Who's telling the truth? Saadia or Kematu?

Solution 1:

The purpose of this quest I think is to make you question which is the right option to take.

It is intentionally unclear.

My logic was this:

The Alik'r were shunned by Whiterun, that's saying something. Perhaps they have a bad reputation for being dirty mercenaries.
It is more likely that an individual spoke out against an organization rather than one individual causing the fall of Taneth.
- The Aldmeri have always been able to win fights without the assistance of individuals, especially noble women, who may or may not have access to military secrets.
If she had caused the downfall of Taneth, why would she hide outside of Aldmeri territory? She could be easily protected elsewhere.

I did see this though:

If you accept Kematu's request and help him capture Saadia, you may encounter a group of Thalmor Justiciars in the wild that carry a Justiciar Execution Order with your race and name. This may indicate that Kematu might have been telling the truth and that Saadia truly was a traitor (source needed, Justiciar Execution Orders are normally issued because of the assault on the Thalmor Embassy in the main questline).

Source: http://elderscrolls.wikia.com/wiki/In_My_Time_of_Need

Solution 2:

Kematu might be telling the truth

The first time you talk to Saadia, she pulls a knife on you. While this may seem like an act of desperate defiance, it may hint at a violent and unpredictable personality.
Saadia seems hesitant to explain the full situation, while Kematu elaborates on it fully. Is Saadia's reticence due to her guilt?
The man you can free from jail seems strangely honourable, saying he has shamed his companions and wants to begin anew.
If Kematu really was an assassin, why paralyse her at the end of the quest - why not just stab her and be done with it? He also mentions justice, and taking her into custody, and implies that Saadia will face a trial back in Hammerfell rather than swift execution. All this points to him and his warriors being enforcers rather than assassins.
Kematu's opening line - "We can avoid any more bloodshed." And his closing lines which imply that Saadia is known for her manipulation of people.
The in game book The Great War refers to Alik'r warriors harassing the Aldermi Dominion forces as they retreated. This would make the dominion hiring them most strange. It is then important to consider this: Is hiring Redgaurd assassins the style of the Dominion? They have a certain level of free reign within the Empire. Why would they need to hire human assassins to kill someone? They have the Justiciars doing that for the Thalmor.
Saadia specifically wants you go and kill Kematu. Why does she want that? The Alik'r are not allowed in the city, so for now she is perfectly safe.

For these reasons I almost always end up siding with Kematu.

Solution 3:

I've done this quest both ways.. and I am now convinced the Alik'r are lying.. I just happened to visit the hall of the dead in white run, after helping the Alik'r and what do I find Saadia's burial Urn. She was supposed to be taken alive back to Hammerfell.

Solution 4:

Facts point to Saadia lying about Alik'r cooperating with the Aldmeri Dominion...

I will base this claim not on what Kematu or Saadia has said or done as a person (which might be subjective) but on hard facts.

My assumptions:

Kematu is an Alik'r warrior.
"The Great War" chronicle accurately depicts the events that unfolded during the war between the empire and the Aldmeri dominion.

Having those assumptions out of the way here are some history facts from "The Great War":

Skyrim begins at 4E 201
In 4E 174 (27 years prior to Skyrim)

General Decianus was preparing to drive the Aldmeri back from Skaven when he was ordered to march for Cyrodiil. Unwilling to abandon Hammerfell completely, he allowed a great number of "invalids" to be discharged from the Legions before they marched east. These veterans formed the core of the army that eventually drove Lady Arannelya's forces back across the Alik'r late in 174, taking heavy losses on their retreat from harassing attacks by the Alik'r warriors.

We learn that General Decianus left some troops behind referred to in the book as "Alik'r warriors" who kept battling the Aldmeri Dominion when Decianus had to heed the call of emperor Titus Mede II to march to Cyrodiil.

