Tuesday, April 18, 2000 6:00 am Eastern Time
Based upon a review of SEC filings for the quarter ending 9/30/99, the Microsoft Corporation no longer pays federal income tax on current income. Taxes now paid are from prior years that were deferred into the future. What this means is that someone cutting hair at Great Clips for $10 per hour now pays more federal income tax than the Microsoft Corporation.
The following reconciliation supports this conclusion for the quarter ending 9/30/99 and is consistent with results for the quarter ending 12/31/99.
$ in billions
Income Before Taxes $3.320
Adjustment ( 3.471)
Adjusted Taxable Income (. 151 billion) Since there is no taxable income, the federal tax owed is zero.
Adjustment Calculation: $1.215 billion from the cash flow statement line titled "Tax Benefit From Exercise of Stock Options" is divided by .35 or 35 percent to get the deduction for stock option wages taken in the quarter and not charged to earnings. This amount is $3.471 billion.
Meanwhile, Bill Gates is strolling the halls of Congress with the swagger of a national hero. At the same time back in Redmond his investment manager is aggressively selling his inflated Microsoft stock and making large investments in the so called traditional economy while all his media outlets, including MSNBC articulate the glories of the new economy. Even the Wall Street Journal did a major editorial last week titled, "Why now is the time to buy Microsoft." These are scenes one would expect to see in Jakarta, Indonesia, not Washington D.C.
One has to wonder how hard working tax paying voters in these Senators' and Representatives' Districts would feel if they knew this amazing fact. Perhaps Bill Clinton himself does not realize that Microsoft now pays no federal income tax. Of course the company has never paid a dividend to shareholders either. That is tough to do when you have 6 billion shares outstanding, including 800 million still owed to employees.
This will be a true test for Microsoft's brilliant public relations staff. They will probably say, yes, we pay tax. What they wont say is that those taxes are from past years that were deferred into the future. The point is that on their current sales they dont pay a dime of federal income tax.
Equally surprising is that most of Microsoft competitors without profits are paying staggering amounts of federal income tax via stock options exercised by employees. The Federal budget has been effectively balanced on the backs of Microsofts competitors.
Amazon.com has never earned a profit yet its employees have paid more than $300 million in federal income tax as they exercised stock options, even if the stock is not sold. This is a windfall for the government because the company cant utilize the tax deduction because Amazon.com has no profits. Microsoft is able to fully utilize its tax deductions and so it is effectively a wash to the IRS, the employee pays but the company takes a deduction and so the net income to the IRS is close to zero.
My calculations indicate the NASDAQ could decline by more than 50 percent and the government would still not be greatly affected because the gains on stock options and related tax revenues would still be dramatic. Within two years wages will also rise, creating more revenue, therefore, the government should not fear initiating reforms now. The timing is excellent.
Now might be a good time to call your local representative or media organization or favorite talk show host and ask why you have not been told that Americas most high profile company that prides itself on the freedom to innovate is running what looks like a financial pyramid scheme and no longer pays federal income tax on massive current revenues.
The Gates 7 Featured in the Upcoming Book "Microsoft's Class War On America."
My upcoming book, Microsofts Class War on America also highlights the Gates 7. These are the people mostly responsible, whether by accident or design, for creating this massive breakdown of our free market system. This situation is responsible for destabilizing the global economic system and creating the single greatest threat to our economic prosperity as a nation.
They are Slade Gorton, US Senator from Washington, Robert Rubin Former Treasury Secretary, George W. Bush Governor of Texas, Mike Brown Former CFO of Microsoft, Greg Maffei- Former CFO at Microsoft, Bob Herbold - Chief Operating Officer at Microsoft and Myron Scholes, a Nobel Prize winning Economist and partner in the Long Term Capital Hedge Fund.
Slade Gorton has publicly insulted Judge Penfield Jackson who, appointed by Ronald Reagan, did a fair and efficient job of handling the DOJ anti-trust trial. This is an important trial for every American because Microsofts stifling innovation here in the US has resulted in most of the more significant technology innovations now occurring in other countries. Gorton has also marshaled large lobbying groups on Microsofts behalf, including the Citizens for a Sound Economy. This group aggressively supports Microsoft, even after receiving numerous versions of my study for months, and also advocates litigation reforms that would make it much harder to sue a company like Microsoft for financial losses.
