Ralphs Information Page

Department of Justice Statement - Federal Judge Formally Sentences Supermarket Chain in Deal that Brings Nearly $50 Million to Reimburse Locked-out Workers and Unions - November 14, 2006

November 14, 2006

Federal Judge Formally Sentences Supermarket Chain in Deal that Brings Nearly $50 Million to Reimburse Locked-out Workers and Unions

Los Angeles, CA - Ralphs Grocery Company has paid $70 million dollars in criminal fines and compensation for Ralphs' workers, their health benefit and pension funds, and their unions, after pleading guilty to several criminal charges for illegally rehiring hundreds of locked-out union members during the 2003-2004 grocery store labor dispute. After Ralphs paid the fines and compensation in recent days, a federal judge in Los Angeles today formally sentenced the company to probation, which will place Ralphs, the owner of about 300 supermarkets across Southern California, under court supervision for the next three years.

At today's hearing, United States District Judge Percy Anderson said that he was "surprised, disturbed and disappointed" by Ralphs crimes, which were committed to gain a "tactical, unfair advantage" over its employees and unions. The company's conduct, according to the Judge, had the effect of "eroding public confidence in the collective bargaining system." Ralphs, Judge Anderson stated, had a "pervasive and powerful corporate culture" that "exalted profits" with a "win-at-any costs" approach.

After being indicted in late 2005, Ralphs in June agreed to plead guilty to the criminal charges, admitting that it covertly rehired locked-out workers under false names and social security numbers during a lockout of approximately 19,000 Ralphs grocery clerks and meat cutters. In addition to rehiring locked-out workers under false identities, Ralphs admitted that it submitted false tax information to the Social Security Administration and Internal Revenue Service for the employees working under false identities.

The company also admitted that two of its executives, who served as trustee and alternate trustee to the trust funds that provide health and pension benefits to current and retired grocery workers, breached their fiduciary duties to the funds. When directly asked if Ralphs had illegally rehired locked-out workers, the executives concealed from other trustees the illegal rehiring. At the time of this criminal conduct, these two executives were serving as Ralphs' top negotiators with the unions. The company has admitted it benefitted from this concealment because the unions did not learn of the illegal rehiring.

Ralphs entered the guilty pleas in United States District Court on July 26. The company pleaded guilty to five felony counts: conspiracy, use of a false social security number, identity fraud, falsifying and concealing material facts in matters within the jurisdiction of the Internal Revenue Service and the Social Security Administration, and concealment of facts from an employee benefit plan.

"As a major company and a large employer, Ralphs had a responsibility to abide by the law in dealing with its employees, the unions who represented them, and government regulators," said George S. Cardona, the Acting United States Attorney on this matter. "Its failure to do so affected large numbers of Southern California residents by unnecessarily prolonging the length of the labor dispute. By its guilty pleas and agreement to pay not only restitution but a substantial fine, Ralphs has accepted responsibility and paid the consequences for its actions. We hope that other corporate employers will recognize that, like Ralphs, they must abide by the law or face the consequences."

Gordon S. Heddell, Inspector General of the Department of Labor, stated: "Ralphs Grocery Company caused great harm to thousands of workers by prolonging a labor dispute by secretly rehiring locked-out employees and failing to make required payments to the pension and benefit plans of the labor unions. This sentencing sends a stern warning that we are committed to working with other law enforcement agencies to vigorously investigate crime schemes that are detrimental to American workers."

Pursuant to a plea agreement with the government, Ralphs paid a $20 million criminal fine. It also paid $50 million into a restitution fund, which largely will be used to give backpay to 19,000 locked-out Ralphs workers. The government and the unions estimate that the restitution fund should provide approximately seven weeks of backpay to each worker. The seven unions that represent the workers will receive some money to reimburse them for financial assistance given to the workers during the labor dispute. The restitution fund will provide approximately $675,000 to the trust funds to reimburse them for unpaid contributions.

In exchange for the $50 million restitution payment, the unions have withdrawn certain unfair labor practice charges pending before the National Labor Relations Board.

This case against Ralphs is the result of a labor dispute that started on October 11, 2003, when the unions struck the Vons supermarket chain. Pursuant to a secret agreement among three grocery store chains, Albertsons and Ralphs locked out their grocery workers on October 12. While workers picketed their stores, Ralphs, Vons and Albertsons continued to operate with management and temporary workers. During labor disputes, federal law allows an employer to lockout all union employees, but prohibits "selective lockouts" where only a portion of the union workforce is locked-out.

On Halloween, the unions decided to stop picketing Ralphs stores, which led to a huge increase in business at its supermarkets. The increase in business caused problems at the store level because Ralphs was operating without its normal workforce. In order to deal with the influx of customers, Ralphs began selectively rehiring locked-out workers – many under false names and false social security numbers – in order to operate with experienced personnel. The lockout and strike lasted approximately 4½ months and affected approximately 65,000 to 70,000 grocery workers, making it the longest and largest labor dispute involving the grocery industry in the United States. Ralphs admitted that during the course of this labor dispute it falsified hundreds of employment records and filed hundreds of false tax forms with IRS and SSA. Ralphs also admitted that a number of its executives participated in the criminal conduct.

