Dominique Strauss-Kahn Released; Defense Declares Case 'Not What It Appeared to Be'

July 1, 2011 -- A smiling Dominique Strauss-Kahn, the former head of the International Monetary Fund, left Manhattan State Supreme Court this morning, arm in arm with his wife, Anne Sinclair, after a judge released him on his own recognizance and without bail.

In contrast, Ken Thompson, the attorney for the 32-year-old accuser, was enraged and vowed to "stand with [his client] to the very end." He said that she lied on her asylum application about being raped, one of the main attacks against her credibility, because she had been the victim of female genital mutilation in her native Guinea.

Still, Strauss-Kahn's defense called today a "very happy day."

"I think you can understand why we believed from the beginning that this case was not what it appeared to be," said Benjamin Brafman, an attorney for Strauss-Kahn. "We are absolutely convinced that while today is a giant first step in the right direction, the next step will lead to a complete dismissal of the charges."

Manhattan District Attorney Cy Vance, whose office is prosecuting the case, said the investigation would continue.

"The vindication of the rights of the sex crime victims is among the highest priorities of this office," he said. "As prosecutors, our duty is to do what is right in every case, without fear or favor, wherever that leads. The disclosures we made that led to today's proceedings reflect that principle."

Prosecutors believe the case has "substantial credibility issues," ABC News learned Thursday night. Today, in court, the district attorney's office said it had reason to "reassess [its] position about the strength of the case."

The court ruled that Strauss-Kahn's bail order and multimillion-dollar cash bond be vacated.

In a letter to the defense, the prosecution detailed the accuser's alleged lies.

"She admitted that the gang rape had never occurred," the letter read. "Instead, she stated that she had lied about its occurrence and fabricated the details, and that this false incident was part of the narrative that she had been directed to memorize as part of her asylum application process."

Despite the setback, the district attorney's office did not move to dismiss the case and prosecutors noted that the alleged sexual assault was corroborated by forensic evidence.

In court, Justice Michael Obus noted that while the circumstances of the case had changed considerably, the case was not over. Before the hearing ended, Obus told Strauss-Kahn he was expected to appear in court July 18. Obus told the court there will be "no rush to judgment."

Taina Bien-Aime, executive director of Equality Now, an international human rights organization, said, "The women's movement around the world is starting to form a coalition in solidarity of the accuser and all women who have been victims of sexual violence."

Bien-Aime feared that "this will jeopardize other women from coming forward and ... justice will not be served," she said. "When it's a 'he said, she said,' generally the woman is put in doubt."

Nevertheless, district attorney's investigators have uncovered significant issues with the account of the maid who alleged Strauss-Kahn assaulted her in a New York City hotel room.

Meanwhile, Lisa Friel, the chief of the Manhattan district attorney's sex crimes unit, has resigned the post she held for nearly a decade, ABC News confirmed. Her resignation Wednesday, first reported by the New York Times, comes as one of the office's most high-profile sexual assault cases continues to unravel.

Discoveries that the Sofitel hotel maid considered financial gain, had questionable relationships with at least one alleged drug dealer and other issues in her past prompted prosecutors to present their findings to the defense, according to law enforcement officials and other people familiar with the case.

While prosecutors were initially extremely confident in their case after Strauss-Kahn's May 14 arrest, as soon as they realized it was unraveling, they did what was proper and contacted the defense.

"In May, the district attorney's office said he was so violent he should be held without bail," ABC News legal analyst Dan Abrams said today on "Good Morning America." "Now you have the district attorney's office saying we have real questions.

"The district attorney's office does not want to be doing this," Abrams added. "They are doing this only because they are starting to not believe her themselves."

The unraveling of the case was first reported Thursday by the New York Times, which noted that the prosecution and defense were engaged in conversations that could result in dismissal of serious charges against Strauss-Kahn. ABC News subsequently confirmed that information.

Dominique Strauss-Kahn Case Called Into Question

The Times noted that among the discoveries are "possible links to criminal activities, including drug dealing and money laundering."

According to the Times, "the woman had a phone conversation with an incarcerated man within a day of her encounter with Mr. Strauss-Kahn in which she discussed the possible benefits of pursuing the charges against him. The conversation was recorded."

That man, as the Times reported, had been arrested on charges of possessing 400 pounds of marijuana. He was among a number of individuals who made multiple cash deposits into the woman's bank account.

Strauss-Kahn, a leading candidate for the French presidency before being accused of sexually assaulting the woman, resigned his powerful position as head of the IMF in the wake of the allegations against him.

ABC News' Katie Kindelan contributed to this report.