By Jonathan Stempel
NEW YORK, Feb 17 (Reuters) - A U.S. judge found no proofthat federal prosecutors in Manhattan knowingly withheld keyevidence from lawyers for a banker charged with Iran sanctionsviolations, even as she excoriated the government formishandling the case.
In an order on Wednesday, U.S. District Judge Alison Nathanin Manhattan urged the Department of Justice's Office ofProfessional Responsibility to investigate any prosecutorialmisconduct in the case against the banker, Ali Sadr HashemiNejad.
Sadr had been convicted last March after prosecutors accusedhim of funneling $115 million through the U.S. banking system toIran in connection with a Venezuelan construction project.
The case unraveled and the charges were dropped afterprosecutors revealed their inadequate disclosures to thedefense, including when a prosecutor suggested that thegovernment "bury" a key exculpatory document.
Nathan ordered prosecutors last September to explain indetail what happened, and said on Wednesday she still believedtheir failures represented "grave derelictions of prosecutorialresponsibility."
But she said "the court does not conclude that any of theprosecutors knowingly withheld exculpatory information orintentionally misrepresented facts to the court.
"In light of this, and given the systemic nature of theerrors and misconduct that occurred in this case, the court willnot engage in further fact-finding," Nathan added.
A spokesman for U.S. Attorney Audrey Strauss in Manhattandeclined to comment.
Sadr's case was dismissed after Strauss' predecessorGeoffrey Berman said continuing "would not be in the interestsof justice."
Nathan also ordered the release of substantially alldeclarations from prosecutors and related filings in the case,saying the pubic interest in seeing the materials outweighed anyprivacy interests.
The case was an unusual rebuke for the Manhattan U.S.Attorney's office, which has long been known for itsindependence, the quality of its lawyers, and its high-profilecases involving Wall Street, corruption and terrorism.(Reporting by Jonathan Stempel in New York; Editing by BillBerkrot)