Michael Casey, Jakarta – Indonesia's Supreme Court overturned a graft conviction against the parliamentary speaker on Thursday, a ruling that cleared the way for his presidential bid – and dismayed those looking for signs of anti-corruption reform.

Akbar Tandjung, head of ex-dictator Suharto's Golkar Party, had been convicted of misappropriating $4.5 million in government funds. He would have been barred from running in the country's July 5 election if judges had upheld the verdict.

But a panel of judges said Thursday there was no proof Tandjung had enriched himself, and that he wasn't responsible for the money because he'd acted on then-president B.J. Habibie's orders to distribute it to the poor. The judges ruled 4-1 for his acquittal.

"The defendant, Akbar Tandjung, is not guilty of committing criminal acts and therefore must be freed and his name and reputation rehabilitated," Judge Paulus Lotulong said in his final summary.

Anti-corruption advocates say the verdict shows the challenges of reforming a court system where the rule of law often takes a back seat to bribery and political connections.

"This is a huge scandal," said Muhammad Asrun, executive director of Judicial Watch, a corruption watchdog. "This country's legal system is bankrupt and getting worse every day. I think the international community will no longer have confidence in the Indonesia courts."

At Tandjung's house in Jakarta, dozens of supporters hugged each other upon hearing of the verdict. They cheered and shouted "Allahu Akbar!" – Arabic for "God is great," and a play on Tandjung's first name. A smiling Tandjung, gathered with his family, told reporters he hoped to be his party's presidential nominee.

"I thank God for fulfilling my prayers and the Supreme Court justices," he said. "I hope that that the Supreme Court's ruling can fulfill the feeling of justice. I hope that the people can understand it." For much of the day Thursday, the drama of the case played out in the streets in front of the Supreme Court building. On one side were the 2,000 Tandjung supporters, who turned the event into a festive political rally, singing party songs and making pro-Golkar speeches.

A few yards away – and separated by barbed wire – about 2,000 angry students chanted anti-Tandjung slogans and carried banners saying: "There is no justice if Akbar wins." "We came here to support justice for the people," said 18-year-old university student Ahmad Syahrulah. "The court should uphold his guilty verdict. We've heard he will be acquitted. If that is true, the judges are reading nonsense." Some of the students clashed with about 700 police officers. Witnesses said the police beat students with batons, sending at least six to the hospital and leaving others with blood streaming down their faces.

Tandjung, 59, has been a Golkar loyalist since his university days. After Suharto fell in 1998, supporters chose the savvy political insider as party chairman – and he set his sights on the presidency. Instead, he became entangled in the embezzlement scandal and was convicted in 2002.

As he pressed ahead with his appeals, the case divided the party and led seven others to announce they'd contest the party's presidential nomination. Among them was former military chief Gen. Wiranto, a leading contender despite his indictment by the United Nations for alleged human rights abuses in the former Indonesian territory of East Timor.