul Toohey, Dili – East Timor is a changed land, with what remained of its simple innocence lost the moment gunmen opened fire on its most revered statesmen.

These leaders – particularly President Jose Ramos Horta – liked to move among the poor, touching them, talking to them, reassuring them that they would never be forgotten. All that is gone. There is no one left to trust.

There are many different versions of what happened on Monday morning. Prime Minister Xanana Gusmao has gone for the simplest.

He yesterday said he could, under other circumstances, imagine that Major General Alfredo Reinado may not have intended to kill the President – except for the fact that on this occasion there was another group of men waiting to ambush him as he drove to his Dili office in a motorcade. "It was a well-co-ordinated attack," said Gusmao.

But the story has taken a deeply sinister turn, with Ramos Horta's brother-in-law, Joao Carrascalao, claiming that both the President and Reinado were set up and attacked by, it would seem, sections of the army, or F-FDTL. The suggestion is that the Australian-led International Security Force, trying to track down two groups of Reinado's men, are looking for the wrong people.

Despite Gusmao's confidence that this was a double assassination attempt by Reinado's group – a view he is certainly entitled to, given his vehicle was shot up by renegades – virtually no one in East Timor believes it.

Not even Reinado, an accomplished big-mouth who liked to taunt the Government in media interviews and his own DVD propaganda releases, seemed capable of an act of such outright stupidity.

The semi-official version is that Ramos Horta was on his early-morning run. Reinado and his offsider, Leopoldino, entered the presidential compound and were shot dead by the F-FDTL guard.

As Ramos Horta returned with his bodyguards, they came upon the remainder of Reinado's men – four or five of them – who were concealed in the deep open storm drain outside the front gate of the compound. The group turned their weapons on the President and started firing.

What does seem clear is that Reinado and Leopoldino were shot early in the raid – if it was a raid. Most East Timorese, from senior government ministers to the ordinary but news-aware street people, are convinced it was a set-up.

Carrascalao, an MP, is married to Ramos Horta's sister, Rosa. Her brother, Arsenio, was in the compound when the shooting started.

"The sequence is this," Carrascalao says. "My bother-in-law Arsenio rang my wife from the compound saying there was shooting. My wife then immediately rang Jose Ramos Horta on his morning walk. Jose told her that he heard some shooting in the direction of the house and he was going back to investigate. He had one bodyguard with him."

Why this bodyguard did not prevent his President from walking into a gun battle is somewhat mysterious, but it may be as simple as the fact that Ramos Horta had relatives inside and could not be prevented from approaching.

Carrascalao continues: "Arsenio rang again a few minutes later saying, 'Jose is wounded'. My wife rang the hospital and they dispatched an ambulance. It did not come to him straight away.

"I have another niece that lives at Balide (about a 15-minute drive from Ramos Horta's compound). She tried to go to the house but outside the Hotel California (on the coast road near the Ramos Horta residence), the UN police tried to prevent her from proceeding. Someone – I don't know who – had rung the UN police. They stayed about 300-400m away. They didn't go in. They were even trying to prevent the ambulance from entering."

Carrascalao says the ambulance finally ignored the UN guard and proceeded through to the villa.

"Jose didn't know Reinado was coming,' Carrascalao says. "Not at all. He was very confident he was going to resolve the problem (of the renegade major taunting the Government after fleeing prison following the laying of murder charges). He would talk to Reinado any time but he would never invite Reinado to his house. I can go there unannounced, but he's my brother-in-law. It's a private house."

Carrascalao does not believe Reinado went to kill the President. "I personally don't think someone who had military training would ever prepare something to kill Jose in that way. I'm not a military man but I don't think they would do it. I think – I can speculate – I think they were both ambushed. I think both Jose and Reinado were tricked."

One of Horta's guards told The Weekend Australian on the day of the attack that Reinado's band disarmed the guards at the front gate. All the men were wearing balaclavas except for Reinado. Reinado and Leopoldino prowled the compound, finding a house lady and demanding to know where Ramos Horta's bedroom was. They kicked in the door and were engaged by guards and shot dead.

One suggestion is that Reinado had been told Ramos Horta wanted to see him. When he arrived at the front gate and was told Ramos Horta was not there, the self-important Reinado stormed in and demanded his promised audience.

Carrascalao points to the fact that the President was shot in the back as he walked up the hill towards Reinado's men hiding in the storm drain.

"Jose was shot in the back. He was not running away. The shots came from behind. The indications are that it was not Reinado's men who shot him – it was a set-up. There was another group laying in wait, across the road."

Carrascalao says there is no doubt Reinado and Leopoldino were shot inside the compound, by F-FDTL guards using machine-guns. In short, he believes Reinado was summoned to the scene, by someone, to set him up for killing his brother-in-law, the President. "I think someone had told Reinado to come down and meet Horta. That is my personal belief.

Knowing Jose, knowing how punctual he is, he would never leave the house without keeping an appointment." He also suggests it is possible that Reinado's own balaclava-clad colleagues may have led him into the trap.

As for the ambush on the Prime Minister, Carrascalao believes it was part of a co-ordinated attack but says: "By whom I don't know."

Carrascalao is a free-speaking man. If he thought Reinado's men had tried to kill the President, he would have little hesitation in saying so.

The ISF has for the past three days been prowling the hills above Dili looking for 18 men who it is believed are associated with Reinado's band. One of them is second-in-command, Lieutenant Gastao Salsinha, who is accused of leading the prime ministerial ambush. He insisted to The Weekend Australian several days ago that he had nothing to do with it. Given he is being hunted, he might well say that.

But if you wind back to the start of this problem, in April 2006, when Timor was torn by rioting and mutiny within the armed forces, it was Reinado and Salsinha who abandoned their roles in a protest against the violent actions of the army they were serving in.

Even when Reinado came down from the hills in 2006 and was involved in a gun battle with the army, which saw him charged with murder, vision of the encounter showed him repeatedly warning the army soldiers approaching him that he didn't want to kill them.

Reinado may have seen himself as a freedom fighter, but he never seemed like a cold-blooded killer.