Under the plea agreement with Ralphs, the United States Attorney's Office may continue to investigate and could prosecute current or former executives or employees of Ralphs or related entities if they were involved in the criminal conduct.

October 16, 2006

U.S. District Judge Accepts Plea Agreement Between Ralphs Grocery Co. and U.S. Government for Felonies Committed to Extend 2003–04 Supermarket Lockout

Ralphs to Pay $70 Million; Ralphs Employees Point to Upcoming Negotiations As Opportunity to Address Injustices

This morning a Federal Judge accepted the plea agreement reached between Ralphs Grocery Co. and the Federal Government for criminal conduct related to the illegal hiring of locked–out workers during the 2003–04 supermarket dispute and later cover–up of the wrongdoing. The formal sentencing is scheduled for November 1, 2006. The judge also appointed a neutral party, known as a “Special Master,” to administer payment to Ralphs employees.

In June, Ralphs pled guilty to five felony counts, including conspiracy, identity fraud, money laundering, and obstruction of justice. Ralphs will pay a settlement of $70 million, including a $20 million fine to the U.S. Government and $50 million in damages, most of which will go to the workers locked out by Ralphs for four and a half months.

“UFCW Local 770, which represents more than 6,000 of the approximately 18,000 men and women locked out by Ralphs in 2003, fully supports this settlement. This agreement does right by the Ralphs workers locked out in 2003–04 and it is an important step towards addressing the injustices willfully inflicted on workers by Ralphs. We entered into negotiations in 2003 in the spirit of trust and cooperation. While the union and the members played by the rules, Ralphs chose to break the law and tilt the playing field,” said Rick Icaza, President of UFCW Local 770. "The real wounds caused by Ralphs’ felonies can be seen in the faces you meet in your local supermarket. Nearly 100,000 workers and family members are now uninsured and those hired since the lockout are toiling for poverty wages.”

Jackie Gitmed, a 30–year Ralphs employee, testified at the hearing and spoke to reporters outside.

“I am glad to see that Ralphs is being held responsible for their actions and I look forward to seeing the individual executives who concocted this illegal scheme indicted as well. I hope they have learned a lesson, said Gitmed. “I just wish that the judge could sentence Ralphs to sharing some of their ill-gotten profits to pay for affordable family health care and fair wages that keep pace with inflation. We will have to fight for these rights at the bargaining table, and we hope that the corporation has learned a lesson and will bargain fairly and in good faith.”

Rev. Alexia Salvatierra, Executive Director of Clergy and Laity United for Economic Justice (CLUE), emphasized the importance of today’s decision.

“Justice was done today. We have Ralphs workers in our congregations and we saw their pain during the lockout,” explained Rev. Salvatierra. “We hope this was a moral wake-up call and that it will make a difference in the next negotiations.”

In December 2005, United States Attorney Debra Wong issued a 53-count indictment against Ralphs Grocery Company for engaging in a “company-wide course of criminal conduct involving the hiring of locked out employees under false names, Social Security numbers, and documentation.” Charges included conspiracy, identity fraud, money laundering, and obstruction of justice during and after the 2003-04 Southern California supermarket lockout.

Still pending are the workers’ unemployment claims and California Attorney General Bill Lockyer’s anti-trust lawsuit regarding the profit sharing pact through which Ralphs funneled millions of dollars to Vons/Pavilions and Albertsons during the strike/lockout.

July 27, 2006

Ralphs grocery chain formally pleaded guilty Wednesday to felony charges that it illegally rehired locked-out employees during the 2003-04 supermarket labor dispute in Southern and Central California.

The pleas in federal court in Los Angeles followed a June 30 agreement between the supermarket chain and federal prosecutors. It called for the company to plead guilty and pay a total of $70 million in fines and restitution. The company would also be placed on three years' probation.

U.S. District Judge Percy Anderson said he would discuss the plea agreement Sept. 27 and would approve or reject it during an Oct. 16 sentencing hearing.

Mary M. Kasper, Ralphs' group vice president of legal services, entered the company's guilty pleas to five charges, which included using fake names and Social Security numbers to rehire about 1,000 workers during the 4 1/2 -month strike and lockout.

Ralphs, a unit of Kroger Co., has also admitted that it violated federal laws regarding identity fraud, conspiracy, pension reporting and record keeping for the Social Security Administration and the Internal Revenue Service.

If the plea agreement is accepted, the company will pay a $20-million fine to the federal government and create a $50-million restitution fund, most of which will go to the 19,000 Ralphs employees who were locked out.

Rod Diamond, Secretary-Treasurer of the United Food and Commercial Workers union, Local 770 in Los Angeles, attended the hearing. He said it was an exciting and emotional day for him for and all of Local 770's 26,000 members, of which about 5,400 are Ralphs employees.

Justice is finally being served. It has been a long, long, hard process.

Assistant U.S. Atty. Adam H. Braun said that the investigation was ongoing and that the government had the option to charge specific individuals.

The U.S. attorney's office said Ralphs also admitted that two executives who helped oversee the employee health and retirement funds concealed the illegal hiring from other fund trustees.

Rank-and-file Ralphs employees who cooperated with the government would not be prosecuted, Braun said. Those who refused to cooperate or provided false information to the government could be charged, he added.

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