KANSAS CITY, Mo. (AP) _ Sprint Corp. has replaced longtime auditor Ernst & Young, which came under fire from some shareholders because of tax shelter recommendations it made to Sprint's top two executives on how to deal with their stock options.

Sprint announced Tuesday that the audit committee of its board of directors chose KPMG as auditor for fiscal 2004. Ernst & Young will complete the 2003 audit.

The Overland Park, Kan.-based company also said it would cap executives' severance packages at two times their base salaries and bonuses in the event another company bought Sprint. The policy was adopted in response to another shareholder vote.

Ernst & Young has been the auditor for Sprint and its predecessor since 1965, and never before has had competition to keep the assignment. But at Sprint's annual meeting in May, 38 percent of shareholders, an unusually high percentage, voted against reappointment of Ernst & Young.

``We are impressed with KPMG's extensive experience in providing audit services to major corporations, especially the talented team that the firm has identified to handle the Sprint account,'' said Charles Rice, chair of the audit committee.

Ernst & Young spokesman Charles Perkins said, ``We have enjoyed our relationship with Sprint over the past several decades, and we will work closely with the audit committee and management during the transition period.''

The AFL-CIO had called for Sprint to switch auditors, complaining that Ernst & Young had compromised its independence through its tax strategy advice for William T. Esrey, then the Sprint CEO, and Ron LeMay, its chief operating officer. The executives have said the tax shelters were recommended to them by the accounting firm, which has continued to stand behind the tax advice.

Despite the controversy, Rice said the board was ``pleased with the professional auditing services'' Ernst & Young had provided Sprint.

Michael Garland, a spokesman for the AFL-CIO's investments office in Washington, said it is unfortunate Sprint's audit committee did not act sooner. He called the switch ``an important step to restore investor confidence in the company and its auditor.''

Meanwhile, Cornish F. Hitchcock, a Washington attorney for Amalgamated Bank's LongView investment fund, said he would like more details about the directors' new policy on ``golden parachutes.'' The investment fund proposed a shareholder vote when any severance package is more than double the executives' base salary plus bonuses.

Hitchcock said he would like to see how the board defines salary and bonuses to determine what kind of agreements need shareholder approval.

Hitchcock said he also was concerned that the board's new policy applies only when there is a change of control, and ``usually, that means there is a takeover.''

Sprint also said Tuesday that the federal government has decided not to bar the company from new contracts. The General Services Administration had considered suspending business with Sprint because it overcharged the Justice Department more than $2 million.

Sprint's government contracts are worth more than $600 million each year.

Sprint also created a lead independent director position and added a committee to focus on corporate governance matters.

The company expects to add new independent directors at a board meeting in December.


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