Labor union asks Sprint to replace auditor

? The AFL-CIO on Wednesday asked Sprint Corp. to appoint a new independent auditor, claiming Ernst & Young compromised its independence by selling questionable tax shelter advice to Sprint’s top two executives.

The AFL-CIO also promised to launch a campaign urging shareholders to vote against the reappointment of Ernst & Young should Sprint fail to put forward a new auditor at its annual shareholder meeting in May.

The AFL-CIO said it is trying to protect the pension plans of union members. It estimates that worker pension funds own about 16.45 million shares of Sprint stock.

“We feel that replacing the auditor is the predicate to restoring investor confidence in the company,” said William Patterson, director of the AFL-CIO’s investment office.

William T. Esrey, the former CEO of Sprint who was replaced last week by Gary Forsee, and Ronald T. LeMay, the Overland Park-based company’s chief operating officer, have both acknowledged they are being audited by the IRS.

Sprint said it stood behind its auditor.

A spokesman for Ernst & Young did not return phone calls seeking comment Wednesday, but the firm has defended its work as legal.

In a letter Wednesday to Irvine O. Hockaday Jr., the lead independent director of Sprint’s board, Richard L. Trumka, secretary-treasurer of the AFL-CIO, said Sprint paid Ernst & Young $5.8 million for the creation of the tax shelters, $5.1 million for audit-related services and $8.4 million for other services.

“Ernst & Young received more income from the Company in 2000 as a result of its tax evasion advice than it did from auditing Sprint’s books … We believe this unbalanced fee structure compromised Ernst & Young’s independence,” Trumka wrote.