Mubarak, 86, was jailed for three years in May last year after being found guilty of fraudulently billing the government $14 million of personal expenses. But the Court of Cassation found legal procedures were not followed properly.
This is the last remaining case keeping Mubarak behind bars as charges of conspiring in the killing of hundreds of protesters during the uprising that ended his nearly three decades-long rule in 2011 were dropped in November last year.
His two sons -- Alaa, 53, and Gamal, 51 -- were given four-year jail terms in the same graft case for which he got three years in prison. Collectively, they were fined 125 million Egyptian pounds and are required to repay 21 million Egyptian pounds.
Mubarak's supporters broke into cheers and chanted "Long Live Justice!" as the court announced its decision. The former president's lawyer Farid El-Deeb has said that he hoped his client would soon be released from Cairo military hospital, where he is being held.
Mubarak has served the maximum detention period, exceeding it by more than a week, according to El-Deeb. However, Egypt's state-run MENA news agency quoted a security official as saying Mubarak will not be released without a decision by the prosecution or the court that will retry him.
The court of cassation did not specify whether Mubarak was a free man following its judgement. The former president and his sons have earlier also been cleared of two separate corruption charges.
The court of cassation, Egypt's top appeals court, announced this morning that it had overturned the three men's convictions for embezzlement and ordered a retrial.
At the original trial, prosecutors alleged that Mubarak and his sons had billed the government for more than 126 million Egyptian pounds of personal expenses -- including utility bills, interior design, landscaping, furniture and appliances -- for several private homes and a public palace that was fraudulently transferred to their ownership.
Other expenses included renovating a villa, and building a new palace wing to accommodate one of Mubarak's granddaughters and a mausoleum for a grandson who died.
Evidence submitted by the prosecutors included more than a thousand original and forged receipts.
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