Sept. 22 (Bloomberg) -- Former Dynegy Inc. tax executive Jamie Olis was resentenced to six years in prison for fraud by the judge whose first sentence, 24 years, was overturned on appeal as too harsh.

Judge Sim Lake in Houston imposed the sentence today after weighing arguments by lawyers for Olis, 40, and the government. A federal appeals court threw out Lake's first sentence last year, saying he miscalculated how much the fraud cost investors and relied too heavily on sentencing guidelines.

Olis's lawyer David Gerger argued in court papers that the sentence shouldn't be as long as those of top executives who looted their companies and committed frauds that in some cases led to bankruptcy. Lake agreed, saying Olis didn't profit from his crimes or destroy the company.

``This is far more in line with type of offense that he committed in light of the position he held within the company,'' said attorney Kirby Behre, co-author of a book on sentencing.

When he handed down the 24-year sentence in 2004, Lake said he had no choice under mandatory federal sentencing guidelines later made advisory by the U.S. Supreme Court.

``I take no pleasure in sentencing you to 292 months, but my job is to follow the law,'' Lake said at the time.

``The judge was given clearer direction that he had discretion, and he used that discretion to impose a far more just sentence than he was forced to the first time around,'' said Behre, a partner at Washington's Paul Hastings Janofsky & Walker.

Falling Share Prices

Olis, former vice president for tax planning at the Houston- based power company, has spent more than two years in prison for his role in what prosecutors said was a scheme to distort Dynegy's financial statements by disguising a $300 million loan as cash flow. The 24-year term was the longest white-collar fraud sentence on record at the time.

The former executive's lawyer argued in court papers that Dynegy's stock price was falling for various reasons in 2002, when the project was publicly revealed. The government's shareholder loss calculation of $100 million also failed to take into consideration rebounds in Dynegy's stock price, they argued.

Dynegy shares fell 1.3 percent to $28.79 on April 3, 2002, the day the Wall Street Journal ran a report that questioned the company's accounting methods.

The shares fell 8 percent, to $19.21 on April 25, 2002, the day after the company reduced its earnings forecast and said the Securities and Exchange Commission had begun an inquiry into accounting methods.

By May 17, 2002, the shares had fallen to $7.02.

Olis's Impact

Prosecutors initially pegged the entire drop in Dynegy's stock price to Olis's fraud, which Lake accepted.

If the judge had found zero loss attributable to Olis, the sentence would have been six months, under the guidelines.

Government lawyers asked Lake to stick with their original loss estimate. They offered him an alternative of $79 million, the tax money the project was intended to save Dynegy.

Lake accepted the alternative, saying shareholder losses ``cannot be reasonably calculated'' on the evidence before him. The correct figure was the intended loss to the U.S. Treasury, he said.

``Olis has led an exemplary life except for'' the criminal tax project, the judge said. ``A lengthy sentence is not needed to deter Olis from future criminal conduct.''

Looking to Skilling

Brian Wice, a Houston criminal appeals lawyer who has closely followed Olis's case, called the six-year sentence a ``bellwether'' for what to expect when Lake sentences Jeffrey Skilling, the convicted Enron Corp. former chief executive officer, next month.

Lake, the attorney noted, said executives who enrich themselves at the company's expense or cause it to fail deserve stiff sentences.

``Before this, we really hadn't seen what Lake will do,'' Wice said.

Gerger, the defense lawyer, asked Lake to scale the sentence to those of former WorldCom Inc. Chairman Bernard Ebbers, 25 years; Tyco International Ltd. Chairman L. Dennis Kozlowski, 8 1/3 to 24 years; and Adelphia Communications Corp. founder John Rigas, 15 years.

Those men were convicted of orchestrating massive frauds that cost their shareholders billions of dollars. Gerger told Lake a 24-year sentence wasn't a deterrent to fraud but was a deterrent to going to trial.

``We're grateful for the reduction,'' Gerger told reporters after the hearing.

Prosecutor Don DeGabrielle called the sentence surprising and said the government will study the decision to determine whether to appeal.

Shares of Dynegy fell 6 cents today to $5.83 in New York Stock Exchange composite trading.

The case is U.S. v. Olis, H-05-CR-217, in the U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

Last Updated: September 22, 2006 17:04 EDT