Robert Rubin, as Treasury Secretary, could have effected a rule change to remedy this situation, as proposed interestingly by John McCain in the mid 1990s. Instead, he later went to Citicorp as co-Chairman only a few months after resigning as Treasury Secretary after the Banking Deregulation bill was passed. The main beneficiary of this deregulation is Citicorp, which together with Microsoft now dominates the processing of electronic financial transactions.
George W. Bush has publicly said that he would dismiss the Microsoft anti-trust case if elected President and is rallying public opinion around Microsoft. He also receives significant support from Microsoft and although his staff has been made aware of this situation on 3 occasions, he apparently has no interest in addressing it. This is ironic because his fathers first speech as President was to alert the nation to the Savings and Loan situation while today George W. Bush is instead contributing greatly to extending a similar breakdown in our free market system.
Mike Brown, a former Chief Financial Officer (CFO) at Microsoft was instrumental in setting accounting standards designed to give preference to Microsoft. He was also Chairman of the Board of the NASDAQ Stock Exchange during a period in which significant financial fraud occurred in the form of price fixing NASDAQ stocks, for which investment firms later paid $1.2 billion in fines.
Greg Maffei, another former CFO, was very aggressive with the media and regularly intimidated reporters, as evidenced in his rebuttal to a New York Times story titled Financial Engineering 1.0 Greg is a brilliant financial person probably more suited to a hedge fund on Wall Street than this role at Microsoft.
Bob Herbold, Microsofts Chief Operating Officer to whom the CFO reports, is a New Media genius that is leading an assault on privacy designed to make the sale of privacy the number one product on the Internet. Herbold was head of advertising at Proctor and Gamble before coming to Microsoft and one only read his famous speech in 1994 to understand why privacy is such an important issue now.
Myron Scholes, a Nobel Prize winning economist and the 7th member of the Gates 7, is quoted in the New York Times as saying that his firm has developed a strategy for sucking nickels from all over the world. That is an interesting business sucking nickels and whether you are on Main Street here in the United States or a poor farmer in Paraguay it simply means a pyramid scheme is out to extract financial resources from you and your family.
It is time for us all to support Arthur Levitt, an outstanding public official and Chairman of the SEC, to embolden the SEC to, rather than focus on smaller firms that are effects of this situation, instead take an action against the Microsoft Corporation and require an earnings restatement. This will restore integrity to the markets and establish a stronger foundation for future economic prosperity. Most importantly, everyone on Main Street is depending upon it.
The upcoming book "Microsoft's Class War On America" will summarize many yet to be disclosed areas regarding what some may consider the greatest financial fraud this century. An extended study on this pyramid scheme is available at http://www.billparish.com/msftfraudfacts.html Reporters and others may freely distribute this press release and other such materials provided that a prominent reference to Parish & Company and the web site www.billparish.com are made.
Bill Parish, President of Parish & Company, has been quoted extensively in a variety of major news publications, as well as The Tech Review, a Canadian investment journal, Bild, the largest paper in Germany, The Fleet Street Letter, a prestigious investment publication and The Independent, a major British newspaper. He has also appeared on ABC news and has been interviewed by KUIK, a Portland area radio station, KIRO in Seattle, Aspen Public Radio, Colorado and various other media stations.
Mr. Parish is a Registered Investment Advisor and former CPA providing fee based investment management services in addition to assisting companies structure their 401k plans to meet their fiduciary obligations and provide top quality well diversified investment choices at the lowest cost. Please consider hiring Bill to be a permanent member of your 401K committee and thereby utilize the services of a top investment professional in order to clearly communicate your commitment to managing your employees 401K plan or what I now call their "Mutual Savings Bank." If you are no longer interested in receiving updates, generally 4 times per year, please type remove in the heading on a reply note.
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