A helicopter belonging to a security contractor hovers above Iraqi skies in this file photo. Image Credit: AP

Washington: A federal judge cited repeated government missteps in dismissing all charges against five Blackwater Worldwide security guards accused of killing unarmed Iraqi civilians in a case that inflamed anti-American sentiment abroad.

US District Judge Ricardo Urbina dismissed the case against the guards accused of the shooting in a crowded Baghdad intersection in 2007.

The shooting in busy Nisoor Square left 17 Iraqis dead. The Iraqi government wanted the guards to face trial in Iraq and officials there said they would closely watch how the US judicial system handled the case.

Urbina said the prosecutors ignored the advice of senior Justice Department officials and built their case on sworn statements that had been given under a promise of immunity.

Urbina said that violated the guards' constitutional rights. He dismissed the government's explanations as "contradictory, unbelievable and lacking in credibility."

"We're obviously disappointed by the decision," Justice Department spokesman Dean Boyd said. "We're still in the process of reviewing the opinion and considering our options."

Prosecutors can appeal the ruling.

Blackwater contractors had been hired to guard US diplomats in Iraq. The guards said insurgents ambushed them in a traffic circle. Prosecutors said the men unleashed an unprovoked attack on civilians using machine guns and grenades.

The shooting led to the unraveling of the North Carolina-based company, which since has replaced its management and changed its name to Xe Services.

The five guards are Donald Ball, a former Marine from Utah" Dustin Heard, a former Marine from Tennessee" Evan Liberty, a former Marine from New Hampshire" Nick Slatten, a former Army sergeant from Tennessee, and Paul Slough, an Army veteran from Keller, Texas.

Defense attorneys said the guards were thrilled by the ruling after more than two years of scrutiny.

"It's tremendously gratifying to see the court allow us to celebrate the new year the way it has," said attorney Bill Coffield, who represents Liberty. "It really invigorates your belief in our court system."

"It's indescribable," said Ball's attorney, Steven McCool. "It feels like the weight of the world has been lifted off his shoulders. Here's a guy that's a decorated war hero who we maintain should never have been charged in the first place."

The five guards had been charged with manslaughter and weapons violations. The charges carried mandatory 30-year prison terms.

Urbina's ruling does not resolve whether the shooting was proper. Rather, the 90-page opinion underscores some of the conflicting evidence in the case. Some Blackwater guards told prosecutors they were concerned about the shooting and offered to cooperate.

Others said the convoy had been attacked. By the time the FBI began investigating, Nisoor Square had been picked clean of bullets that might have proven whether there had been a firefight or a massacre.

The Iraqi government has refused to grant Blackwater a license to continue operating in the country, prompting the State Department to refuse to renew its contracts with the company.

In a statement released by its president, Joseph Yorio, the company said it was happy to have the shooting behind it.

"Like the people they were protecting, our Xe professionals were working for a free, safe and democratic Iraq for the Iraqi people," Yorio said. "With this decision, we feel we can move forward and continue to assist the United States in its mission to help the people of Iraq and Afghanistan find a peaceful, democratic future."

The case against the five men fell apart because, after the shooting, the State Department ordered the guards to explain what happened. In exchange for those statements, the State Department promised the statements would not be used in a criminal case. Such limited immunity deals are common in police departments so officers involved in shootings cannot hold up internal investigations by refusing to cooperate.

The five guards told investigators they fired their weapons, an admission that was crucial because forensic evidence could not determine who had fired.

Because of the immunity deal, prosecutors had to build their case without those statements, a high legal hurdle that Urbina said the Justice Department failed to clear. Prosecutors read those statements, reviewed them in the investigation and used them to question witnesses and get search warrants, Urbina said. Key witnesses also reviewed the statements and the grand jury heard evidence that had been tainted by those statements, the judge said.

The Justice Department set up a process to avoid those problems, but Urbina said lead prosecutor Ken Kohl and others "purposefully flouted the advice" of senior Justice Department officials telling them not to use the statements.

It was unclear what the ruling means for a sixth Blackwater guard, Jeremy Ridgeway, who turned on his former colleagues and pleaded guilty to killing one Iraqi and wounding another. Had he gone to trial, the case against him would likely have fallen apart, but it's unclear whether Urbina will let him out of his plea deal.

Timeline: Blackwater and Security Regulations

The Defense Authorization Bill passed by Congress contains provisions that tighten government oversight of private security contractors working in Iraq and Afghanistan.

It would require clear rules of engagement for private guards, and it would establish minimum standards for hiring and training guards. The contractors would also have to comply with military regulations and orders issued by commanders in a war zone.

The drive to pass the legislation was prompted by a series of violent incidents involving private security companies in Iraq, including one of the largest, Blackwater Worldwide. Here's a timeline of events in Blackwater's rise and some of the incidents that triggered calls for tighter regulation:

December 1996: Blackwater is founded by Erik Prince, heir to a fortune earned by his father in the auto-parts business. Over the next few years, the company builds its customer base by providing training in firearms, personal security and counterterrorism.

October 2000: Al Qaida bombers attack the USS Cole in Yemen, killing 17 sailors. Shortly afterward, Blackwater receives its first big federal contract, training sailors in counterterrorism.

March 2003: US forces invade Iraq, providing opportunities for private security companies such as Blackwater to win contracts to protect US government and private personnel working in the war zone.

March 2004: Iraqi insurgents kill four Blackwater contractors in Fallujah, Iraq. Their bodies are set afire and dragged through the streets before being hanged from a bridge over the Euphrates River. The incident was one of the factors leading to the first Battle of Fallujah in April, in which the American military tried unsuccessfully to capture the city.

June 2004: Coalitional Provisional Authority chief Paul Bremer issues Order 17, making private contractors immune from Iraqi law.

January 2005: Families of the four contractors killed in Fallujah file a wrongful death suit against Blackwater, claiming the company failed to provide the force protection it had promised to its client. Blackwater counter-sued, saying the Blackwater employees had signed away their right to take legal action against the company.

June 2005: Blackwater guards shoot and kill an Iraqi man in Hilla, south of Baghdad. The guards fail to report the incident, which a U.S. State Department memo describes as "the random death of an innocent Iraqi citizen."

September 2005: Blackwater receives a no-bid contract to provide security for government facilities in New Orleans after Hurricane Katrina.

September 2006: A Blackwater security convoy traveling on the wrong side of the road collides with a civilian vehicle. Blackwater personnel reported that they couldn't rescue the civilian driver, because his car burst into flames.

December 2006: A Blackwater guard is accused of killing one of the security guards of Iraq's vice president in the Green Zone. Blackwater fires the man for "violating alcohol and firearm policy," but he is not prosecuted.

February 2007: The House Committee on Oversight and Government Reform holds hearings on the use of private contractors in Iraq, including testimony from Blackwater and the families of the Blackwater employees killed in Fallujah.

September 2007: Blackwater guards on a State Department convoy open fire in Nisoor Square in Baghdad, killing 17 Iraqis and wounding about two dozen others. An FBI investigation finds that at least 14 of the shootings were not justified.

October 2007: Blackwater founder Erik Prince testifies before a House panel, saying his company has few remedies for dealing with employees accused of crimes.

December 2007: Blackwater says it will go ahead with plans to build a training facility in Southern California, about 45 miles east of San Diego. The announcement comes just a day after voters in the nearby town of Potrero voted to recall five planning board members who had approved the project. The issue is now in the hands of the San Diego County Board of Supervisors, which is waiting for the results of environmental impact studies.

The Defense Authorization Bill, including a provision to create a Commission on Wartime Contracting, is passed by the House, then the Senate — and is sent to President George Bush.