I still think that’s not something you’d want to have come back from a government background check. As long as they they are dutifully reporting the truth of the matter in terms of how the government ruled on the case then that seems like enough.
What your describing sounds like it should stay out of government hands just on an ethical basis
The employer is asking for a background check to minimize losses/insurance payments due to employee theft. If the government background check does not reflect the risk of the individual being involved in theft in the past (for whatever reason), then the employer will find another, perhaps even less ethical provider of information to assess the risk.
What your describing sounds like it should stay out of government hands just on an ethical basis