For much of 2004 and 2005, as the investigation dragged on, the government continued accepting Axion-made parts. But finally, after receiving almost 250 of the Black Hawk parts, the Army in December 2005 terminated Axion's contract when its deliveries lagged. In June 2006, agents raided Latifi's home and business for a second time and froze $2.5 million in assets.
For nine months, Axion slowly strangled while the investigation continued. Then on March 30, 2007, the uncertainty was broken. Latifi's son, Alex Jr., 16, got a text message from a friend: "Is everything OK with your family?" The local U.S. attorney had issued the indictment, publicly declaring that Latifi had "knowingly and willfully" exported defense items without a required license.
Amid near daily reports of an imminent U.S. showdown with Iran over its nuclear ambitions, Latifi's lawyers — fearing that an Alabama jury would be quick to convict an Iranian-American — opted to have the trial decided by a judge instead.
The gamble quickly paid off as the trial got underway on Oct. 22. Johnson, appointed to the federal bench in 1998 by President Clinton, was often exasperated by the prosecution and betrayed open annoyance with Mills for failing to verify that Latifi's signature on one of the Jan. 13, 2004, test reports was genuine and not another Lemay forgery.
Questioned by the judge, Mills testified there was no reason to ask Latifi for a handwriting sample because there was no indication the report had been forged. "Does it ever dawn on federal agents, you in particular, that if somebody is forging somebody's name on checks, they might be forging them somewhere else?" the judge said.
On Oct. 30, Johnson dismissed all the charges against Latifi with blunt words for the prosecution and the Army investigators. Two months later — and only after the judge had ordered the government to act — the Justice Department issued a two-sentence statement announcing the acquittal and indicating that Axion had been reinstated as a government contractor "in good standing."
Vindication may have come too late. Along with Latifi, dozens of workers have suffered financial hardship. Wayne Smartt, 51, an $18,000-a-year factory crew leader, has struggled to make ends meet since losing his Axion job about 18 months ago as government orders dried up. Without a full-time salary, the father of five came close to losing his home. "I had to go pick up cans along the side of the road … paint homes and stuff, just do whatever I could do," Smartt said.
The protracted legal ordeal effectively "ruined Axion's business," the judge wrote in a May 29 ruling ordering the government to pay Latifi's legal fees. Martin, the local U.S. attorney, said she would seek permission to appeal the decision.
Karen Naramore, a spokeswoman for the U.S. attorney, said Martin would not comment on the case while that process continued. Mills also declined comment. Attempts to reach Lemay through her attorney were unsuccessful.
Today, Latifi is seeking additional legal fees and access to the government's files through a legal channel called the Hyde Amendment, which provides for compensating exonerated defendants if "the position of the United States was vexatious, frivolous, or in bad faith." Prosecutors are fighting back. This spring, while Johnson was visiting her native Denmark, Martin sought to have another judge overturn Johnson's order requiring prosecutors to appear in court with their files.