When a former investment manager who admitted running a trading scheme that caused more than $27 million in losses was sentenced during the summer to home detention, Maryland's U.S. attorney said he would appeal for jail time to send the message that his office would not go easy on white-collar criminals.

But the appeal was quietly dropped this fall after government lawyers determined there was little chance for it to succeed.

"I think the evaluation correctly reflected the applicable law," U.S. Attorney Thomas M. DiBiagio said last week. "You look at what the law is, and then you move on to the next case."

William F. Mahon, 44, who worked in Owings Mills as manager of Alexander & Alexander's U.S. Treasury investment portfolio during the mid-1990s, began serving his six-month home-detention sentence after the government withdrew its appeal in late September, his attorney said.

As part of his sentence, Mahon also was ordered to spend 2 1/2 years under supervised release and to pay more than $450,000 in restitution, interest and penalties.

"He is serving his sentence, he has paid the fine," said David P. King, a Burlington, N.C., attorney who represented Mahon in the case.

Mahon pleaded guilty in June to charges of defrauding his former employer and failing to report on his income tax returns $190,000 in kickbacks he has acknowledged accepting from a Florida securities dealer who heavily profited from commissions in the trading scheme, federal records show.

Federal prosecutors said they wanted Mahon to receive a 15-month prison term, but U.S. District Judge William M. Nickerson agreed with defense arguments that Mahon was eligible for a probation sentence. King argued that Mahon had cooperated with government investigators for more than five years and said a harsh sentence could deter other criminal defendants from cooperating.

Within hours of the sentencing, DiBiagio said his office would appeal and called Mahon's punishment inappropriately light given the facts of the case and the amount of money lost or put at risk.

According to federal records, Mahon worked with a Florida securities dealer, Dean J. Jupiter, to conceal millions of dollars in unauthorized mortgage-backed derivatives trades. The scheme at one point put at risk as much as $70 million in Anderson & Anderson funds, records show.

The eventual loss to the insurance brokerage was more than $27 million, according to court records. Some of that loss, however, was recovered through other investments.

Federal prosecutors typically do not challenge sentences. In Mahon's case, DiBiagio signed the notice of appeal and filed it the day the home-detention sentence was handed down. In an interview at the time, he said: "The message should go out: We are going to investigate these cases, and we are going to seek substantial prison sentences."

All appeals filed by federal prosecutors, however, must be reviewed and approved by Justice Department appellate lawyers. DiBiagio said it was during that review that it was determined that the appeal was unlikely to be successful and should be withdrawn.

As part of the Justice Department review, King said he advised government lawyers that the case could put the government in an awkward position, from a policy standpoint, if the sentence was upheld in a published appellate-court decision that could influence cases.

King said he was not told why the challenge was dropped.