Roundly denouncing a Las Vegas federal prosecutor for withholding 650 pages of evidence potentially helpful to two lawyers charged in a stock fraud case, the 9th U.S. Circuit Court of Appeals upheld dismissal of all 64 charges and refused to allow a retrial.

"This is prosecutorial misconduct in its highest form; conduct in flagrant disregard of the United States Constitution; and conduct which should be deterred by the strongest sanction available," wrote Judge Kim Wardlaw.

The panel found the Nevada U.S. Attorney's Office violated the constitutional obligation to turn over potentially exculpatory information to the defense under Brady v. Maryland, 373 U.S. 83 (1963).

Five men, including attorneys Daniel Chapman and Sean Flanagan, were charged in 2003 in a 64-count indictment of a complex securities trading scheme called a "box job," in which a small group secretly control corporate shares and manipulate stock through straw officers and shareholders, according to the opinion in U.S. v. Chapman, 2008 WL 1946744.

The government alleged that the defendants made $12 million, which was allegedly laundered through Flanagan and Chapman's law firm and various corporations.

Assistant U.S. Attorney J. Greg Damm, identified in court records as the trial attorney, assured the defense and the trial judge that he had turned over all documents. But one day before trial in 2006, he announced that the case agent, who was not on the witness list, would testify. None of his statements, memos or notes had been disclosed to the defense.

When the trial judge demanded proof the records were given to the defense, Damm said he could not verify the claim and kept no log of the 400,000 pages of discovery given to the defense.

"We are disappointed with the appellate court's decision," said Natalie Collins, spokeswoman for Nevada U.S. Attorney Greg Brower.

She said her office reported the matter to the Justice Department's Office of Professional Responsibility upon dismissal. "OPR's investigation concluded that the U.S. Attorney's Office did not engage in any intentional misconduct," she said.

The 650 missing pages ultimately included rap sheets, plea agreements and cooperation agreements with witnesses, said C. Stanley Hunterton of Hunterton & Associates in Las Vegas, an attorney for Chapman. He said he was not contacted by the OPR about the investigation.

U.S. District Judge James Mahan dismissed the charges in 2006, saying it was impossible to go on with the trial based on the withheld information.

"There never was an explanation by the government about why the documents were not turned over when the court ordered it," said James L. Sanders of McDermott Will & Emery's Los Angeles office, who represents Flanagan.