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By Jonathan Stempel
NEW YORK (Reuters) - A U.S. judge found no proof that federal prosecutors in Manhattan knowingly withheld key evidence from lawyers for a banker charged with Iran sanctions violations, even as she excoriated the government for mishandling the case.
In an order on Wednesday, U.S. District Judge Alison Nathan in Manhattan urged the Department of Justice's Office of Professional Responsibility to investigate any prosecutorial misconduct in the case against the banker, Ali Sadr Hashemi Nejad.
Sadr had been convicted last March after prosecutors accused him of funneling $115 million through the U.S. banking system to Iran in connection with a Venezuelan construction project.
The case unraveled and the charges were dropped after prosecutors revealed their inadequate disclosures to the defense, including when a prosecutor suggested that the government "bury" a key exculpatory document.
Nathan ordered prosecutors last September to explain in detail what happened, and said on Wednesday she still believed their failures represented "grave derelictions of prosecutorial responsibility."
But she said "the court does not conclude that any of the prosecutors knowingly withheld exculpatory information or intentionally misrepresented facts to the court.
"In light of this, and given the systemic nature of the errors and misconduct that occurred in this case, the court will not engage in further fact-finding," Nathan added.
A spokesman for U.S. Attorney Audrey Strauss in Manhattan declined to comment.
Sadr's case was dismissed after Strauss' predecessor Geoffrey Berman said continuing "would not be in the interests of justice."
Nathan also ordered the release of substantially all declarations from prosecutors and related filings in the case, saying the pubic interest in seeing the materials outweighed any privacy interests.
The case was an unusual rebuke for the Manhattan U.S. Attorney's office, which has long been known for its independence, the quality of its lawyers, and its high-profile cases involving Wall Street, corruption and terrorism.
(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot)