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Psychiatric officials will now evaluate whether 63-year-old Sture Bergwall can be released from the secure mental health unit where he's been held since 1991.
Bergwall confessed to more than 30 murders over three decades and was convicted of eight of them. But he later said he had lied to investigators because he craved attention and was heavily medicated.
Retrials were ordered in each case, but prosecutors said that without the confessions they didn't have enough evidence to go back to court. On Wednesday they dropped the final case, which involved the death of a 15-year-old boy who disappeared in northern Sweden in 1976.
Bergwall was convicted in 1994 of murdering the boy, even though there was no technical evidence linking him to the crime and the cause of death could not be established.
"That a person has been convicted of eight murders and later been declared innocent, that is unique in Swedish legal history," attorney general Anders Perklev told reporters in Stockholm. "It has to be considered as a big failure for the justice system."
By telephone from the Sater psychiatric unit, Bergwall called the decision to drop the final charges "overwhelming and emotional," and called for an investigation into how the justice system has handled his case.
"The next step is that I, with my lawyers, take actions for my release," he told The Associated Press.
Bergwall, a convicted sex offender and bank robber who at the time had changed his name to Thomas Quick, was already detained at the Sater unit when he started taking responsibility for a series of unsolved deaths. His grisly tales of homicide, rape and even cannibalism resulted in a series of murder convictions in the 1990s.
The lack of evidence to support the confessions led to some doubts over Bergwall's guilt, but a 2006 review by Sweden's chancellor of justice found no problems with the convictions.
Two years later Bergwall recanted in a Swedish TV documentary, saying he had fabricated the story of Thomas Quick the serial killer. He now claims it was a cry for attention, fueled by heavy medication.
"If I hadn't accepted therapy and benzodiazepines, no Thomas Quick would have been created," Bergwall told AP. "In that lies the guilt that I must carry to my grave with respect to the relatives of the victims, their suffering during the Thomas Quick years."
Sven-Erik Alhem, a Swedish legal expert who was not involved with the case, called it Sweden's "greatest miscarriage of justice in modern times." He said it was particularly painful for the families of the victims, who are unlikely to ever find out the truth of what happened to their loved ones.
With Bergwall's confessions withdrawn, there are no longer any strong links between the eight deaths, and it's not even clear that all were homicides. In two cases no bodies were found.
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Associated Press writer Malin Rising contributed to this report.