Is former WorldComm CEO Bernard Ebbers getting off easy with 25 years in prison? Maybe. Under new federal white-collar crime sentencing guidelines that didn’t apply to his case, his penalty would have been life without parole.

While Ebbers’ crimes were egregious, this same type of harsh fate is a possibility now for U.S. executives found guilty of a crime that caused their company’s market capitalization to decline by a relatively paltry $2.5 million.

In some instances, the penalties for first-time offenders will match those in murder cases, says Jim Felman, chairman of the American Bar Association’s committee on sentencing.

Felman, who practices law with Kynes, Markman & Felman P.A. in Tampa, Fla., and has followed sentencing practices since the late 1980s, is nervous about such severe penalties. “To routinely incarcerate first-time nonviolent offenders for lengths of time previously reserved for someone who had killed someone is something we should think very carefully about,” he says.

Welcome to the new rules set by of the U.S. Sentencing Commission, a group of seven people appointed by the president and approved by the Senate.

In the late 1980s and into the 1990s, federal sentencing guidelines were uneven, sending youthful drug offenders to jail for life while white-collar criminals got much lighter sentences. To deal with the disparity, the sentencing commission went to work updating its guidelines. About the time it finished and its efforts became law, the Enron wave of scandals broke. However, penalties cannot be applied retroactively. Still, Congress, facing an angry public, wanted to do something. But rather than explain the new guidelines (which took effect in November 2001), it pushed for even stiffer laws in the sweeping Sarbanes-Oxley law.

The sentencing commission took what Congress approved and turned it into a system that meshed with the 2001 laws, but added a point system that increased penalties. If you are an executive or director who is convicted, you get points. The points go up if the crime affected large numbers of victims. Same if a public company was involved. Felman says under the new system if the loss is $50 million or more, even a mid-level officer who had knowledge of the crime faces life without parole.

“My point is that in the future there will be cases where the defendants are not quite so notorious (as Ebbers) and deserving of such harsh penalties,” says Felman.

The new laws do include a loophole.

“If you cooperate, the judge can toss the guidelines out the window,” Felman says. “You can imagine the pressure to lie. It will be an absolutely overwhelming motive to not just cooperate but say what the judge wants to hear. It really has the potential to skew the truth-seeking function.”

While it is unlikely Congress will go back and reduce penalties, the U.S. Supreme Court ruled in a case early this year that such sentencing rules were unconstitutional if mandatory. Now they are advisory, but Felman expects the U.S. Justice Department and others to closely watch how judges employ their discretion.

— Tim McClain