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Libby, who served as Vice President Dick Cheney's chief of staff, lied about how he learned the identity of covert CIA agent Valerie Plame and how he talked to reporters about her. He was sentenced to 30 months in prison, but Bush commuted the sentence.
"I don't know Mr. Libby," Trump said in a statement issued by the White House. "But for years I have heard that he has been treated unfairly. Hopefully, this full pardon will help rectify a very sad portion of his life."
Members of the Bush administration had sought to discredit Plame's husband, former Ambassador Joseph Wilson, over his claims that the administration fabricated intelligence on Iraq before the U.S. invasion in 2003.
The pardon comes as Trump himself and members of his inner circle are under investigation by federal authorities. Special counsel Robert Mueller is reportedly looking at possible obstruction of justice by the president, as well as whether Trump and his campaign colluded with Russia during the 2016 election.
Trump has repeatedly denied collusion and obstruction of justice.
The special prosecutor in the Plame case, Patrick Fitzgerald, was appointed by then-Deputy Attorney General James Comey.
Trump fired Comey as director of the FBI last year. Comey said the president made several attempts to secure his loyalty. Trump told NBC's Lester Holt that he had been thinking about the Russia investigation when he decided to fire Comey.
Excerpts of Comey's new memoir, "A Higher Loyalty," have started to leak. In the book, which is being released next week, Comey says Trump was "untethered to the truth."
Here's White House press secretary Sarah Huckabee Sanders' Friday statement on the pardon:
Today, President Donald J. Trump issued an Executive Grant of Clemency (Full Pardon) to I. "Scooter" Lewis Libby, former Chief of Staff to Vice President Richard Cheney, for convictions stemming from a 2007 trial. President George W. Bush commuted Mr. Libby's sentence shortly after his conviction. Mr. Libby, nevertheless, paid a $250,000 fine, performed 400 hours of community service, and served two years of probation.
In 2015, one of the key witnesses against Mr. Libby recanted her testimony, stating publicly that she believes the prosecutor withheld relevant information from her during interviews that would have altered significantly what she said. The next year, the District of Columbia Court of Appeals unanimously reinstated Mr. Libby to the bar, reauthorizing him to practice law. The Court agreed with the District of Columbia Disciplinary Counsel, who stated that Mr. Libby had presented "credible evidence" in support of his innocence, including evidence that a key prosecution witness had "changed her recollection of the events in question."
Before his conviction, Mr. Libby had rendered more than a decade of honorable service to the Nation as a public servant at the Department of State, the Department of Defense, and the White House. His record since his conviction is similarly unblemished, and he continues to be held in high regard by his colleagues and peers.
In light of these facts, the President believes Mr. Libby is fully worthy of this pardon. "I don't know Mr. Libby," said President Trump, "but for years I have heard that he has been treated unfairly. Hopefully, this full pardon will help rectify a very sad portion of his life."