As the body of Berg arrived back home, mystery surrounded not only his disappearance but also why he had been held by Iraqi police for about two weeks and questioned by FBI agents three times.
Berg's family disputed US officials' claims that he was never in US custody.
"The Iraqi police do not tell the FBI what to do, the FBI tells the Iraqi police what to do. Who do they think they're kidding?" Berg's father, Michael, told reporters from his home in a Philadelphia suburb on Wednesday.
The FBI said on Wednesday it learned on 25 March that Iraqi police had detained Berg. The agency said Berg told FBI agents he was in Iraq to acquire contracts for his communication towers business.
The intelligence agency said its agents emphasised the dangerous environment in Iraq and encouraged Berg to accept an offer from the Coalition Provisional Authority (CPA) in Iraq to facilitate his safe passage out of the country.
"Mr Berg refused these offers," the FBI statement said. "He also refused government offers to advise his family and friends of his status."
"The Iraqi police do
not tell the FBI what to do, the FBI tells the
Iraqi police what to do. Who do they think they're kidding?"
A family spokesman, however, rejected the suggestion that the 26-year-old Berg turned down a US offer to get him out of the country.
"The idea that they offered to get Nic out and he turned them down, knowing his life was in danger, I don't believe that," neighbour Bruce Hauser said.
On 5 April, nearly two weeks after Berg disappeared in Iraq, the family sued in a Philadelphia federal court and named US Secretary of Defence Donald Rumsfeld as responsible for their son's disappearance.
Berg was missing from 24 March until his release on 6 April, when he told his parents he had been detained by Iraqi police in Mosul. He disappeared again on 9 April after telling his parents he was looking for a safe way out.
Michael Berg (L) questioned
official US statements on his son
Dan Senor, spokesman for the CPA in Baghdad, said on Wednesday that Berg had not been in US custody before or after his arrest. But US authorities in Iraq are nominally in charge of Iraqi police and the military.
Senor said Berg was visited three times by the FBI for possibly suspicious activities, but determined he was "not involved in any criminal or terrorist activities".
The Berg family contend that their son had already intended to leave the country on 30 March but that his detention prevented him from doing so.
Berg first worked in Iraq in December and January and returned in March. He was inspecting communications facilities, some of which were destroyed in the war or by looters.
Berg, 26, was inspecting
communications facilities in Iraq
Michael Berg also told AP that Nicholas' paternal aunt, now deceased, married an Iraqi man named Mudhaffar, who became close to Nicholas. In one of the emails, Nicholas Berg describes going to the northern city of Mosul, where he had met Mudhaffar's brother, identified as Muwaffaq Mustafa.
"We got along splendidly," Berg wrote. "We spent a few hours and I helped him establish an email account."
Berg notes that "my presence ... made him more concerned (about his own safety and probably mine too) than I've been the entire time I've been here."
A website video on Tuesday showed a masked man cutting off Berg's head. Berg was dressed in orange Guantanamo-style overalls.
According to reports, the audio portion of the video, which was originally credited to the Muntada al-Ansar website,
claims the killing was in revenge for US torture and humiliation of Iraqi prisoners by US soldiers at the Abu Ghraib prison.
"I still hold him (Rumsfeld) responsible because if they had let him go after a reasonable time or given access to a lawyer we could have gotten him out of there before the hostilities escalated," Michael Berg told a US radio station on Tuesday.
Aljazeera.net cannot verify the source of the graphic video