WASHINGTON -- A federal judge dropped all charges yesterday against Oliver L. North, bringing to an abrupt end the five-year prosecution of the former National Security Council aide that was the most celebrated and hotly contested legal battle of the Iran-contra affair.
"This terminates the case," said Judge Gerhard A. Gesell at yesterday's brief hearing in U.S. District Court.
He ruled after Lawrence E. Walsh, the Iran-contra independent prosecutor, said he would abandon the prosecution of Mr. North, the former Marine Corps lieutenant colonel who set up the arms pipeline to the Nicaraguan contras after Congress cut off military aid to them in 1984.
With that, Mr. North, who was initially convicted on three felony counts, won his long campaign to have them dismissed.
Mr. North, who four months ago denounced Mr. Walsh as "an imperial prosecutor" and "a vindictive wretch" for pursuing the case against him, appeared relieved but subdued yesterday as he declared himself "totally vindicated."
Mr. Walsh was more circumspect. "These things speak for themselves," he said. "I don't think prosecutors should comment beyond that."
Mr. North burst upon the national scene in late 1986 as the central figure of the Reagan administration's secret sales of arms to Iran and the illegal diversion of the proceeds to rebel forces in Nicaragua.
His testimony before a joint congressional committee in the jTC summer of 1987 transfixed the nation -- and ultimately doomed the efforts to prosecute him.
After nearly five years, Iran-contra prosecutors estimate they have spent $27.5 million.
But many of the deepest mysteries in the affair remain unsolved. It is still unclear, for example, precisely how much President Bush, President Ronald Reagan or William J. Casey, the former director of central intelligence, knew of the affair, or whether there was a concerted effort within the Reagan administration to conceal it from Congress.
Mr. Walsh's investigation appears to be far from over. In recent months, it has developed new life as prosecutors focus on a possible cover-up of the affair at the Central Intelligence Agency.
This month, a federal grand jury returned a 10-count indictment against a former high-ranking CIA official, Clair E. George, charging him with perjury, false statements and obstruction of Congressional inquiries into the affair.
Prosecutors gave up on the North case after concluding in meetings over the weekend they they could not prove that witnesses who testified in Mr. North's criminal trial in 1989 were unaffected by his nationally televised testimony to the House and Senate investigating committees in 1987.
Because that testimony was given under a grant of immunity from prosecution, a divided federal appeals court held that those who heard it and were influenced by it should not have been allowed to testify against Mr. North.
Last week, Robert C. McFarlane, the former national security adviser, who was Mr. North's superior and mentor during the early stages of the affair, shocked prosecutors when he said that his testimony in the North trial had been deeply influenced by watching Mr. North's appearance before the congressional committees.
The dropping of the charges against Mr. North appeared to place in grave jeopardy the five guilty verdicts against John M. Poindexter, Mr. McFarlane's successor as national security adviser, who, like Mr. North, appealed his conviction on grounds that his immunized testimony to Congress had tainted his trial.
Mr. North tenaciously insisted on his innocence through a congressional investigation and an eight-week criminal trial. Yesterday he brought a Bible to the hearing, and afterward he hugged his lawyers and his wife, Betsy.
Outside the federal courthouse, he said that "for five years my family and I have been under fire." Now, Mr. North said, he felt "totally exonerated, fully, completely, I don't have another word for it." He added, "I've had my last hearing on the Hill forever, I hope."
Mr. Bush expressed satisfaction with the dismissal. "He's been through enough," said Mr. Bush.
For prosecutors, the dismissal came as the latest frustration in a case that had been dogged from the start with daunting problems in declassifying documents and obtaining the cooperation of Reagan administration officials.
But the blow that proved fatal to the North case -- and may scuttle the Poindexter convictions -- was delivered shortly after Mr. Walsh began his investigation when Congress, in attempting to hasten its fact-finding inquiry in 1987, agreed to grant immunity to Mr. North and several other witnesses, thus shielding them from subsequent prosecution on the basis of that testimony.
"This is a very, very serious warning that immunity is not to be granted lightly," Mr. Walsh told reporters after yesterday's hearing.