Though forensic tests did "unambiguous evidence" of a sexual encounter between Strauss-Kahn and the woman, prosecutors do not believe much of what the accuser has told them about the circumstances or about herself, The New York Times said in a report today.
Quoting law enforcement officials, the paper said holes have developed in the credibility of the housekeeper who charged that the French politician had attacked her in his Manhattan hotel suite before rushing out in a hurry.
"Since her initial allegation on May 14, the accuser has repeatedly lied," one of the law enforcement officials was quoted as saying.
Issues related to the 32-year-old Guinean housekeeper's the asylum application and her possible links to criminal activities including drug dealing and money laundering have raised doubts over her credibility, an official said.
Strauss Kahn was to appear again in a court later in the day to ease the strict bail conditions imposed on him. The paper said Strauss-Kahn could be freed from house arrest.
In fact, senior prosecutors and his lawyers have met to discuss whether to dismiss the felony charges.
Strauss-Kahn, 62, was pulled out of a Paris-bound flight in May and arrested over the allegations that almost ruptured his political prospects. The French politician was considered a strong contender for presidency before the charges appeared forcing him to quit as the Managing Director of the International Monetary Fund.
While the serious charges may be dropped, the district attorney's office may try to require Strauss-Kahn to plead guilty to misdemeanor, but his lawyers are likely to contest such a move, said the Times.
"It is a mess, a mess on both sides," one official said. Prosecutors, who were initially emphatic about the case's strength and the victim's account, plan to tell the judge in the next court meeting that they "have problems with the case" based on what their investigators have discovered, and will disclose more of their findings to the defence.
The woman though still maintains that she was attacked, the officials said.
Among other discoveries that raised doubts in the minds of investigators was a phone conversation the woman had with an incarcerated man discussing the possible benefits of pursuing the charges against Strauss-Kahn.
The man had been arrested on charges of possessing marijuana and is among a number of individuals who made multiple cash deposits, totaling around USD 100,000, into the woman's bank account over the last two years.
Strauss-Kahn's lawyers have already made it clear that they would make the woman's credibility a focus of their case.