Sprint management in flux

Despite Sprint’s desire to keep its management changes under wraps anyone watching the telecoms industry knows the carrier is looking for a new CEO. The move follows speculation that company chairman and CEO William Esrey would be stepping down.

Two-weeks ago it was reported that Sprint was courting Gary Forsee, executive vice president at BellSouth. The carrier later confirmed these rumors only because BellSouth filed a restraining order.

The carrier is trying to prevent Forsee from accepting the position citing a stipulation in his contract that forbids him from joining a competitor within 18 months of his departure. A court in Atlanta is reviewing the case and expects to make a decision as early as this week.

The industry was left to speculate as to why Esrey would leave Sprint at a time when it is one of a handful of large carriers with an experienced and stable executive management team. People thought Esrey just wanted to retire, that he needed more time to focus on his health (he was diagnosed with cancer late last year) or that the company was getting ready to post lower than expected earnings. But all of this speculation turned out not to be true.

According to reports, Esrey is being investigated by the IRS because of a specific tax shelter he used under the advice of Ernst & Young. While the accounting firm would not comment in detail about its client, Ernst & Young has come out and said it stands by its advice.

Many executives apparently have used this specific tax shelter especially in the early 1990s. But the tax shelter has come under IRS scrutiny.

Reports also say that Sprint’s board is pushing Esrey and COO Ron LeMay, out of the company because of a dispute over the legitimacy of the tax shelter and the IRS audit.

It’s nearly impossible for onlookers to judge if there was any wrongdoing or if Esrey and other Sprint executives simply followed bad advice. But it is clear that the telecom industry really can’t stand many more black eyes.