Oct. 23 (Bloomberg) -- Jeffrey Skilling, Enron Corp.'s former chief executive officer, was sentenced to 24 years and four months in prison and must forfeit $45 million for directing a massive fraud that destroyed the company and made its name synonymous with corporate wrongdoing.

U.S. District Court Judge Sim Lake sentenced Skilling today in Houston federal court after seven victims described how the fraud upended their lives. Lake recommended Skilling serve his term at a prison in Butner, North Carolina, while denying a prosecution request that he be jailed immediately. Skilling, 52, received the minimum sentence he faced under federal guidelines that suggest between 24 and 30 years.

``Skilling and his attorneys argue that the guideline range would be tantamount to life in prison,'' the judge said after hearing a defense request for a seven- to 10-year term. ``But as the many victims of his crime have so poignantly explained, his crimes have imposed on them a life sentence of poverty.''

Enron, once the seventh-biggest U.S. company by sales, had a market value of more than $68 billion before its bankruptcy in December 2001 wiped out more than 5,000 jobs and at least $1 billion in retirement funds. It was the second-largest bankruptcy in U.S. history, after WorldCom Inc.'s collapse in July 2002. Enron investors claim they lost $30 billion.

Stared Down

Kenneth Lay, Enron's former chairman, was convicted with Skilling in May of orchestrating a fraud that used off-the-books partnerships to hide debt and inflate income. Lay died from a heart attack at age 64 in July, before he could be sentenced. Lake voided Lay's conviction last week under federal law requiring a dismissal when a defendant is unable to appeal.

During his sentencing, Skilling's mouth was clenched as he listened to victim testimony. The former CEO looked at each person as they spoke, clasping his hands so tightly that his knuckles went white. Upon hearing his sentence, he stared down at the ground. His wife Rebecca began to cry, placing her head in her hands.

``The evidence establishes that the defendant repeatedly lied to investors,'' the judge said before pronouncing sentence.

Lake denied the ex-CEO's request to stay out of prison while he appeals, a ruling Skilling's lawyers said they would appeal. Lake didn't set a date when Skilling must report to prison, where he will be required to enter drug and alcohol treatment.

No Parole

Under federal law, criminal defendants can get two months shaved off their sentence for every year of good behavior, said David Irwin a former federal and state prosecutor who now practices in Towson, Maryland. There is no parole for federal crimes. Since Skilling was sentenced to more than seven years, he can't serve his term in a minimum security facility, Irwin said.

``Today's sentence is a measure of justice for the thousands of people who lost their jobs and millions of dollars in investments when Enron collapsed under the weight of the fraud perpetrated by the company's top executives,'' said Alice Fisher, an assistant U.S. attorney general, in a statement.

In recent corporate fraud cases, former WorldCom Chairman Bernard Ebbers was sentenced to 25 years, Tyco International Ltd. Chairman L. Dennis Kozlowski received an 8 1/3 to 24 year term, and Adelphia Communications Corp. founder John Rigas got a 15 year sentence.

Christopher Bebel, a former U.S. Securities and Exchange Commission lawyer in private practice in Houston, said Skilling's sentence ``reflects the highly egregious nature of the deceit that was engaged in and it adequately accounts for the billions of dollars of losses that trusting investors sustained.''

Basis for Appeal

After the hearing, Skilling said he felt he has a good basis for appeal.

``Deep down -- and this is no act -- I believe I'm innocent,'' he said. ``People say Jeff hasn't shown remorse, but that's not true. My life has been a nightmare. I fell off a rock cliff once, and I lived, and sometimes now I wish I hadn't.''

Standing next to his lawyer, Skilling told a crowd outside the courthouse that he felt remorse for what happened at Enron.

``Those people who lost their retirements, they can't start over and that's a terrible thing,'' he said. ``But that's not to say I did something wrong.''

Skilling was ordered to pay the $45 million in restitution out of his assets, some of which were frozen by the U.S. government. He will be paying out almost everything he owns, including proceeds from the sale of his home.

``It will leave Mr. Skilling with virtually no assets, as is appropriate,'' prosecutor Sean Berkowitz said at the hearing.

`Sends a Message'

The money, which will be withheld pending Skilling's appeal, will go to the fraud's victims in a restitution fund to be administered by U.S. District Judge Melinda Harmon of Houston, who presides over the civil class action lawsuits against former Enron officers and banks. Skilling will be allowed to pay an additional $15.5 million to his lawyers, who Berkowitz told the court will ``still be out about $20 million.''

