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Trump's decision to commute Stone's sentence just days before he was due to report to prison marked the Republican president's most assertive intervention to protect an associate in a criminal case and his latest use of executive clemency to benefit an ally.
Democrats condemned Trump's action as an assault on the rule of law.
"Roger Stone has already suffered greatly," the White House said in a statement. "He was treated very unfairly, as were many others in this case. Roger Stone is now a free man!"
The veteran Republican political operative's friendship with Trump dates back decades. Stone, 67, was scheduled to report by Tuesday to a federal prison in Jesup, Georgia, to begin serving a sentence of three years and four months.
Trump, seeking re-election on Nov. 3, opted to give Stone a commutation, which does not erase a criminal conviction, rather than a full pardon. Grant Smith, a lawyer for Stone, said his client feels "incredibly honored" for "this act of mercy."
Stone was among several Trump associates charged with crimes in former Special Counsel Robert Mueller's investigation that documented Russian interference in the 2016 election to boost Trump's candidacy.
The White House, in its statement, criticized Mueller's investigation and the prosecutors in Stone's case. The White House said Stone is a "victim of the Russia Hoax that the Left and its allies in the media perpetuated for years in an attempt to undermine the Trump Presidency."
"There was never any collusion between the Trump Campaign, or the Trump Administration, with Russia. Such collusion was never anything other than a fantasy of partisans unable to accept the result of the 2016 election," the White House said.
Mueller's investigation found extensive contacts between Trump's campaign and Russians.
House of Representatives Intelligence Committee Chairman Adam Schiff said, "With this commutation, Trump makes clear that there are two systems of justice in America: one for his criminal friends, and one for everyone else."
The top Democrat on the Senate Intelligence Committee, Mark Warner, added, "The United States was founded on the rule of law. It seems our president has nothing but contempt for it."
Bill Russo, a spokesman for Trump's Democratic election opponent Joe Biden, accused the president of abusing his power "as he lays waste to the norms and the values that make our country a shining beacon to the rest of the world."
Guilty on all counts
A Washington jury in November 2019 convicted Stone on all seven criminal counts of obstruction of a congressional investigation, five counts of making false statements to Congress and tampering with a witness.
Trump repeatedly lashed out on Twitter about Stone's case, accusing prosecutors of being corrupt, the juror forewoman of political bias and the judge of treating his friend unfairly.
Attorney General William Barr earlier intervened in the case to scale back the Justice Department's sentencing recommendation, leading four career prosecutors to quit the proceedings.
One of them, Aaron Zelinsky, told lawmakers on June 24 that his supervisor in the U.S. Attorney's office in Washington was told to go easy on Stone for political reasons.
Stone was convicted for lying to the House Intelligence Committee about his attempts to contact WikiLeaks, the website that released damaging emails about Trump's 2016 Democratic election rival Hillary Clinton that U.S. intelligence officials have concluded were stolen by Russian hackers.
The U.S. Constitution gives a president the "power to grant reprieves and pardons for offenses against the United States, except in cases of impeachment." Trump's use of this executive clemency often has benefited allies and well-connected political figures.
He pardoned hardline former Arizona county sheriff Joe Arpaio, former Republican White House aide Lewis "Scooter" Libby, conservative commentator Dinesh D'Souza and convicted "junk bond king" Michael Milken. He also commuted the prison sentence of Democratic former Illinois Governor Rod Blagojevich, who had been a contestant on Trump's former reality TV show.
Stone has been a fixture in American partisan battles dating to the 1970s. Stone, a colorful figure known for his natty attire, has labeled himself an "agent provocateur" and famously has the face of former President Richard Nixon tattooed on his back.
Former Trump aide Sam Nunberg, a Republican political consultant and associate of Stone, said, "No one is not voting for President Trump because he commuted Roger. In fact, the president protected his right flank with the commutation."
Barr has also sought to dismiss the charges against Flynn. And Barr last month fired a Manhattan-based federal prosecutor whose office had charged Trump's former personal lawyer Michael Cohen and was pursuing an investigation that could ensnare Trump's current attorney Rudolph Giuliani.