The military admitted late Sunday that three bank employees – a 57-year-old man and two women coworkers – killed by U.S. soldiers in the Baghdad airport complex were just as their loved ones and Iraqi police had maintained: "Law abiding citizens of Iraq." But the soldiers who fired at them were, a military statement said, "not at fault."

The announcement about the conclusion of an Army investigation corrected what had seemed implausible all along. For weeks after the June 25 shooting, the Army claimed a weapon was found with the Iraqis' car despite the fact that they had just passed through the rigorous weapons searches leading to the airport terminal. Even as NEWSWEEK reported on the high-profile case July 7, the military was standing by its story, which would have meant that a long-time employee of an airport bank branch suddenly decided to divert from his daily commute to fire small arms at soldiers in multiple armored vehicles. The original Army statement portrayed the incident as a minor combat victory, claiming soldiers had killed three "criminals" attempting to attack them.

 The new military account calls the incident itself "tragic" and attempts to account for the dramatic reversal by saying there was a mix up in the investigation. A press release stated that the soldiers initially thought they were being fired upon and then there was "a misunderstanding that the Iraqi police arriving at the scene collected a weapon."

But a member of the Iraqi police team at the airport told NEWSWEEK Sunday night that he told American investigators the day of the incident that he and his colleagues had found no weapon. The man, who asked not to be named because he is not authorized to speak about the investigation, said he angrily asked U.S. troops examining the scene why soldiers had fired on unarmed Iraqis. He kept asserting the same in two subsequent interviews by U.S. officers, he said. The original Army statement also said the car "exploded" after it hit a wall, which Iraqi witnesses contradicted.

Iraqi officials have stated consistently since the incident that the Iraqis were unarmed and the western-owned contractor responsible for airport security has attested that it would be nearly impossible for a driver to successfully pass its search points with a weapon. Army spokesman Lt. Col. Steve Stover told NEWSWEEK that investigators knew about July 7 that no weapon was involved.

The victims were Hafd Abood, known to be a doting father who preached education to his children, and two female coworkers, Maha Adnan Younis and Surur Shahid Ahmed. Abood's son Mohammed said earlier Sunday that the military offered each family $10,000 in compensation in a meeting on Friday. He said the families refused the money unless it comes with a written apology.

The case received widespread attention among Iraqis and prompted condemnations by Prime Minister Nuri al-Maliki. Iraqi police said early on that it appeared that Abood was driving toward where U.S. soldiers were parked by the road and may have innocently swerved in their direction to avoid a pothole. The military's new account says the soldiers opened fire after using "escalation of force" measures to get the car to slow – including warning shots. They fired warning shots to stop at least one other car after the incident. The soldiers were from a unit that does not usually travel in the airport area, meaning they might not have known that it's considered one of the most secure places in Iraq. Civilian cars there regularly move at close distances with military convoys amid the daily traffic.

Human rights advocates have repeatedly called for better precautions against similar incidents and more thorough military investigations into civilian deaths.

Late Sunday, Mohammed, himself a taxi driver in the airport, was stunned by the news. "I'm confused. I don't know what to do. We need our rights," he said, noting that his father was the breadwinner for a large family. "We need to make a case in American courts." Such cases are nearly impossible to win. 

Stover said the military planned to continue meetings with the families.

With reporting from Salih Mehdi and Yassar Ghani in Baghdad.