Dominique Strauss-Kahn goes free without bail,

A smiling Dominique Strauss-Kahn was freed with no bail Friday in a stunning reversal of fortune as prosecutors declined to drop attempted rape charges against the French bigwig.

The accused sexual predator, due back in court July 18, walked out of court with his biggest legal victory since his May 14 arrest for assaulting a midtown Manhattan hotel maid.

Strauss-Kahn held hands with his wife, who stood by him from the start, and flashed a smile while leaving the courtroom. He declined to address a media horde at the Manhattan courthouse.

"This is a giant step," said defense attorney Benjamin Brafman after his client's triumph. "The next step will lead to a complete dismissal of the charges."

With sources saying the case was collapsing amid a series of lies by the accuser, prosecutors acknowledged their witness had "substantial credibility issues."

But prosecutor Joan Illuzzi-Orbon said the case against the defendant would continue.

"The fact of a sexual encounter was and is corroborated by forensic evidence," she said.

The attorney for the Midtown hotel maid whose allegations were at the center of the high-profile case insisted his client was telling the truth.

"It is obvious that this woman made some mistakes, but that doesn't mean she is not a rape victim," said lawyer Ken Thompson.

"From day one, she has described a violent sexual assault that Dominique Strauss-Kahn committed against her," Thompson said. "She has described that sexual assault many times, to prosecutors and to me, and she has never once changed a single thing about that encounter."

He added that the woman planned to go public with her identity in the near future.

The 62-year-old former head of the International Monetary Fund will be freed from his house arrest in a $50-000-a-month lower Manhattan townhouse.

His $1 million cash bail and $5 million bond will be returned under a deal with prosecutors, and he is permitted to travel anywhere in the U.S under the agreement, said noted attorney Brafman.

Prosecutors held onto his passport, keeping Strauss-Kahn from returning to his homeland. The defendant and his wife share a home in Washington, D.C.

Strauss-Kahn, accompanied by his television newswoman wife Anne Sinclair, departed for court in a black Lexus SUV about 40 minutes before his scheduled hearing.

Asked if he felt vindicated, the accused sexual predator turned to face reporters but said nothing. Strauss-Kahn's wealthy wife had posted the huge payout to spring him from Rikers Island.

Strauss-Kahn wore a calm, almost serene look as he headed inside the courthouse with Sinclair and a security guard. He wore a black suit with a light blue tie.

Brafman was smiling too as he joined his white-haired client for the hearing.

The prosecution of Strauss-Kahn is in jeopardy of falling apart because the hotel maid who accused him was caught in a web of lies, sources said.

The Bronx chambermaid's credibility crumbled as investigators linked her to a network of crooks and found that she had multiple bank accounts stuffed with a total of almost $100,000 in dirty cash, sources said Thursday night.

Prosecutors now believe there was little truth in anything the native of Guinea native told them since the NYPD yanked the one-time contender for the French presidency off a plane at Kennedy Airport on May 14, the sources said.

A horde of media joined the simply curious outside the courthouse where Strauss-Kahn was due at 11:30 a.m.

"I hope he will not be guilty for the image of France," said French tourist Jean Mark Beauchet, 62. "It changed the political scenario in France. He would have won the election."

Hells Kitchen resident Willa Streeter said she was there to support Strauss-Kahn.


"I feel bad how they handled this case," she said. "They took him to Rikers Island with all those murderers."

A phalanx of photographers lined either side of the courthouse entrance awaiting Strauss-Kahn, who had reason for optimism: There even appears to be a smoking gun exposing his accuser.

Less than a day after Strauss-Kahn's arrest, his accuser had a telephone conversation with an incarcerated "high-end, profitable drug dealer," said one source with knowledge of the imperiled case.

During the jailhouse chat, the maid discussed how she could cash in by accusing the political and financial titan. The damning talk was caught on tape.

"The DA's office has concluded she materially misled the grand jury," said a source close to the case. "The case has gone to hell. It's a wreck."

Thompson dismissed the reports of her involvement with drug dealers as "a lie."

A perjury charge against the accuser is a possibility - but what actually happened in the hotel room may forever remain a he-said-she-said, the sources said.

"The end is going to be soon - whether it's this week or next week, the case is not sustainable," the source said.

Prosecutors still believe Strauss-Kahn and the accuser had a sexual encounter - possibly even one of a forcible nature, a police source said. But the maid's shattered credibility makes even a misdemeanor charge against him seem like a tough sell.

The stunning revelation, first reported Thursday by the New York Times, is a major blow to the NYPD and first-term Manhattan District Attorney Cyrus Vance Jr. DA's office.

It will also inevitably fuel pre-existing speculation that Strauss-Kahn was set up by political enemies - claims prosecutors have previously said are without merit.

NYPD Deputy Commissioner Paul Browne, the department's top spokesman, declined comment. A spokesman for the DA's office also refused comment.

The well-placed source said the NYPD rushed to judgment after it learned Strauss-Kahn was headed to the airport to catch a Paris-bound flight after allegedly fondling the maid at his $3,000-a-night suite at the Sofitel hotel near Times Square. France does not have an extradition policy with the United States.

"They jumped the gun here because he was getting on a plane," the source said. "That is the explanation."

From the moment the criminal charges made headlines, Strauss-Kahn's legal team beat the bushes, sources said. They learned that she told investigators that her application for asylum included a previous rape - but the papers held no such claim, another cop source said.

The defense team also learned she was paying hundreds of bucks a month for several phone bills, but told authorities she had only one phone, that source said.

In late May, Strauss-Kahn's lawyers sent a letter to prosecutors saying they had evidence that shot holes in the case. Prosecutors fired back telling them to turn over the goods, the sources said.

Prosecutors have scoffed at the notion Strauss-Kahn's defense team spoon-fed them info about the maid's shady background, sources said.

Defense lawyers "knew by the second or third day she was not who she claimed to be," one source said.

The maid had a jailhouse chat with a man who had been busted with more than 400 pounds of marijuana, the sources said. He and a handful of others had made several cash deposits - adding up to about $100,000 - into "sophisticated bank accounts" set up for the maid.

The maid has told authorities she knew little about the big-money deposits, the sources said.

"She's complicit in those activities," the source said. "She's a rainmaker. She's in with a crew that makes illegal money."

Strauss-Kahn Set Free: MyFoxNY.com