$2.3M In 'Blood Money' Paid To Free CIA Contractor

Raymond Davis Released After Victims' Families Agree To Pardon

A CIA contractor from Highlands Ranch, Colo., has been freed from Pakistani prison after families of the two Pakistanis he killed pardoned him in exchange for $2.34 million in compensation or "blood money."

News of Raymond Allen Davis' release sent small groups of protesters to the street in major cities. They briefly clashed with police outside the U.S. consulate in Lahore, where officers fired tear gas at men burning tires and hurling rocks. Some called for larger protests Friday after noon prayers.

Davis has been in jail since Jan. 27, seriously straining ties between Pakistan and the United States. The countries' alliance is considered key to ending the Afghan war.

Punjab Law Minister Rana Sanaullah said Davis was charged with murder on Wednesday but was then pardoned by the families of the victims in exchange for compensation payment.

The families accepted a payment of 60 million rupees each, or $700,000 for each family, according to ABC News, citing Davis' attorney, Zahid Hussain Bokhari.

The Associated Press said the U.S. paid $2.34 million to secure Davis' release. This number might account for the family of a third man -- who was run over and killed by U.S. officials responding to the shooting.

In what appeared to be a carefully choreographed conclusion to the diplomatic crisis, a U.S. official said Pakistan had paid the families. That arrangement allowed Secretary of State Hillary Rodham Clinton to assert in a news conference the U.S. didn't pay compensation.

But the American government "expects to receive a bill at some point," said the official, who spoke only on condition of anonymity because the situation was so sensitive. The payments to families in Pakistan are roughly 400 times as high as the U.S. has paid to families of many civilians wrongfully killed by U.S. soldiers in the wars in Iraq and Afghanistan.

Chaudhry Mushtaq, superintendent at Kot Lakhpat jail, said Davis left the jail in the company of U.S. consulate officials.

Davis, 36, left the country immediately for Kabul in neighboring Afghanistan, where he was expected to be debriefed extensively about his time in custody, Pakistani and American officials said.

Raymond Davis' Wife Talks To 7NEWS

Davis' wife, Rebecca, told 7NEWS she has not spoken to her husband since January, when he was arrested. She said she was elated when she learned of her husband's release in a phone call at 6:30 a.m.

"I knew it was self-defense. My husband is not a killer. He's not a Rambo," she said.

She said she doesn’t know when she'll see him but anticipates he will be home this weekend.

She's upset that some media outlets have called her husband "Rambo."

Payment Of Blood Money Common In Pakistan

Davis, a 36-year-old Virginia native, said he shot the two men in self-defense as they tried to rob him in late January. He claimed the two men attacked him as he drove through a busy Lahore neighborhood.

7NEWS confirmed Davis owns a security company called Hyperion Protective Consultants, which is contracted to do work for the U.S. government.

The payment of "blood money" to the families, sanctioned under Pakistani law and a common occurrence here, was considered by Davis' attorney as the best way to get out of the crisis.

Islamist political parties, relishing the difficult situation the United States finds itself in, had pressured the families not to accept any American money.

Sanaullah said Davis was formally indicted on murder charges before members of the two slain mens' families were taken into the court, where they signed papers formally forgiving him in exchange for an undisclosed sum of money.

Judges then acquitted him on all murder charges, he said.

Reporters were not allowed to witness the proceedings.

"This all happened in court and everything was according to law," Sanaullah said. "The court has acquitted Raymond Davis. Now he can go anywhere."

Raja Muhammad Irshad, a lawyer for the families, said 19 male and female relatives appeared in court to accept the $2.34 million.

He said each told the court "they were ready to accept the blood money deal without pressure and would have no objection if the court acquitted Raymond Davis."

Representatives of the families had previously said they would refuse any money.

Arsad Mansoor Butt, who had earlier represented the families, accused Pakistan's government of pressuring his former clients; he gave no details.

Some media reports said the some of the families had been given permission to live in the United States. Irshad said that was not discussed in court.

In the separate case of carrying an illegal firearm, Davis was convicted but sentenced to time served and a fine of 20,000 rupees, or $233, his attorney said.

Protesters Beat Up

After the announcement, protesters demonstrated against the release of Davis outside the US consulate in Lahore, where they chanted anti-Davis and anti-US slogans and burned tires.

