Prosecutors dropped the Medicaid fraud case against former governor Don Siegelman and a top aide Tuesday after the judge ruled that the government could not back up the charge at the heart of the indictment.

U.S. District Judge U.W. Clemon ruled that there was insufficient evidence to support a conspiracy charge against Siegelman and former chief of staff Paul Hamrick. That left only a health care fraud charge against the two.

At that point, Assistant U.S. Attorney Matt Hart said: "The government moves to dismiss this case. There is no point in going forward."

Siegelman had tears in his eyes and immediately hugged his wife, Lori, who was seated in the front row.

"The people of Alabama can see that what we've said all along was correct: that this indictment was baseless and false," Siegelman said.

Siegelman, 58, Hamrick, 40, and a supporter, physician Phillip Bobo, were accused of trying to rig bids on lucrative contracts sought by Bobo's company to provide medical care to poor pregnant women in rural Alabama in 1999, Siegelman's first year in office.

Before jury selection Monday, the judge held a hearing in which he made prosecutors give him a preview of their evidence on the conspiracy charge. The judge, who last month threw out a theft charge against Siegelman and Hamrick, repeatedly criticized the evidence but delayed dismissing the conspiracy charge until after opening arguments Tuesday.

Siegelman was narrowly defeated by Republican Bob Riley in a 2002 campaign that focused on the ethics of the Siegelman administration.

The judge's decision does not end Siegelman's legal concerns. A federal grand jury in Montgomery has been investigating other issues from his administration, including a tax break given to a Waste Management Inc. landfill and approval for HealthSouth Corp. to build a hospital in Birmingham. Siegelman has not been charged in that investigation.