WASHINGTON (Reuters) - The U.S. Justice Department asked a federal judge on Wednesday to throw out the corruption conviction of former Alaskan Senator Ted Stevens because prosecutors withheld helpful evidence from his lawyers.

Former Republican Senator Ted Stevens of Alaska departs the Federal Courthouse in Washington, October 27, 2008. REUTERS/Hyungwon Kang

Attorney General Eric Holder said he decided to abandon the case against Stevens, a Republican who narrowly lost his bid for re-election last year amid heavy publicity over the case, after a review showed prosecutors did not turn over to the defense information that might have helped Stevens’ case.

In October, a federal jury found Stevens guilty of seven counts of lying on a Senate disclosure form to conceal $250,000 in gifts and home renovations from an oil executive and other friends.

“I have determined that it is in the interest of justice to dismiss the indictment and not proceed with a new trial,” Holder said as department prosecutors filed a motion in federal court to set aside the jury verdict and throw out the charges.

The decision to drop the high-profile case was a major embarrassment for the Justice Department. U.S. District Judge Emmet Sullivan immediately set an April 7 hearing on the department’s request.

Stevens, 85, -- who had been the longest-serving Republican in the U.S. Senate -- said he is grateful the department acknowledged that he did not receive a fair trial.

“I always knew that there would be a day when the cloud that surrounded me would be removed. That day has finally come. It is unfortunate that an election was affected by proceedings now recognized as unfair,” he said in a statement.

Allegations of prosecutorial misconduct had delayed the sentencing of Stevens, who was narrowly defeated in the November election by Mark Begich, a Democrat. The case was cited as one reason for the loss.

Stevens had faced up to five years in prison on each count, but under federal guidelines was likely to get much less prison time or just probation if he had been sentenced.

CONCEALED EVIDENCE

Stevens’ defense attorneys had sought to overturn the conviction, citing a whistleblower complaint by an FBI agent who said another agent and prosecutors improperly concealed evidence helpful to Stevens.

U.S. prosecutors are required to fully disclose evidence to defendants.

Earlier this year, Sullivan, the presiding judge in the case, ordered three Justice Department attorneys held in contempt for failing to turn over documents to Stevens’ legal team.

The department said in court documents filed on Wednesday it failed to turn over to the defense for use at trial notes from an interview in April last year with Bill Allen, the former head of an Alaska oil-services firm and the prosecution’s star witness.

It said Allen in the interview estimated the value of the renovation work at Stevens’ home to be far less than what he testified at trial and said he did not remember talking to a mutual friend about a bill for Stevens for the work.

The Justice Department said the interview notes, which contradicted Allen’s crucial testimony at trial, were discovered and turned over to the defense only last week.

Holder said the department’s Office of Professional Responsibility, which probes allegations of prosecutorial misconduct, will conduct a thorough review of the case.

Brendan Sullivan and Robert Cary, the main defense lawyers, called for a full investigation. “Not only did the government fail to disclose evidence of innocence, but instead intentionally hid that evidence and created false evidence that they provided to the defense.”

Stevens, who had a reputation for being hot-tempered during his career in Washington, was a ranking member of the Senate Appropriations Committee known for his ability to bring federal funding to his sparsely populated state.

“It’s time for Senator Stevens, his family and Alaskans to move on and put this behind us,” Begich, his Democratic successor in the Senate, said.

Senate Republican Leader Mitch McConnell said, “It was disappointing to lose the seat, no question about it. Also no question that if this decision had been made last year he’d still be in the Senate.”

Republican Senator Lisa Murkowski, also of Alaska, welcomed the Justice Department’s decision, but said, “I am deeply disturbed that the government can ruin a man’s career and then say ‘never mind.’”

If Stevens had been re-elected, Democrats still would have controlled the 100-member Senate. But the number of Republicans would be 42 rather than 41.