A court-appointed special prosecutor has determined that serious misconduct by Justice Department prosecutors tainted the federal investigation and trial of former Sen. Ted Stevens, according to a report released Thursday.

"The investigation and prosecution of U.S. Senator Ted Stevens were permeated by the systematic concealment of significant exculpatory evidence which would have independently corroborated Senator Stevens's defense and his testimony, and seriously damaged the testimony and credibility of the government's key witness," the report noted.

In August 2008, Stevens was indicted on seven counts of false statement charges for allegedly trying to conceal information on his Senate financial disclosure forms related to a renovation project of his home in Girdwood, Alaska, and other gifts including a puppy from a charity event, a massage chair, and a statue of giant salmon.

After a trial filled with legal gaffes, numerous requests for a mistrial by the defense and stunning revelations of the prosecutors withholding evidence Stevens was wrongfully convicted  by a federal jury in October 2008 just days before he faced election for his Senate seat. Shortly after the trial concluded, a key government witness David Anderson came forward and acknowledged that he provided false testimony and that the prosecutors allowed billing records from Anderson to be introduced into evidence although they knew they were inaccurate.

Following a review by a new set of prosecutors in April 2009, Attorney General Eric Holder asked Judge Emmett Sullivan to dismiss the indictment and not proceed with a new trial.

When U.S. District Judge Emmet  Sullivan set aside the verdict in April 2009 and dismissed the indictment Sullivan appointed Washington lawyer Harry Schuelke as special prosecutor to conduct a criminal investigation of the federal prosecutors working on the Stevens case.

The 525-page report catalogs misconduct by prosecutors during the trial, including withholding evidence, wrongfully redacting FBI reports, and sending a witness back to Alaska before the witness could be called by Stevens' defense lawyers from the Washington, D.C. law firm Williams & Connolly.

Schuelke does not recommend criminal charges against any of the prosecutors but he and his co-investigator William Shields, found serious misconduct.

The prosecution charged that Stevens lied on his Senate financial disclosure forms, in effect concealing $250,000 worth of gifts and home renovations from a wealthy oilman, Bill Allen, and his oil services company, VECO.

During the trial Stevens defense lawyers argued that Stevens paid $160,000 for the home renovations and did nothing wrong. The report highlights that the lead FBI case agent, Mary Beth Kepner, did not write reports following interviews with Bill Allen, who had asserted that the work only cost $80,000.

"The value of VECO's work on the Girdwood residence was $80,000, constituted significant …information. However, that information was not recorded in any [FBI reports] and was not disclosed to Williams & Connolly until 2009, after the trial, when the new team of prosecutors took over," the report found.

"The government introduced false business records to boost the value of renovations on the Senator's Alaska home. It also hid from the defense the evidence needed to show that the value was much less than the government claimed, including evidence that its key witness disagreed with the government about the value of the renovations," Stevens defense lawyers Brendan Sullivan and Robert Cary said in a statement.

In a September 2006 phone call intercepted by the FBI that was released at the trial the feisty senator told Bill Allen, "We got a fight out there ahead of us. And we're gonna win it because we didn't do anything wrong."

The report details areas where the prosecutors withheld information from Stevens' defense team including information that could have been used to impeach Bill Allen regarding an investigation into him on statutory rape charges and proof that Allen persuaded a teenage prostitute to commit perjury in an unrelated human trafficking case.

The report found the prosecutors, "possessed documentary evidence of Mr. Allen's subornation of perjury by Ms. Tyree since at least October, 2007."

"The government lied to protect its chief witness and to prevent the defense from using this damning information during cross-examination of Allen. Had the defense been permitted to demonstrate that Allen had previously suborned perjury about his own sexual misconduct, the government's case would have been destroyed." The defense lawyers said in a statement.

During the trial the defense showed documents that Stevens asked Allen for a bill for the work at his home. "You owe me a bill … remember Torricelli, my friend," Stevens wrote, in reference to former Sen. Robert Torricelli, who was ousted from the U.S. Senate amid an ethics investigation. "Friendship is one thing Congressional … ethics rules entirely different."

Allen testified that Stevens had asked for bills for the renovations to his Girdwood home to "cover his ass." This came to be known as the CYA statement in the review.

"Mr. Allen testified in this investigation that the memory of the CYA statement came to him during his flight to Washington, D.C. for the trial, after some prodding by Agent Kepner," the investigative report noted.

The report also disclosed that prosecutors did not conduct a full review of information for items that should have been provided to the defense, or Brady information, in reference to the Supreme Court case Brady vs. Maryland where prosecutors withheld information from the defense team.

"The prosecutors never conducted or supervised a comprehensive and effective review for exculpatory information. The review of the government's files Brady information was conducted by FBI and IRS agents, some of whom were unfamiliar with the facts…unassisted and unsupervised by the prosecutors," the report found.

Following the trial, the FBI's Chad Joy filed a whistleblower complaint with the District Court alleging that the lead FBI agent on the case, Mary Beth Kepner, might have had an inappropriate relationship with Allen, the government's star witness, and that the agent was allegedly telling potential witnesses about grand jury information before trial.

The Justice Department's Office of Professional Responsibility has also conducted a review of the prosecutors. Attorney General Eric Holder has indicated that the internal report may be released at some point. Holder has said there may be sanctions for the prosecutors who worked on the case.

"The department is in the process of making an independent assessment of the conduct and, to the extent it is appropriate and in accordance with the privacy laws, we will endeavor to make our findings public when that review is final," said Justice Department spokeswoman Laura Sweeney.

Ken Wainstein, a defense attorney for prosecutor Joseph Bottini wrote a letter to Attorney General Holder disputing that the misconduct was intentional. "We do take issue-very strong issue-with the finding that these missteps were intentional and were something more than simple human errors on the part of an AUSA who was working under extremely difficult circumstances. That finding of intentional misconduct is completely unsupported by the evidence, and is the product of an investigative process that was marked by selective fact-finding."

Following the trial,  Stevens and his longtime former chief of staff William "Bill" Phillips were killed in a plane crash in a remote part of Alaska along with the pilot and two others in August 2010.  Prosecutor Nicholas Marsh committed suicide in September 2010.

Stevens helped work on statehood for Alaska and had built a reputation as a senator for his ability to secure millions in federal dollars to Alaska, where he was affectionately referred to as "Uncle Ted."   Buildings and facilities all across Alaska, including the state's biggest airport, bear Stevens' name.

In a statement, Stevens' widow Catherine Ann Stevens said, "I find it hard to understand the actions by those who have sworn to uphold our laws. My husband, also a former federal prosecutor, very much wanted to read this report and the yet to be released report by the Office of Professional Responsibility. I am saddened that he is not able to do so."