The report in the Wall Street Journal quotes but does not name a person who claims to have knowledge of negotiations over Uday's possible surrender.
Uday, according to the story, is conducting talks with U.S. forces through intermediaries, apparently discussing the terms of his confinement and incarceration. The No. 3 most wanted Iraqi leader, Uday may fear reprisals by Iraqi citizens and feel safer in U.S. custody.
But the commander of U.S. ground forces in Iraq said Friday he knew of no negotiations being held with envoys of Saddam Hussein's eldest son but insisted that any surrender of Uday Hussein would have to be "unconditional."
"Nobody's brought an offer from Uday to me, and I would facilitate his coming on in. But it would be unconditional," McKiernan said at a briefing in Baghdad.
"There are no negotiations," he said. "There is a lot of (intelligence), there's a lot of reports that we follow up on on locations but there are no negotiations going on. Nor would there be."
McKiernan's comments contradict the Journal report, which said U.S. commanders are not rushing into a deal because they are confident they will find Uday, as they have found around 20 of the top 55 former regime leaders they seek. Others have surrendered.
One member of the list, Ali Hasan "Chemical Ali" Al-Majid is believed to have been killed in an airstrike.
Additional Iraqi elites not on the list of 55 are also in U.S. custody.
The unnamed source also tells the Journal that Saddam may have taken $1 billion in gold from the Iraqi central bank, in addition to the $1 billion in cash said pilfered by his sons. It claims that Saddam's mental health is in doubt.
Uday was the commander of the Saddam Fedayeen militia and headed Iraq's Olympic committee. He brother Qusay, who supervised the country's feared Special Security Organization and held a top Baath party post, is also wanted.
Uday is reputed to have tortured athletes who did not perform well, along with friends, schoolmates and women in whom he was romantically interested, CBS News Reporter Lisa Barron reports.
In the deck of cards used by U.S. Central Command to illustrate their hunt for Iraqi officials, Uday is the ace of hearts and Qusay is the ace of clubs.
Coalition forces have captured two more members of the top 55 list this week, bringing the total in custody to 25.
On Thursday, they busted Aziz Salih al-Numan, No 8 on the list, a Baath party commander who ran Kuwait after the 1990 Iraqi invasion and may have taken part of the brutal repression of the 1991 Shiite uprising. According to the Journal, he is one of a select list of nine leaders who faces possible war crimes charges.
Coalition forces said Monday they captured a Saddam brother-in-law, Luay Khayrallaha, who was taken into custody Friday.
He is the brother of Saddam's wife, a companion of Uday, and a representative of the former regime's intelligence and security apparatus, Central Command said in a statement.
Defense Secretary Donald H. Rumsfeld has said there is a list of some 200 former regime officials who coalition troops are looking for.
CEBTCOM has said they hope the Iraqis in custody — which include high-ranking figures like Deputy Prime Minister Tariq Aziz and science adviser Amir al-Saeed — would help them accomplish two avowed goals of the Iraq mission: bringing Saddam to justice and locating weapons of mass destruction.
The status of Saddam, whom U.S. warplanes twice tried to kill, is unknown. So far, Iraqi leaders in custody have maintained that Iraq had no weapons of mass destruction, according to published reports.