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(Reuters) - Jeffrey Skilling, the former Enron Corp chief executive, could be freed from prison nearly a decade sooner than originally expected, under an agreement with federal prosecutors to end the last major legal battle over one of the biggest corporate frauds in U.S. history.
The agreement calls for Skilling to see his federal prison sentence reduced to as little as 14 years, down from the 24 years imposed in 2006. It could result in Skilling's freedom in late 2018, with good behavior.
In exchange, Skilling, 59, who has long maintained his innocence, agreed to stop appealing his conviction. The agreement would also allow more than $40 million seized from him to be freed up for distribution to Enron fraud victims.
A resentencing became necessary after a federal appeals court upheld Skilling's conviction but found the original sentence too harsh.
Once ranked seventh on the Fortune 500 list of large U.S. companies, Enron went bankrupt on December 2, 2001 in an accounting scandal that remains one of the largest and most infamous U.S. corporate meltdowns.
Thousands of workers lost their jobs and retirement savings, and images were beamed around the globe of staff carrying possessions out of Enron's downtown Houston office tower, past the company's "crooked E" logo.
Wednesday's agreement, which is subject to court approval, recommends that Skilling be resentenced to between 14 and 17-1/2 years in prison, including time already spent there. Skilling has been in prison since December 2006.
"The proposed agreement brings certainty and finality to a long painful process," Skilling's lawyer Daniel Petrocelli said in a statement. "Although the recommended sentence for Jeff would still be more than double any other Enron defendant, all of whom have long been out of prison, Jeff will at least have the chance to get back a meaningful part of his life."
Skilling had worked for Enron for two decades and was chief executive for six months, leaving the company fewer than four months before its bankruptcy.
A Houston federal jury in May 2006 convicted him on 19 counts of securities fraud, conspiracy, insider trading and lying to auditors.
In imposing the 24-year sentence, U.S. District Judge Sim Lake in Houston said Skilling had through his crimes "imposed on hundreds, if not thousands of people a lifetime of poverty."
Skilling's sentence is the longest imposed over Enron's collapse, which also led to the demise of the company's accounting firm Arthur Andersen.
The 5th U.S. Circuit Court of Appeals ordered a resentencing in 2009, but this was delayed as Skilling tried unsuccessfully to persuade appellate courts, including the U.S. Supreme Court, to overturn his conviction.
Lake is now scheduled to resentence Skilling on June 21.
U.S. Department of Justice spokesman Peter Carr said the sentencing agreement "ensures that Mr. Skilling will be appropriately punished for his crimes and that victims will finally receive the restitution they deserve. Mr. Skilling will no longer be permitted to challenge his conviction for one of the most notorious frauds in American history."
Along with WorldCom Inc and Adelphia Communications Corp, Enron was at the center of a series of corporate accounting scandals that led to reforms including the federal Sarbanes-Oxley Act of 2002.
At the 2006 trial, the Houston jury also found Kenneth Lay, who preceded and followed Skilling as Enron's chief executive, guilty of fraud and conspiracy. Lay died in July 2006, and his death led to his conviction being thrown out.
Former Chief Financial Officer Andrew Fastow, considered the mastermind of Enron's fraud, testified against Skilling and Lay and was sentenced to six years in prison.
Fastow was released in December 2011. He declined to comment on Wednesday.
Another former top Enron executive and Skilling confidant, Cliff Baxter, committed suicide less than two months after the company's bankruptcy.
Skilling is being held at a low-security prison for men in Littleton, Colorado, and according to federal prison records could be freed in February 2028.
Federal prisoners like Skilling are expected to serve at least 85 percent of their sentences.
In 2010, the Supreme Court did not overturn Skilling's conviction, but called it into question in concluding that the government relied on an overbroad interpretation of a law making it illegal for someone to deprive others of "honest services."
The next year, however, the 5th Circuit reaffirmed the conviction.
At his October 2006 sentencing, Skilling blamed Enron's demise on a credit and liquidity crunch. "The company did not have enough dry powder to deal with it," he said.
The case is U.S. v. Skilling, U.S. District Court, Southern District of Texas, No. 04-cr-00025.
Reporting by Jonathan Stempel in New York; Additional reporting by Dena Aubin in New York, and David Ingram and Aruna Viswanatha in Washington, D.C.; Editing by Gerald E. McCormick, Chris Reese and Sofina Mirza-Reid