In 4E 175 (26 years prior to Skyrim)

The Emperor encouraged [The Aldmeri Dominion] in their belief that he was preparing to surrender; meanwhile, he gathered his forces to retake the Imperial City. [...] One army, with the legions from Hammerfell under General Decianus, was hidden in the Colovian Highlands near Chorrol.

We learn that General Decianus was directly involved in the retaking of the Imperial City during the Battle of the Red Ring.

In 4E 175 at the end of the war

In the end, the main Aldmeri army in Cyrodiil was completely destroyed. The Emperor's decision to withdraw from the Imperial City in 4E 174 was bloodily vindicated. Lord Naarifin was kept alive for thirty-three days, hanging from the White-Gold tower. It is not recorded where his body was buried, if it was buried at all. One source claims he was carried off by winged daedra on the thirty-fourth day.

We learn that Lord Naarifin a general of the Aldmeri Dominion was gibbeted at the end of the retaking of the Imperial City.

In 4E 175 the White-Gold Concordat is signed.

Empire and the Aldmeri Dominion signed the White-Gold Concordat, ending the Great War. [...] Hammerfell, however, refused to accept the White-Gold Concordat, being unwilling to concede defeat and the loss of so much of their territory. Titus II was forced to officially renounce Hammerfell as an Imperial province in order to preserve the hard-won peace treaty. The Redguards, understandably, looked on this as a betrayal.

We learn that the Redguards refuse to accept the treaty (and are expelled from the empire) and continue to wage war with the Aldmeri Dominion.

In 4E 180 (21 years before Skyrim)

In the end, the heroic Redguards fought the Aldmeri Dominion to a standstill, [...] to allow the eventually Second Treaty of Stros M'kai in 4E 180 and the withdrawal of Aldmeri forces from Hammerfell.

We learn that the Aldmeri Dominion were eventually forced to widthdraw from Hammerfell as the war lead to a standstill. Although not explicitly mentioned, judging by the White-Gold Concordat I doubt that the treaty of Stros M'kai left the Aldmeri Dominion empty handed (which might explain Kematu saying that the resistance in Hammerfell is still ongoing).

My Conclusions - Feel free to make your own based on the given facts

I doubt that 21 year is enough to clear up all the bad blood between the altmer and the redguards especially with the redguards being involved in gibbeting one of their more famous generals.
Even though the Aldmeri Dominion could have control over part of Hammerfell after the treaty, I doubt that they would be able to employ Alik'r who were part of the Hammerfell military during the war just a few decades ago.
Since Aldmeri Dominion justiciar parties are freely roaming throughout Skyrim (prisoners in tow), hiring a third party to do the same job seems questionable.
It makes sense that Alik'r warriors are turned away everywhere because they are seen as a military unit of Hammerfell which is no longer part of the empire, having a non-empire military unit march through a city could be seen as potentially dangerous, provocative and bearing heavy implications politically.
Kematu asks you to meet him in Rorikstead. Rorik himself is an old war dog who fought in the Great War. Since he himself has most likely fought alongside redguards from Hammerfell, he might have allowed them to stay in his town as fellow veterans of war. I doubt that Rorik (having fought against the Aldmeri Dominion) would let them stay in his town if he had any suspicions about them making deals with the Thalmor.

Solution 5:

The game doesn't tell us who is right here, so we're stuck with the dilemma people face in real life: we have to make the best choice with the information we have.

Ultimately, my decision is to side against the Alik'r (note that is not the same thing as siding with Saadia):

they have been causing trouble in Whiterun, to the point of getting thrown out and/or arrested
the Alik'r out searching refuse to give any reasons for hunting Saadia
they don't have any sort of official documentation of their hunt
they have been harassing Redguard women who are travelling throughout Skyrim
they are operating from a bandit hideout

All of the hard evidence is against the Alik'r acting in an acceptable or legitimate fashion, with only Kematu's honeyed words suggesting otherwise. Furthermore, they have already been instructed to cease their activities. As Thane of Whiterun, it is the dragonborn's duty to eliminate the Alik'r for their continued activities against Whiterun hold.