Brian Wice, a Houston appellate lawyer who was at the hearing, said Skilling's sentence ``sends a message that the captain of the ship is responsible for what happens on his watch.''

Michael Ramsey, who served as lead defense attorney for Kenneth Lay, disagreed with the length of the prison term.

``For Skilling to receive so much above what Andy Fastow drew is retaliation or retribution,'' Ramsey said, referring to the former Enron chief financial officer and star government witness who received a six-year sentence earlier this month. Ramsey added that Skilling's grounds for appeal are promising.

Butner Complex

``Skilling has many issues that can be appealed, with venue being the major issue,'' the lawyer said, referring to Lake's refusal to move the trial out of Houston, where Enron was based. The defense argued the jury pool would be tainted by people affected by Enron's collapse. ``There are so many close calls in this case,'' Ramsey said.

The Butner Federal Correctional Complex, where Skilling is likely to serve his sentence, is northeast of Durham, North Carolina. It houses 3,624 men in one low- and two medium-security prisons, a minimum-security camp and a medical facility, according to Felicia Ponce, a spokeswoman for the U.S. Bureau of Prisons. The facility offers work and educational training, including small business classes, she said.

Lake placed Skilling on electronic monitoring and confined him to his home except for visits to his doctor, church and treatment for substance abuse or psychiatric disorders. Skilling, convicted of 19 counts including securities fraud, conspiracy and insider trading, may never again serve as an officer or director of a publicly held company.

Founded Enron

Lay founded Enron in 1985 by merging Houston Natural Gas, where he was CEO, with Omaha, Nebraska-based InterNorth Inc., another pipeline company. Skilling came to Lay's company in 1990 from McKinsey & Co., a consulting firm he joined after his 1979 graduation from Harvard Business School, where he received a master's degree. InterNorth had been a McKinsey client.

Skilling became Enron's president and chief operating officer in 1997 and CEO in February 2001, replacing Lay. Skilling quit that August, four months before Enron's bankruptcy filing.

Skilling said during his sentencing that Enron's credit problems led to the company's collapse, not wrongdoing by him.

Enron failed because of a ``severe liquidity event in the last week of October 2001,'' he told Lake, adding that ``when events started to unravel, the company didn't have enough dry powder to deal with it. That's the sum of what I think happened at Enron. But I wasn't there, and there isn't enough I can say about how much I wish I was there. Not to say I could've changed it.''

`Persecuted'

Before Lake handed down his sentence, he allowed the testimony of people both in favor of a stiff sentence for Skilling, and those urging leniency.

Two people, including Skilling's assistant, Sherri Sera, spoke in support of the former CEO.

``Skilling cared for and does care deeply for the Enron employees,'' Sera told the judge. ``It is my opinion that Jeff Skilling has been persecuted for five years.''

Seven witnesses testified how Enron's collapse negatively affected their lives.

``The worst mistake Ken Lay ever did was to bring you in and have you run the company, which was a company we all loved,'' said Anne Beliveaux, 64, who worked at Enron for 18 years as a senior administrative assistant in the tax department. She said she lost more than $500,000.

`Liar and a Thief'

Dawn Powers Martin, who worked for 22 years at Enron, called Skilling ``a liar and a thief,'' at the hearing. ``He betrayed everyone who trusted him,'' she said. Turning to Skilling, she said, ``While you dined on chateau briand and champagne, we were clipping coupons.''

Diana Peters, who told Lake she worked at Enron for 11 years as a computer technician, said she found out she was losing her job and health insurance soon after her husband was diagnosed with inoperable cancer. She has since sold her house and all her furniture, she said.

``I'm asking you today, judge, I'm begging you today, to give Jeff Skilling the maximum,'' she said.

After Lay's death and Fastow's decision to cooperate with prosecutors, Skilling was left as the most visible target for people's ire over Enron's collapse, according to Robert Mintz, a former federal prosecutor.

``He had the cross-hairs on him in terms of getting the most substantial sentence,'' Mintz said. ``He and his lawyers knew he was facing somewhere in the neighborhood of 30 years.''

The case is U.S. v. Skilling, 04-cr-25, U.S. District Court, Southern District of Texas (Houston).

To contact the reporters on this story: Thom Weidlich in Houston federal court at tweidlich@bloomberg.net and; Laurel Brubaker Calkins in Houston federal court at laurel@calkins.us.com.

Last Updated: October 23, 2006 21:00 EDT