Please read:

Juniper Packaging Solutions provides custom packaging

products to companies all over the United States.

With five production facilities, the company produces cardboard

boxes, plastic and steel drums, aluminum bottles, and absorbent

pouches and bags. Companies using their products ship everything

from chemicals in 55-gallon containers to biological specimens

in tamper-evident pouches.

Spencer Williams is the vice president in charge of the Maryland

production facility, and in the last year he's become concerned

about plant performance. The plant needs a long lead time for

orders, and defect rates have increasedboth of which hurt customer

satisfaction.

In Spencer's opinion, the problems are the result

of outmoded production equipment. Recently Spencer's team

of production managers identified three pieces of state-of-the-art

equipment that they believe will turn the plant around and make

it the most efficient of the company's five plants. Unfortunately,

the price tag of the equipment is $2,000,000 and the company has

a freeze on capital expenditures greater than $500,000. The freeze

was mandated by the company chief executive officer (CEO) after

third-quarter earnings dropped by 10 percent due to a weakening

of the Asian economy and reduced shipments to Japan and Korea

by several of Juniper's major customers.

Spencer and the controller of the Maryland plant both believe

that the new equipment is absolutely necessary for the company

to maintain customer satisfaction and market share. Together

they've devised a plan to circumvent the capital expenditure

freeze. Each piece of equipment is actually a "system" with multiple

components (e.g., conveyor belt, box molding unit, box taping

unit, etc.). Spencer will ask the equipment manufacturers to break

each system into components and submit multiple bills (e.g., a

separate bill for the conveyor, a separate bill for the box molding

unit, etc.) each less than $500,000. The plant controller will then

approve the expenditures as being consistent with the guidelines

that only prohibit expenditures on equipment costing more than

$500,000.

Required:

Is the plan devised by Spencer and the CFO ethical? In answering

this question, assume that Spencer and the controller are both

firmly convinced that the new equipment will increase shareholder

value.

Thanks,