WASHINGTON – A federal judge has dismissed corruption charges against former Sen. Ted Stevens and opened a criminal investigation into prosecutors who mishandled the case.

U.S. District Judge Emmet Sullivan said the misconduct was the most serious he has ever seen in nearly 25 years on the bench. He appointed attorney Henry Schuelke (Shul-KEE) as special prosecutor to investigate the Justice Department team for possible criminal contempt charges.

Sullivan made the unusual move Tuesday shortly before dismissing corruption charges against Stevens. Stevens was convicted in October of seven counts of lying about gifts he received from wealthy friends.

An Alaska Republican, Stevens narrowly lost his re-election bid shortly after the verdict.

WASHINGTON – The Justice Department asked a judge Wednesday to toss out the corruption conviction of former Sen. Ted Stevens because prosecutors withheld evidence from his defense team.

The department is abandoning a hard-fought victory that had turned into an embarrassment. The prosecutors who handled the trial have been removed from the case and their conduct is under investigation.

The case cost Stevens the Alaska seat he had held since 1968.

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

A week after his conviction, Alaskans voted by a narrow margin to oust Stevens in the November election. The patriarch of Alaska politics since before statehood, Stevens, 85, also was the longest serving Republican senator.

He appealed his conviction and had been awaiting sentencing.

Stevens was convicted of seven felony counts of lying on Senate financial disclosure forms to conceal hundreds of thousands of dollars in gifts and home renovations from a wealthy oil contractor.

The trial was beset by government missteps, which continued even after the guilty verdict was read. The trial judge grew so infuriated he took the unusual step of holding the Justice Department in contempt.

In court filings, the Justice Department admitted it never turned over notes from an interview with the oil contractor, who estimated the value of the renovation work as far less than he testified at trial.

“I have determined that it is in the interest of justice to dismiss the indictment and not proceed with a new trial,” Holder said in a statement released Wednesday. He said the department must ensure that all cases are “handled fairly and consistent with its commitment to justice.”

The Justice Department is seeking to have the indictment against Stevens dismissed. If U.S. District Judge Emmet Sullivan agrees, Stevens’ conviction would be vacated. The judge has scheduled a hearing for Tuesday.

Stevens’ attorneys praised Attorney General Eric Holder as “a pillar of integrity” for his decision to disregard a jury verdict that they said was obtained unlawfully.

“In essence, the government tricked the jury into returning a tainted verdict against the senator based on false evidence,” Stevens’ lawyers Brendan Sullivan Jr. and Robert Cary said in a statement.

“This case is a sad story and a warning to everyone. Any citizen can be convicted if prosecutors are hell-bent on ignoring the Constitution and willing to present false evidence,” their statement said.

In December, Stevens asked a federal judge to grant him a new trial or throw out the case, saying his trial had many deficiencies.

Judge Sullivan held Justice Department lawyers in contempt in February for failing to turn over documents as ordered. He called their behavior “outrageous.”

The judge had ordered Justice to provide the agency’s internal communications regarding a whistle-blower complaint brought by an FBI agent involved in the investigation of Stevens. The agent objected to Justice Department tactics during the trial, including failure to turn over evidence and an “inappropriate relationship” between the lead agent on the case and the prosecution’s star witness.

The decision was first reported Wednesday by National Public Radio.

William Canfield, a former Stevens staffer and longtime friend, said the trial’s effects may never be undone. He said Democrats used the taint of Stevens’ legal problems as a campaign issue not just in Alaska, but in election challenges to his friends and allies, including Republican Sens. John Sununu, who was defeated, and Norm Coleman, whose close race is still being decided in court.

Sen. Mark Begich, the Democrat who won Stevens’ seat, called the decision to drop the case “reasonable.”

“I didn’t think Senator Stevens should serve time in jail and hopefully this decision ensures that is the case,” Begich said in a statement.

ANCHORAGE, Alaska – Alaska’s incoming senator is bullish on gun rights, wants to open the Arctic National Wildlife Refuge to oil and gas drilling and believes less government is better. And he’s a Democrat.

But “definitely different than a New York Democrat,” says Mark Begich. “I’m from Alaska.”

Begich, the 46-year-old, two-term Anchorage mayor, will take office in January after narrowly defeating 85-year-old Ted Stevens, the longest serving Republican in the history of the Senate. Part of Stevens’ undoing in his bid for a seventh term was his conviction on federal felony charges last month.

With Republican Gov. Sarah Palin and 51-year-old Republican Sen. Lisa Murkowski, Begich represents the face of a shifting political landscape in the nation’s northernmost state, and arguably its most misunderstood.

Begich says he’s part of a generational break with Stevens and others in the state’s political old guard, a theme the 44-year-old Palin, the defeated Republican vice presidential candidate, has often used to define herself.

Begich says his concerns are in large part bipartisan, in contrast to the rigid orthodoxy often practiced in Washington. He warned that party leaders there shouldn’t look for a rubber stamp from his office, even when trying to round up votes to break Republican filibusters on the Senate floor.

