NEW YORK Former IMF chief Dominique Strauss-Kahn was released from house arrest on Friday after prosecutors said the hotel maid who accuses him of attempted rape lied to a grand jury and made other false statements.
Strauss-Kahn, 62, still faces charges that he sexually assaulted the woman in New York but questions about her credibility appear to be shifting the case in his favor in a twist that could upend French politics.
The former steward of the global economy smiled as he left court with his wife, Anne Sinclair, at his side.
Until his May 14 arrest, Strauss-Kahn was a strong potential challenger to Conservative President Nicolas Sarkozy in the 2012 election. Jubilant supporters in the French Socialist party hoped he might rejoin the presidential race but some analysts saw his chances as too tarnished.
Strauss-Kahn's lawyers want the charges dropped. The judge said prosecutors will reexamine the evidence after they revealed the maid lied to a grand jury about her actions after the alleged attack and on tax and immigration documents.
"I understand that the circumstances of this case have changed substantially and I agree the risk that he would not be here has receded quite a bit," Justice Michael Obus told the court as he released Strauss-Kahn.
"There will be no rush to judgment. The people will continue to investigate and reexamine the matter as appropriate."
Strauss-Kahn, whose house arrest had included electronic monitoring and an armed guard, agreed to return to court as needed, including for a July 18 hearing.
His bail payment of $1 million and bond of $5 million were returned to him but his passport was not, meaning he can travel only within the United States.
With his resignation on May 19, Strauss-Kahn severed all his ties to the International Monetary Fund. Christine Lagarde, who has just stepped down as French finance minister, takes over the top IMF job on Tuesday.
The case has hinged on the accuser, a 32-year-old Guinean immigrant who cleaned the $3,000-a-night suite at the Sofitel hotel in Manhattan where Strauss-Kahn was staying.
Prosecutors found issues with her asylum application, tax return and statements to the grand jury investigating the assault case, court documents showed.
Prosecutor Joan Illuzzi-Orbon told the court "the facts of the sexual encounter was and is corroborated" but some details appear to have changed.
The woman initially said Strauss-Kahn assaulted her and she then cowered in the hallway outside his room until he left and she felt safe to seek help. Now, prosecutors say, she admits she cleaned a nearby room and then returned to Strauss-Kahn's suite to start cleaning before reporting the incident.
After the dramatic revelations, Strauss-Kahn's lawyer Benjamin Brafman said he wants the charges dropped.
"We are absolutely convinced that while today is a first giant step in the right direction, the next step will lead to a complete dismissal of the charges," Brafman said.
The woman's brother told Reuters in Guinea that she was the victim of a smear campaign.
Her lawyer, Kenneth Thompson, said after the hearing his client's story had never wavered and that Strauss-Kahn had bruised her badly and tore a ligament in her shoulder.
"The claim that this was consensual is a lie," Thompson told reporters. "She made some mistakes but that doesn't mean she is not a rape victim."
The New York Times quoted law enforcement officials as saying prosecutors found possible links between the accuser and people involved in drug dealing and money laundering.
They also discovered the woman made a phone call to a jailed man within a day of her encounter with Strauss-Kahn in which she discussed the possible benefits of pursuing the charges against him, the paper said.
The conversation was recorded. The man was among a number of people who had made multiple cash deposits, totaling around $100,000, into the woman's bank account over the last two years, The New York Times said.
Some commentators suggested that Strauss-Kahn, known as the "great seducer" of French politics, could have been set up.
His arrest opened the field for several other Socialist candidates for next April's presidential election, including party leader Martine Aubry, who trails colleague Francois Hollande in opinion polls.
Sarkozy, who nominated Strauss-Kahn for the IMF job, has not commented on the affair since his arrest. The case has prompted debate in France on gender equality and a media tradition of respecting the privacy of politicians' sex lives.
Nina Mitz, a former senior adviser to Strauss-Kahn at the French Ministry of Finance, said: "Today's stunning news can only make us regret that so much talent may have been wasted at a time when we all very much needed it."
(Additional reporting by Grant McCool, Christine Kearney, Paula Rogo and Bernd Debussmann Jr in New York, Mark Hosenball in Washington, Marie Maitre, Catherine Bremer and Geert De Clercq in Paris and Saliou Samb in Guinea; Writing by Mark Egan; Editing by John O'Callaghan)