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Legal Aspectsof

Information Systems

Case of State of Maryland vs. CyberSmoke

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Who is CyberSmoke.com? Online company that distributes

different types of tobacco products.

Upcoming leader in e-commerce. Company goals:

Highest quality of service, quick delivery, and low prices.

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Who is CyberSmoke.com? The company addresses these goals

by: Tracking the orders to assure that packages are

not misplaced, lost, or stolen. Replaces them at no additional cost to the

consumer. Addresses customer fears of shopping online. Secure shopping by blocking credit card

numbers. Validates user is 18 by receiving the credit card

number and checking a box that verifies that they are 18.

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How do you place an order? Business conducted in an orderly

fashion. Three ways to place an order: 1) Order online through the

website. 2) Call the toll-free line.

3) Print out order form and fax it in.

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Business Transactions

Business Transactions (On annual basis)

90%

6% 4%

Online Orders

Toll-free Hotline Orders

Fax Orders

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CyberSmoke’s Workforce Fifty employees handle 5,000

transactions per day. Ship over 30,000 cartons of cigarettes

all over the world on a monthly basis. Employees enjoy such benefits as:

Healthcare, retirement plans, paid vacations, and impressive bonuses.

Trade union: Protect workers’ rights and ensures fair

compensation.

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Organizational Structure

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Customer Base Average consumer is 25-30 years

old. Native Americans and Alaskan

Natives make up the largest part of the customer base.

Teenage smoking has increased by 30% in the past year.

Statistics show a upward trend in cigarette smoking.

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Ethical Analysis CEO’s set the codes of ethics or

lack of that will be followed within a company.

CyberSmoke is currently operating under unethical business practices by simply utilizing a check box manipulated by the consumer for age verification.

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Ethical Analysis: 1st Weak Position is Egoism

CEO’s are operating under the weak ethical principle of egoism. Egoism:

‘The view that actions taken by the company are correct that are within the company’s own self interest; I.E., making a profit, and not taking into account what is good for society as a whole.’ (Wilson, 2003)

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Ethical Analysis:2nd Weak Position is Ethical Relativism

The CEO’s are also operating from the weak ethical position of ethical relativism. Ethical relativism:

‘All evaluative judgments are relative to social-cultural norms or an individuals norms.’ (Wilson, 2003)

Example: The parent of the minor knows the kid smokes,

doesn’t care, and gives the kid the credit card to order his or her cigarettes.

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Ethical Analysis:3rd Weak Position is Hedonism

Hedonism: ‘The view that the best life is a life

devoted to pleasure.’ (Wilson, 2003) Example:

Common thread throughout tobacco advertising that smoking is pleasurable and when you’re having fun, don’t forget your cigarettes because they’re fun too.

Only one getting any pleasure out of cigarettes is the cigarette companies as they roll around in the profits.

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Violations and Remedies

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Major Violations Age Verification Violation

Violated section 897.14 of Food and Drug Administration (FDA) regulations .

TAX Envision Violated chapter 10a, section 376 of

Federal Jenkins Act.

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Section 897.14 - Requires

Sale of tobacco products to persons under 18 years of age is prohibited.

Must verify purchaser’s age by physically looking at a photo ID.

Retailer allowed to sell cigarettes or smokeless tobacco only in a direct, face-to-face exchange without the assistance of any electronic or mechanical device.

Retail should not market tobacco products to minors.

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Jenkins Act - Requires Company must file with the tobacco tax

administrator of the State into which such shipment is made or in which such advertisement or offer is disseminated.

Company must file tax no later than the

10th of each month with the tax administrator of the State into which shipment is made.

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Remedies

Section 897.14

First time violation - $250.

Second time violation - $1500.

Maximum fine of $15000.

Revoke Sales License.

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Remedies Section 897.14First time $250.

Second time $1500.

Maximum fine of $15000.

Revoke Sales License.

Remedies Jenkins Act

Directors must be imprisoned for 6 months.

CyberSmoke.com can be fined $1,000. CyberSmoke.com should repay in full

all tax that should have been collected from the purchaser plus any additional expenses incurred by states and all legal fees.

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Ethics and Law Violations CyberSmoke strictly adheres to Federal

Laws: Currently, online cigarette merchants are

supposed to adhere to the Jenkins Act, a law passed in 1949 that requires anyone who sells cigarettes across a state line to an individual or unlicensed distributor to report the transaction to the state's tobacco tax administrator.

CyberSmoke acting on legislation recently passed down by Congress provides the Food and Drug Administration all records relating to online tobacco sales.

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Ethics and Law Violations CyberSmoke pays taxes for cigarettes sold in

states requiring excise taxes be paid such as California, and Washington State.

CyberSmoke offers full refunds for lost or stolen merchandise and replaces all lost merchandise.

CyberSmoke avoids selling tobacco products in states that outright ban the sale of tobacco products over the internet. Such as Wisconsin, New York.

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The Final Verdict

CyberSmoke is found guilty and charged with violations of the Jenkins Act.

CyberSmoke has fail to comply with Jenkins Act on 2 accounts of not collecting taxes.

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Judge Ruling:

Though CyberSmoke is guilty, license will not be revoked

under the following conditions…

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Appropriate Punishment: CyberSmoke will be fined $1000

for failure of Tax collection (in violation of the Jenkins Act).

Furthermore, the company will have to replenish a total of $5-7 million dollars in taxes that were not collected.

Top executives and seniors will be issued imprisonment for 6 months.

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Appropriate Punishment Con’t

If CyberSmoke satisfies the three criterias of

1. Paying fine 2. Replenishing tax amounts 3. Imprisonment for 6 months

CyberSmoke will have fulfilled its requirements and may continue its company activities.

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Conclusion

If CyberSmoke fail to satisfy these requirements, the company shall be revoked of license and shut down immediately.

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The End

Are there any questions for CyberSmoke?

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Rolling Credits/Presenters

Christopher Paul Nancy Nguyen Gennadiy Vekker Tim Baldwin Christopher Brune