The protesters briefly clashed with police, and officers fired tear gas and arrested a number of demonstrators.

"After the decision was announced to the press, you know Pakistan Thehreek Insaaf (local political party) opted to protest against this unjust decision and the release of Raymond Davis, but it is very unfortunate that the police have beaten and charged the protesters, and they have arrested a few people from the scene, and there are at least ten injured protesters here. We condemn the act of the police on this issue," said Local Political Party leader Ejaz Chudhary.

In the U.S., the deal for the release drew some criticism. Rep. Dana Rohrabacher, R-Calif., complained that Pakistan already receives billions of dollars in U.S. aid. During a congressional hearing, he said the U.S. should look at whether foreign aid recipients "are treating us like suckers."

Case Fueled Tension Between CIA, Pakistan's Inter Service Intelligence (ISI)

The killings triggered a fresh wave of anti-American sentiment in Pakistan and were testing an alliance seen as key to defeating al-Qaida and ending the war in Afghanistan.

The tensions were especially sharp between the CIA and Pakistan's powerful Inter Services Intelligence, its spy agency, which said it did not know Davis was operating in the country. One ISI official said the agency had backed the "blood money" deal as way of soothing tensions.

The United States initially described Davis as either a U.S. consular or embassy official, but officials later acknowledged he was working for the CIA, confirming suspicions that had aired in the Pakistani media.

But given the high stakes for both nations, few imagined either side would allow the case to derail the relationship. The main question was how long it would take to reach a deal.

The case dominated headlines and television shows in Pakistan, with pundits using it to whip up hatred against the already unpopular United States. While the case played out in court, many analysts said that the dispute was essentially one between the CIA and the ISA, and that they would need to resolve their differences before Davis could be freed.

University of Colorado law professor Aya Gruber tells 7NEWS she's amazed the extent of the United States' government involvement.

While a cash for freedom deal is typical under Islamic law, she thinks the U.S wants to send a wake-up call worldwide.

"You could imagine that the government wants to send a message to CIA agents, that we'll protect you so you can do your job," said Gruber.

One ISI official said CIA director Leon Panetta and ISI chief Gen. Shuja Pasha talked in mid-February to smooth out the friction between the two spy agencies. A U.S. official confirmed that the phone call took place.

Pasha demanded the U.S. identify "all the Ray Davises working in Pakistan, behind our backs," the official said.

He said Panetta agreed "in principle" to declare such employees, the official said, but would not confirm if the agency had done so.

A second ISI official said as a result of that conversation the ISI -- which along with the army is a major power center in the country -- then backed an effort to help negotiate the "blood money." The officials spoke on condition of anonymity because they are not allowed to give their names to the media.

CIA Spokesman George Little said the two agencies had had "a strong relationship for years."

"When issues arise, it is our standing practice to work through them. That's the sign of a healthy partnership, one that is vital to both countries, especially as we face a common set of terrorist enemies," he said.

Issues Of Diplomatic Immunity Never Resolved

The United States had insisted that Davis had diplomatic immunity and demanded Pakistan free him immediately.

Pakistani officials, faced with criticism by Islamist parties and members of the public, had refused to state clearly whether he had immunity. A high court in Pakistan refused Monday to decide whether the CIA contractor has diplomatic immunity, sending the case back to a lower court. The lower court had already ruled that Davis does not enjoy protected diplomatic status because neither he nor the Pakistani government has provided documents proving that he does.

U.S. Embassy In Pakistan Makes Statement

The following statement was made by the U.S. Ambassador Cameron Munter in Islamabad, Pakistan

    The families of the victims of the January 27 incident in Lahore have pardoned Raymond Davis. I am grateful for their generosity. I wish to express, once again, my regret for the incident and my sorrow at the suffering it caused.

    I can confirm that the United States Department of Justice has opened an investigation into the incident in Lahore.

    I wish to express my respect for Pakistan and its people, and my thanks for their commitment to building our relationship, to everyone’s benefit. Most of all, I wish to reaffirm the importance that America places in its relationship with Pakistan, and the commitment of the American people to work with their Pakistani counterparts to move ahead in ways that will benefit us all.

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