Sprint chairman William Esrey, 63, spent last week defending his use of a controversial tax shelter that is reportedly responsible for his departure from the company. The Wall Street Journal reported that a boardroom dispute over tax shelters was forcing Esrey and Ronald LeMay, Sprint's chief operating officer, out of the company.

The tax strategy allowed Esrey and LeMay to defer taxes from paper profits for stock options they received in 1999 and 2000.

In defending himself, Esrey referred to the telecommunication company's auditors at Ernst & Young, who recommended the tax shelter.

In a statement Wednesday, Ernst & Young said it provides clients with tax planning "that is appropriate and has the highest probability of being approved if reviewed by the IRS ... Because this policy was strictly adhered to in the case of the Sprint executives, we stand by the tax advice and counsel we provided."

Esrey wrote in a letter to employees Wednesday that in the event that the ruling went against him, it would ruin him financially. But he has been advised by his accountant and lawyer that it is unlikely he'll be charged, he said.

This controversy highlights the vulnerable position of accounting firms post-Enron. Companies and investors are working to eliminate the gray areas in accounting and make the profession more accountable for its consulting. Accounting firms Ernst & Young and KPMG are both faced with lawsuits from former clients charging that the firms pressed them to enter into allegedly illegal tax shelters.

Regulators are cracking down on firms, too. In July 2002, the U.S. Justice Department filed enforcement actions against accounting firms KPMG LLP and BDO Seidman to enforce 29 summonses that request tax shelter documentation.

Also last year, the IRS took a proactive approach to encourage tax shelter disclosure. In exchange for information about disclosed transactions and items, the IRS promised to waive certain accuracy-related penalties that might apply to an underpayment of tax. Consequently, the IRS has uncovered up to $16 billion in claimed losses and deductions.