McDonnell, once a rising star in Republican circles, was convicted on federal corruption charges in 2014 and sentenced to two years in prison. He remained free pending appeal, and this spring, the Supreme Court unanimously threw out his conviction, although the justices left open the possibility of a retrial.
In a motion filed with a federal appeals court, US Attorney Dana Boente said the United States planned to file a "motion to dismiss the indictment."
"Today is a great day in which my family and I rejoice. More than 3 1/2 years after learning of an investigation, the final day of vindication has arrived," McDonnell said in a statement. "Throughout this ordeal I have strongly proclaimed my innocence. I would never do, nor consider doing, anything that would violate the trust of the citizens of Virginia I served during 22 years in state elected office. These wrongful convictions were based on a false narrative and incorrect law."
McDonnell's case centered around the question of what constitutes the scope of an "official action" under federal corruption law. He received gifts, money and loans from Jonnie R. Williams, the CEO of a Virginia-based company, the government said, in exchange for official acts seen as favorable to Williams and his business.
But his lawyers responded that his actions were limited to routine political courtesies and he never put his thumb on the scale by exercising government power on William's behalf.
Writing for the Supreme Court, Chief Justice John Roberts set a clear definition of the term "official action" and how it can be used in corruption convictions.
"In sum, an 'official act' is a decision or action on a 'question, matter, cause, suit, proceeding or controversy," Roberts wrote. "Setting up a meeting, talking to another official, or organizing an event (or agreeing to do so) -- without more -- does not fit that definition of an official act."
Roberts also said that political corruption can still be prosecuted by the government, and noted that McDonnell's actions were "distasteful."
"There is no doubt that this case is distasteful; it may be worse than that," Roberts wrote. "But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the government's boundless interpretation of the federal bribery statute. A more limited interpretation of the term 'official act' leaves ample room for prosecuting corruption, while comporting with the text of the statute and the precedent of this court."
Impact on future corruption cases
White collar criminal defense attorney Barry Pollack was not surprised that the government dropped the case after the Supreme Court ruling.
"I think the Supreme Court case made it pretty clear that the government would have an uphill battle if it attempted to retry the case," he said.
He noted that at trial, the government's case was that McDonnell set up the meetings, but that he left it to the appropriate government decision makers to decide whether or not to provide Williams with the business opportunities he was seeking.
"Now the government is going to be held to a higher standard in pursuing public corruption charges against public officials," Pollack said.
Noah Bookbinder, executive director of the Citizens for Responsibility and Ethics in Washington, said the decision allows corrupt conduct go unpunished.
"Even with the court's unfortunate decision, the Justice Department had a chance to show it was not deterred and to build on aggressive precedent set by the conviction of then-Congressman (Chaka) Fattah and other recent prosecutions," Bookbinder said. "Instead, the department sent a clear signal that they it would not aggressively enforce corruption laws to hold public officials accountable when they abuse their office. It is our hope that they do not pass on prosecution next time, because rest assured, there will be a next time."
Next for McDonnells
McDonnell said he didn't know what would be next for him.
"I have begun to consider how I might repurpose my life for further service to my fellow man outside of elected office. Polls and politics no longer seem that important. People and policies are," he said. "I know not fully what the future holds as I enter the 'fourth quarter' of life. I do know it will be a wonderful adventure, beginning with 4 blessed new grandchildren, a new small business, countless new friends, and multiple new ministry opportunities."
Lawyers for Maureen McDonnell said they were pleased with Thursday's action.
"You can imagine, Maureen couldn't be more thrilled or thankful that this is all over and she is very happy that the DOJ took such a careful look at the case and came to a decision that we of course agree with," said William Burck from Quinn Emmanuel Urquhart & Sullivan.