Musharraf, who was president when Bhutto was assassinated in December 2007, was spotted dancing at the 'mehndi' ceremony of his wife Sehba's friend's niece at a restaurant at Jericho Turnpike in Long Island just a day after the UN commission submitted its report on April 15.
He told his friends at the ceremony that the UN panel's report was "simply a bunch of lies", The News reported on Monday.
At about 11 pm, Musharraf was invited to the dance floor and he was seen shaking a leg to the beat of a Pakistani 'dhol' (drum).
"I now believe (the) stories about Musharraf, that he would dance with a full glass on his head with such perfection that not a single drop would fall out of the glass," said one guest, who witnessed Musharraf's dance.
Boota Shaikh, who played the dhol, said Musharraf had danced during the mehndi ceremony at his request. Shaikh praised Musharraf for making the event memorable.
"Musharraf sahab and Begum sahiba were so happy that they even gave me money and I am thankful to them," he said.
An unnamed friend of Musharraf said the former president was "not scared" following the release of the UN commission's report.
The friend said it was "absurd" to think that Musharraf was behind the killing of Benazir Bhutto.
The ruling Pakistan People's Party's top leadership has decided to take "appropriate legal actions" against all persons, including Musharraf, named in the UN commission's
report as being responsible for the assassination of Bhutto.
Musharraf has not yet publicly commented on the UN report.
What do experts say?
Legal proceedings against Musharraf cannot be initiated merely on the basis of a UN panel's report holding him responsible for lapses that led to the assassination of Benazir, Pakistani legal experts have said.
Experts say the UN's commission's report has neither absolved anyone nor held anyone criminally responsible for the killing of Bhutto, the former chairperson of the ruling Pakistan People's Party.
The report is based on interviews and not on a criminal investigation, the experts said. The report also did not specifically fix responsibility on anyone as this was not the mandate of the UN panel, they added.
The PPP's top leadership has asked Prime Minister Yousuf Raza Gilani to take "appropriate legal actions" against all persons, including Musharraf, who have been named in the UN panel's report as being responsible for the assassination of Bhutto.
Law Minister Babar Awan, a close aide of President Asif Ali Zardari, has even said that steps will be taken to bring Musharraf back to Pakistan.
The former president left the country a year ago and is currently living in self-exile in Britain.
However, leading legal expert Ahmer Bilal Sufi said the government "cannot even request the Interpol to issue red corner notices for Musharraf" on the basis of the UN panel's report as no criminal case has been registered against the former military ruler in Pakistan or elsewhere.
"No legal action can be initiated even against the seven officials who were made Officers on Special Duty (and removed from their current posts) yesterday in the light of the findings of the UN report," Sufi said.
He was referring to action taken by authorities against five senior police officials and one civil official who were involved in the investigation of Bhutto's assassination in December 2007.
"The UN commission's report has not fixed criminal responsibility. Inaction on the part of Musharraf's government in providing security to Bhutto is not tantamount to committing a criminal offence," Sufi said.
Sufi, an expert on international laws, further said there is a need to initiate a criminal investigation in order to try Musharraf or other persons.
"However, the report has benefited President Zardari and the PPP-led government to put pressure on the army," he said. The report will now remain an issue with the UN.
"The UN commission has been disbanded and its report been submitted to the UN Security Council," Sufi added.