The Financial Pyramid At Microsoft Is Now Accelerating

One need only examine the State Teachers Retirement System of California to see the impact. This one system now owns more than 16 million Microsoft shares with a current market value of $1.4 billion due to its commitment of indexing based upon the S&P 500. If 80 percent of this value is the result of a pyramid scheme, based upon manipulating a breakdown in the accounting rules, that would imply a future loss of $1.1 billion to the teachers of California. It is unfortunate that teachers will bear this loss when they are already struggling to keep pace with inflation. To confirm this amount one need only contact James Wollman, CEO of the California State Teachers Retirement System. This is just one public retirement plan in one state.

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In July I met SEC Chairman Arthur Levitt here in Portland, Oregon, and provided him a complete summary of findings. This summary has also been provided to Robert Parry and Alan Greenspan of the Federal Reserve, Treasury Secretary Summers, Secretary of Labor Alexis Herman and both Joel Klein and Phil Malone of the Department of Justice. In addition, the largest public pension funds, their investment advisors, state budget officers and representatives from leading bond rating agencies, including Duff and Phelps, now have the report. These pension managers were specifically asked to remove Microsoft from their indexed portfolios based upon the S&P 500 as a step toward demonstrating their fiduciary responsibility to plan participants.