The decision came mid-trial, one day after prosecutors wrapped up their case against Tom Welch, who led the city's bid to host the Olympics, and his deputy Dave Johnson.
U.S. District Court Judge David Sam told jurors Friday morning that the prosecution had presented "insufficient evidence" to justify the trial going forward. He criticized the prosecution, saying the case "offends my sense of justice."
Throughout the trial, Sam — who tossed out the original charges against the bid leaders before an appeals court — reinstated them; repeatedly ruled against prosecutors on evidence and frequently shut down their lines of questioning.
Sam entered a judgment of acquittal for Welch and Johnson. His decision can't be appealed because defendants cannot be tried twice for the same crime.
Welch sat stoically as the judge issued his ruling, but Johnson wiped tears from his face and moments later gave defense lawyer Max Wheeler a long hug. The two men had faced up to 75 years in prison if convicted on all counts.
Justice Department fraud prosecutor Richard Wiedis on Thursday had urged the judge to reject the defense request to drop the charges, saying, "To dismiss this case now is to deprive the jury of its right to make a statement that Olympic corruption must be stopped."
Wiedis had argued that Welch and Johnson defrauded their overseers by misappropriating money from a humanitarian program to dole out gifts and favors to the IOC delegates who awarded Utah the games in 1995.
The "assistance program" was actually meant for impoverished athletes from developing countries, but just 10 percent of the money "went to sports equipment — soccer balls for athletes who needed and deserved them," Wiedis said.
FBI agent Paul Bingham, the final prosecution witness to take the stand Thursday, went over charts summarizing payments and perks doled out to 15 of the IOC delegates plus some relatives including trips to Disneyland, stopovers at Paris hotels, tuition at U.S. schools and car repairs. The IOC kicked out seven delegates, and three others resigned over the scandal.
Johnson's lawyer Max Wheeler said the government did little at trial but "put lots of money in front of this jury and ask them to speculate as to the purpose of those payments."
"We have not heard from a single witness of a person being bribed," he said.
Some of the government's own witnesses disputed the bribery allegations. They included Olympic trustee Spencer Eccles, the patriarch of a wealthy Utah banking clan, who donated $500,000 for the Olympic pursuit and turned on prosecutors Monday, calling their case "ill-conceived."
"Now that has to be a first in my 35 years of trial practice where the so-called victim doesn't think he's been victimized," Wheeler said.
Turning to the prosecution table, he said: "And I would submit that if you get inside the heart of hearts of these two gentlemen, they'd hope you throw it out."
Over courtroom laughter, Sam remarked: "Well, you'd have to inquire if there's any hearts there."
Welch and Johnson have insisted they committed no crime, and both refused to accept government plea offers before and after their July 2000 indictment.
Legal experts say the government ran a risk with an elaborate set of charges alleging bribery racketeering, fraud and conspiracy.
The case asserted wrongdoing at virtually every step of Salt Lake's first serious Olympic bid campaigns starting in 1989 — even before it was designated as the U.S. candidate city — and running for a decade.
After the ruling, Wiedis said the judge had been "too hard" on the government.
"In our view, the evidence that the jury was permitted to hear was more than sufficient for the case to go to verdict," Wiedis said.
Rep. Chris Cannon, R-Utah, who chairs the House Judiciary Committee's Subcommittee on Commercial and Administrative Law, said the panel might hold hearings next year to examine the government's handling of the case.
"After so obvious an abuse of power it is now the responsibility of Congress to see what has gone wrong," Cannon said. "This should include making the victims of fouled prosecutorial discretion whole, at least for the cost of their defense."