Microsoft has indeed erected a financial pyramid that has destabilized the global economy, is now destabilizing the U.S. stock market and could indeed destabilize the overall U.S. economy, as evidenced by Boeing's actions. The link to this copyrighted report provides background information on the specifics of this scheme. http://www.billparish.com/msftfraudfacts.html
How the Microsoft Financial Pyramid Scheme Impacts the Boeing
Corporation
Boeing is a cost intensive highly unionized organization and
its workers in the Seattle area are falling behind due to wage increases not
keeping up with the area's true inflation rate. This has resulted in
intense labor conflicts with management. In the last bargaining session
management asked that workers accept more wages in stock options rather than
cash wages yet this is a tough sell to Boeing's workers. Management is
clearly attempting to join a pyramid scheme initiated by Microsoft yet being
denied access by its workers who want real cash wages.
Further complicating the negotiating process is that wage increases at Boeing are heavily influenced by government wage inflation rates yet these official wage inflation rates for the Seattle/Tacoma area do not include stock option wages. Such stock option wages in some years have accounted for almost 75 percent of total compensation at the Microsoft Corporation. After being converted to cash, these stock option gains have been deployed to dramatically increase the cost of housing, goods and services in the area. As a result, Boeing and all other workers with collective bargaining agreements influenced by wage inflation statistics, in particular teachers and nurses, are losing ground to what Parish & Company calls "false inflation."
This is not real inflation resulting from true cost pressures but rather a false inflation resulting from a paper pyramid scheme manufacturing stock certificates on the equivalent of a photo copy machine in Microsoft's accounting department. While Microsoft's own employees think they are being compensated with stock options, they are really being used as a shell to generate tax deductions as one element of an ingenious financial pyramid scheme. This scheme also allows Microsoft to grossly inflate its reported earnings since these stock option wages are not charged to earnings, and thereby inflate the value of its stock. This is important because Microsoft can use its inflated stock value to purchase competitors, new technology, etc.
Since the Boeing Corporation must deduct the cash wages it pays to workers from its earnings yet Microsoft is not required to deduct its stock option wages from earnings, due to an accounting loophole, even though the same tax deduction is provided in each case, Boeing is handicapped in the capital markets. Boeing's stock is essentially deflated because it is being forced to show its wage expense as a deduction from earnings, thereby lowering earnings. Meanwhile, Microsoft's earnings are grossly inflated, drawing more investor interest and forcing Boeing to cut costs in order to improve earnings and thereby raise its stock price.
Many traditional companies have also responded to this situation by merging in an attempt to cut costs and gain more interest in their stock in the capital markets. A good example is GE with its purchase of Honeywell and claim that it will eliminate 50,000 jobs at Honeywell.
Parish & Company believes that the current merger wave, in particular in telecom and financial services, is a direct result of trying to compete with a financial pyramid scheme erected by the Microsoft Corporation. Many of these mergers are not only unproductive but have also seriously undermined the U.S. economy by creating industry dominating predators, two examples being Citigroup and Cisco Systems.
Parish & Company has tried to generate a dialogue on this issue for almost 3 years, calling this form of stock option generated wage inflation in the Seattle/Tacoma area "false inflation." It is truly ironic that the Federal Reserve continues to tinker with interest rates and has yet to address the inflationary impact of this corruption of the financial reporting process. The Federal Reserve has told me that "I am knocking on the wrong door" and that "accounting policies are not within the bank's purview."
The Microsoft Financial Pyramid Destabilizes Government Tax Revenues
Many companies forced to compete with Microsoft for high technology talent
have also issued significant amounts of non qualified stock options. They
basically had no choice, a good example being Intel. These non qualified
stock option wages are taxed as ordinary W-2 wages to employees, even if they do
not sell the stock. This has been an important source of revenue in Oregon
where the top state income tax rate is 9 percent. It has even been
mentioned to me, unconfirmed, that in California the entire state surplus can be
attributed to stock option wages and capital gains at one technology company
alone, Cisco Systems. Parish & Company has been lobbying for a study
of this area for quite some time.
Intel is now the largest source of both individual and corporate tax receipts for the State of Oregon. At a January 12 meeting of Portland's City Club Intel's top executive in Oregon noted that the average wage at Intel is $100,000 His basic message was that the State needed to attract more high tech employment like Intel. He did not disclose what percent of these wages result from stock options and what percent were actually paid in cash wages. In addition, the Portland Tribune featured comments in an article titled "Tech group wants education dollars" on March 20th from this same executive.
Given this situation, Parish & Company is today formally requesting via email to Jim Johnson, Manager, and Craig Barrett, CEO, that the Intel Corporation disclose to the State of Oregon, and specifically to its top economist Tom Potiowsky, its forecast of stock option gains and the resulting tax impact for the year 2001 so that state tax revenues may be adequately forecast.
Unlike his predecessor Andy Grove, Mr. Barrett has been silent on many important issues necessary to bring the technology industry forward and this could present an excellent opportunity to end this silence. Grove's unselfish stands including stating that the tech industry did not need special tax subsidies to compete because such subsidies could introduce distortions to the overall economy, privacy, security and many other issues helped make Intel great. Perhaps Mr. Barrett could even call the Portland Tribune and offer to do a column, which would be a major coup for a new high quality paper like the Tribune. Such a column could be syndicated yet the act of publishing it in a local paper would be noted.
Very important decisions with respect to allocating resources between education, transportation and other services are now being made and the state is entitled to know how to plan around what could be a significant drop in individual tax receipts. This information is already available for 1999 and 2000 given that stock option gains are included in a separate box on employees W-2 wage statements. Isolating the non qualified options that are considered wages from incentive stock options that receive different treatment is easy. It should also be noted that most firms have not issued incentive stock options for years.
Parish & Company also encourages the Portland City Club, what some consider to be the finest such club in the nation, to consider supporting this efforts goals given that both the State Economist and Intel's top Oregon executive have addressed the club in the last 3 months.
Given the national push for a significant tax cut in the federal budget, this
situation has become even more important. Clearly, the federal government
should disclose what percent of individual tax receipts were non qualified stock
option wage gains for 1999 and 2000 and consider that these income levels may be
non recurring given the recent drop in the stock market. To not do so
could risk a sharp increase in interest rates as the government is forced to
return to deficit spending.
Copyright March 22, 2001: All rights reserved. Please also note that several thousand leading journalists, academics and investment professionals view these reports and failure to cite them as your source does seriously impair your credibility, especially if you are a journalist. I now receive numerous comments from journalists surprised that other reporters and analysts use this material without attribution, two notable examples being the SF Chronicle front page story titled Tax Free Routers that was syndicated and repeated in leading publications all over the world, including the Wall Street Journal and Washington Post, and Individual Investors.com's use of material for its analysis of Cisco Systems.
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