Microsoft Tax Evasion

• In our continuing series on Microsoft, this issue of The SPOTLIGHT reports on how the megacorporation escapes paying its federal taxes and commits fraud.

Recently, while I was receiving a $12 haircut, I asked the hairdresser, a single mother, how much she made per hour. Ten dollars, she replied.

In that moment an astonishing realization occurred. This single mother, who earns $10 per hour, pays more federal income tax than the Microsoft Corporation does.

Meanwhile, Bill Gates is strolling the halls of Congress with the swagger of a national hero as if it were a hallway in his own house. He is also buying in fomercials on television, paid for with funds pilfered from your retirement, his own employees and other average workers who do not know he is running a classic financial pyramid scheme.

At the same time, back in Redmond, Wash., his investment manager is aggressively selling his inflated Micro soft stock and making large investments in the so-called traditional economy. All his media outlets, including MSNBC, articulate the glories of the new economy. Even The Wall Street Journal recently did a major editorial titled: "Why now is the time to buy Microsoft."

These are scenes of corruption one would expect to see in Jakarta or Mexico City, not in the United States.

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. Pyramid schemes are not designed with equity or integrity in mind.

Equally surprising is that most of Microsoft's competitors that consistently operate in the red are paying staggering amounts of federal income tax via stock options exercised by employees.

For example, Amazon.com, an Inter net-based book retailer, has never earned a profit, yet its employees have paid more than $300 million in federal income taxes.

This is a windfall for the government. Amazon.com can't utilize the tax deduction because the company has no profits. Microsoft is able to fully utilize its tax deductions and so it is effectively a "wash" to the IRS -- the employees pay, but the company takes a deduction. The net income to the IRS is close to zero.

The federal budget has been effectively balanced on the backs of Micro soft's competition.

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.

The Gates SEVEN

The so-called "Gates Seven" are re sponsible -- whether by accident or design -- for creating this massive corruption of our free market system. This fraud is responsible for destabilizing the global economic system and creating the single greatest threat to our economic prosperity as a nation.

The Gates Seven are Sen. Slade Gor ton (R-Wash.); former Treasury Secre tary Robert Rubin; Texas Gov. George W. Bush (R); two of Microsoft's former chief financial officers, Mike Brown and Greg Maffei; chief operating officer at Micro soft Bob Herbold; and Myron Scholes, a Nobel Prize winning economist and partner in the Long Term Capital Hedge Fund.

Gorton has marshaled large lobbying groups on Microsoft's behalf, including the Citizens for a Sound Economy. This group aggressively supports Microsoft -- even after receiving numerous versions of my study -- and also advocates litigation reforms that would make it much harder to sue a company like Microsoft for financial fraud.

Gorton has publicly insulted Judge Penfield Jackson, who has done a fair and efficient job of handling the Justice Department's anti-trust trial.

The government's anti-trust case is an important trial for every American. When Microsoft stifles innovation in the United States, most of the significant technology innovations occur in other countries.

Rubin, as treasury secretary, could have effected a rule change to remedy this situation. 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 trans actions.

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 Micro soft. Although his staff has been made aware of Microsoft committing fraud, Bush apparently has no interest in addressing it.

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 oc curred in the form of price fixing NASDAQ stocks. Investment firms later paid $1.2 billion in fines for this.

Maffei, another former CFO, was very aggressive with the media and regularly lied and intimidated reporters, as evidenced in his rebuttal to a New York Times story entitled, "Financial Engin eer ing 1.0." Greg is a brilliant financial person probably more suited to a hedge fund on Wall Street than this role at Microsoft.

Herbold, Microsoft's chief operating officer, is a "new media" genius who is leading an assault on privacy designed to make the sale of consumers' private information the number one product on the Internet. Herbold was head of advertising at Procter and Gamble before coming to Microsoft.

These revenues from the sale of privacy undermine competitors ability to sell content -- for example subscriptions to popular web sites -- since Microsoft is simultaneously marketing similar products and services at no cost.

Rather than focus on government standards, a discussion of the privacy issue -- a key revenue generator for Microsoft's scheme -- should begin in Redmond.

Scholes, a Nobel Prize winning economist and the seventh member of the Gates Seven, is quoted in The New York Times as saying that his firm has developed a strategy for "sucking nickels from all over the world." Whether you are on Main Street in the United States or a poor farmer in Paraguay, "sucking nickels" simply means a pyramid scheme that is out to extract financial resources from you and your family.

Support Arthur Levitt, an outstanding public official and chairman of the Securities and Exchange Commission (SEC). Contact the SEC and tell them to take action against the Microsoft Corporation for financial fraud. This will restore integrity to the markets and establish a stronger foundation for future economic prosperity.

For more detailed information on this amazing story, log on to Bill Parish's web site at www.billparish.com.