Judge Ricardo Urbina said prosecutors violated the defendants' rights by using incriminating statements they had made under immunity during a State Department investigation to build their case.
“The government used the defendants' compelled statements to guide its charging decisions, to formulate its theory of the case, to develop investigatory leads, and ultimately to obtain the indictment in the case,” Judge Urbina ruled.
“In short, the government had utterly failed to prove that it made no impermissible use of the defendants' statment or that such use was harmless beyond a reasonable doubt.”
The guards had been charged with killing 14 Iraqi civilians and wounding 18 others using gunfire and grenades during an unprovoked attack at a busy Baghdad intersection.
Judge Urbina explained in his opinion that federal prosecutors were offered an opportunity during a three-week hearing that began in mid-October 2009 to prove that they had not made use of the defendants' statements.
“The explanations offered by the prosecutors and investigators in an attempt to justify their actions... were all too often contradictory, unbelievable and lacking in credibility,” Judge Urbina wrote.
He added: “The court must dismiss the indictments against all of the defendants.”
The five defendants were security guards employed by Blackwater Worldwide, which since has been renamed a Xe Corporation.
Blackwater has insisted its personnel were acting in self-defence, but critics repeatedly have accused the company of a “shoot first, ask questions later” approach when carrying out security duties in Iraq.
A State Department review panel in 2007 concluded that there had been insufficient US government oversight of private security firms hired in Iraq to protect diplomats and to guard facilities.
The panel found that as a result there was an “undermined confidence” in those contractors, both among Iraqis and US military commanders.