As a Democrat from a a state long regarded as a conservative GOP stronghold, Begich hopes to use his party-bridging style to political ends, such as winning over Congress on drilling in the refuge, an issue that has been stalled for years.

Asked about Palin, Begich singled out one of Palin’s signature issues: building a pipeline to tap the vast natural gas reserves on Alaska’s North Slope.

“Right now, I think her issues are very similar to mine. We need to create jobs and opportunity for the state.”

Palin, who at one point called for Stevens to step aside, issued a brief statement a day after Begich’s victory Tuesday declaring, “this is a new era for Alaska.”

Stevens has served for four decades in the Senate, earning a reputation for extracting billions of dollars in federal aid for his home state. He is of the same generation as former Gov. Frank Murkowski, 75, who was ousted by Palin. Unlike Stevens’ famously cantankerous personality, Begich is known for being affable, approachable, polite.

To some, the changing of the political dynamics in Alaska was inevitable.

“There’s not much left of anybody’s old guard,” said state  Rep. Mike Doogan, an Anchorage Democrat. “There aren’t that many of Ted Stevens’ contemporaries walking around above ground.”

Part of the change in Alaska politics is not just new faces in office – it comes from its large transient population. Workers who come from elsewhere in search of jobs don’t have much loyalty to long-serving politicians such as Stevens or Rep. Don Young, a Republican now headed for his 19th term after a tight race.

Stevens’ pursuit of a seventh term was damaged by his conviction in federal court – just days before the election – for lying on Senate disclosure forms to conceal more than $250,000 in gifts and home renovations from an oil field services company. Young also is being investigated for his connections to the same firm, VECO Corp.

He says he’s done nothing wrong. Palin’s was elected after promising to take on Exxon Mobil Corp., ConocoPhillips and BP, the multinational energy companies that long dominated the state’s biggest industry. Her proposals included a hefty tax hike on oil production and a natural gas pipeline plan that the companies fought.

“The Alaska legislature has been essentially subservient to the industry since 1977, when oil production began,” said University of Alaska Anchorage historian Steve Haycox.

“That’s changing. Alaskans have come to realize they can exert more leverage on the industry without harming the state’s economic profile.”

ANCHORAGE, Alaska – Republican Sen. Ted Stevens, a stalwart of Alaska politics who was convicted of felony charges last month, trails his Democratic rival by more than 800 votes and many of the outstanding ballots come from parts of the state that have favored the challenger.

Even a Republican pollster and Stevens’ friend said his chances for re-election to a seventh term were slim.

“When he came back from the trial and began to campaign personally, it really made a difference,” said David Dittman.

“That doesn’t change anything for all those votes that were cast earlier.”

Mark Begich, the two-term mayor of Anchorage, holds an 814-vote lead with ballot counting resuming on Friday. State election officials said they planned to count 10,000 votes, and the bulk of the rest – about 25,000 – on Tuesday.

Neither candidate was claiming victory nor conceding defeat. Begich said he was “very pleased we’re ahead of the game,” but added, “I can’t predict anything at this point.”

Roughly 15,000 of the remaining ballots come from Anchorage and the surrounding region where Begich is leading. Nearly 9,000 more are from the state’s southeastern panhandle, which Begich is winning handily. Votes from both areas won’t be counted until Tuesday.

Of the votes to be counted Friday, about 5,000 come from the Matanuska-Susitna Borough north of Anchorage, a conservative area home to Gov. Sarah Palin. Stevens has been leading in that area by a margin of 2-to-1. Also to be counted were votes from the interior city of Fairbanks and surrounding areas, where Stevens has a slight lead; and the vast Alaska Bush, where Begich is winning easily Dittman said most of the ballots being counted now were cast in the weeks before the election.

Absentee ballots went out Oct. 14; Stevens was convicted Oct. 27 of lying on Senate disclosure forms to conceal more than $250,000 in gifts and home renovations from an oil field services company.

Statewide, about 15,000 of the remaining votes are questioned ballots, known elsewhere as provisional ballots. They are most commonly cast by people who are voting away from their home polling places. Ivan Moore, an Anchorage pollster who has worked for Democrats, said voters out of the area tend to be younger, single and more likely to vote Democratic.

“I just don’t see a significant bloc of votes that’s remaining for Ted to get him back into this,” Moore said. Begich was winning votes in military installations and the state’s remotest areas, both historical strongholds for Stevens.

The Democrat contends that Stevens’ return wasn’t enough to win over those who supported him in the past.

“His base of support – during the trial, prior to the conviction, and now – didn’t stay with him,” he said of Stevens.

“His core vote areas, those guys said no. They changed votes.” Stevens’ campaign didn’t return calls seeking comment.

“Ted Stevens’ resignation from the Senate is long overdue.  If Stevens fails to resign, the Senate should stop protecting him and move quickly to expel him.”

Senator John McCain, the Republican presidential nominee, called for the resignation of his longtime colleague, Senator Ted Stevens, who was convicted on Monday of seven felony counts related to violations of federal ethics laws.

Alaska Sen. Ted Stevens vowed to fight his Monday conviction on federal corruption charges, a verdict he attributed to “repeated instances of prosecutorial misconduct.”