Can you please explain this error to me?

J.Shi
Sat, 22 Jul 2006 19:36:28 +0000

The original sentence is:

Two coast guard crew were dispatched to check an anonymous informant’s warning, and he had observed a boatload of illegal immigrants approaching Florida’s west coast.

The choices are:

…check the warning of an anonymous informant that he had observed…

or

…check the anonymous informant’s warning saying he had observed…

Which one is the correct correction? And why?