July 13 (Bloomberg) -- Former WorldCom Inc. Chief Executive Bernard Ebbers was sentenced to 25 years in prison for orchestrating the largest accounting fraud in U.S. history, an $11 billion scheme that drove his company into bankruptcy.

Ebbers, 63, was tearful as U.S. District Judge Barbara Jones pronounced sentence in Manhattan federal court this morning. After it was over, he embraced his wife. Jones ordered Ebbers to surrender to federal prison on Oct. 12.

The sentence is the stiffest for a CEO since Enron Corp.'s 2001 collapse triggered a string of white-collar prosecutions. Three weeks ago another federal judge gave John Rigas, the 80- year-old founder of Adelphia Communications Corp., a 15-year term for looting the cable television company. His son Timothy, the ex-finance chief, got 20 years.

``Justice was served,'' said New York State Comptroller Alan Hevesi, the lead plaintiff in a civil suit against WorldCom. Defendants in the case, including former officers and directors, 17 investment banks and the accounting firm Arthur Andersen, agreed to pay investors more than $6.1 billion, making it the largest settlement ever in a securities fraud class action.

``This immense fraud was the turning point that caused millions of people to stop investing and cost the U.S. economy tens of billions of dollars in lost economic activity,'' Hevesi said.

`High-Water Mark'

``This is the high-water mark for securities fraud sentences,'' said Kirby Behre, a former federal prosecutor. He said Jones ``technically'' showed leniency by sentencing Ebbers to five years less than the minimum term called for under U.S. guidelines.

``But it's not likely the guy is going to live 25 years anyway,'' he said.

Jones noted that the guidelines called for a sentence of 30- years-to-life for the crimes Ebbers was convicted of. She then gave him 25, saying 30 years was ``excessive.''

Even with good behavior, Ebbers wouldn't be eligible for release before 2027. Jones said she'd consider allowing him to remain free on bail pending the outcome of his appeal.

Ebbers, a former milkman and bouncer who helped found WorldCom, was convicted on March 15 of ordering subordinates to cook the books from 2000 to 2002 by hiding debt and inflating revenue. The collapse of WorldCom, once the No. 2 long-distance company, resulted in the largest bankruptcy in U.S. history.

`Sheer Hell'

Defense lawyers asked Jones to recommend that Ebbers serve his time in the federal facility in Yazoo City, Mississippi, near his home. Yazoo City has a minimum security prison camp for men and also houses low- and medium-security inmates, according to Carla Wilson, a spokeswoman for the U.S. Bureau of Prisons.

Ebbers would not be eligible for the camp because of the length of his sentence, Wilson said.

Most of the inmates at Yazoo City were convicted of drug offenses, and about 4 percent committed white-collar crimes, she said.

Before Ebbers was sentenced, Henry Bruen, 37, a former employee in WorldCom's national sales group, told Jones that he'd been unable to find work since losing his job in 2003.

``This was sheer hell,'' he said. ``Where do I get my life savings back from?''

Ebbers was convicted of conspiracy and securities fraud and seven counts of making false filings to the U.S. Securities and Exchange Commission.

``We can't wait to appeal this case,'' defense attorney Reid Weingarten said after court, citing rulings by Jones that excluded evidence Ebbers claims would have proved his innocence.

`Not a Minor Fraud'

As he arrived for court this morning, Ebbers shoved a news photographer waiting outside. Ebbers, who testified during the trial, declined to speak today before being sentenced.

Defense attorneys appealed for leniency, citing his heart problems and $96 million in charitable donations. Ebbers, who was once worth $1 billion, has also agreed to pay as much as $45 million -- almost all of his remaining assets -- to settle criminal and civil claims by the government, former employees and investors.

``If you live 60-some odd years, and you have an unblemished record, and you have endless numbers of people who attest to your goodness, doesn't that count, particularly on this day?'' Weingarten told the judge.

``This was not a minor fraud,'' Jones said before imposing sentence. ``It seems quite clear to me that Mr. Ebbers was a leader'' of the scheme.

Lifetime Ban

In a related matter today, the SEC filed a civil suit seeking to bar Ebbers from serving as an officer or director of a public company. He agreed to a lifetime ban.

WorldCom lost $184.6 billion in market value from its high in June 1999 to July 2002 when it filed for bankruptcy.

WorldCom emerged from bankruptcy in April 2004 as MCI Inc. and has agreed to be acquired by Verizon Communications Inc.

Prosecutors say Ebbers was responsible for at least $2.22 billion in shareholder losses, that he obtained hundreds of millions of dollars in loans secured by his inflated WorldCom shares and that he obstructed justice by giving false testimony during his trial.

The government's star witness during the Ebbers trial, ex- WorldCom finance chief Scott Sullivan, will be sentenced on Aug. 4. He pleaded guilty to participating in the fraud and is seeking leniency after testifying for prosecutors.

Oklahoma Case Closed

Sullivan told jurors at the trial that beginning in September 2000 he repeatedly urged Ebbers to warn investors about slowing revenue growth and that his boss refused to do so.

``We have to stick with our guidance,'' Sullivan recalled Ebbers telling him.

In Oklahoma, where Ebbers faced a trial in state court on 15 counts of securities fraud, Attorney General Drew Edmondson said today's sentence had obviated the need for any further prosecution on his part.

``Ebbers could spend the rest of his life in federal prison and there is no justification for bringing him here to impose a sentence he will never serve,'' Edmondson said.

Another former chief executive, Tyco International Ltd.'s L. Dennis Kozlowski, is scheduled for sentencing on Aug. 2 in New York state court. Kozlowski and his former finance chief, Mark Swartz, were convicted June 17 of grand larceny, securities fraud and conspiracy. They each face up to 30 years in prison.

Two former Enron CEOs, Jeffrey Skilling and Kenneth Lay, accused of orchestrating a massive accounting fraud, are due to go to trial in January.

The case is U.S. v. Ebbers, 02-CR-1144, U.S. District Court, Southern District of New York.

To contact the reporters on this story: David Glovin in New York at dglovin@bloomberg.net.

Last Updated: July 13, 2005 15:48 EDT