Federal Grand Jury Indicts Ralphs in Labor Fraud Scheme
A news release from US Attorney Debra Wong Yang of the Central District of California said the 53-county indictment charged that Ralphs Grocery Company gave the rehired workers false names and false social security numbers and filed thousands of falsified employment documents including tax withholding forms and income tax documents.
Prosecutors allege that the Los Angeles-based company, which operates 460 supermarkets inCalifornia and southern Nevada, required rehired locked-out employees to work under the false identities to hide its illegal activities from labor unions, the Internal Revenue Service, the Social Security Administration and the National Labor Relations Board (NLRB) during the 141-day 2003-2004 grocery worker strike.
The indictment alleged that the company concealed its rehiring of locked-out employees by assigning those employees to stores far from their normal workplaces, moving them from store to store, and requiring them to wear name tags bearing their false names. The indictment alleges that Ralphs’ conduct was the result of “tacit approval, if not encouragement, by Ralphs’ senior management to hire locked-out and striking employees as temporary replacement workers.”
The indictment also charged that Ralphs falsified reports it submitted to pension and health benefit plans for current and retired grocery workers. In addition, Ralphs allegedly issued thousands of weekly payroll checks under the false names used by rehired workers, and then allowed these workers to cash their paychecks at Ralphs stores as means of concealing and promoting the ongoing use of false identities, prosecutors charged.
The indictment specifically charges Ralphs with conspiracy, 14 counts of causing the use of false social security numbers, five counts of identity fraud, one count of falsifying and concealing material facts in matters within the jurisdiction of the Internal Revenue Service and the Social Security Administration, one count of conspiracy to commit money laundering, 11 counts of money laundering, 16 counts of false statements relating to an employee benefit plan, one count of concealment of facts relating to an employee benefit plan, two counts of false statements to the NLRB and one count of obstruction of justice.
In a statementon the Web site of The Kroger Co., Ralph’s corporate parent, officials acknowledge that some managers rehired striking workers under false names and/or false Social Security numbers, but that the company never condoned such actions and has made contributions to employee benefit plans and filed corrected records for all affected workers.
Ralphs has taken disciplinary action against the management individuals involved, the company statement said. “Ralphs regrets that a number of its store managers took it upon themselves to violate Company policy and federal law in order to rehire striking workers. Although we believe many of these managers acted for humanitarian or personal reasons, their actions nonetheless were wrong and contrary to explicit Company policy,” said Paul Heldman, Kroger’s senior vice president, in the statement.
Softening a Strike’s Effects
The indictment alleges that, in combination with a secret revenue sharing agreement that Ralphs executed with its two main competitors, the rehiring scheme was intended to better Ralphs’ position in the 2003- 2004 labor dispute by, among other things, mitigating the financial and operational hardships of a complete lockout. 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 inUnited States history.
In December 2003, the National Labor Relations Board began an investigation of allegations that Ralphs had violated federal labor laws by rehiring locked-out employees under false names and social security numbers, allegations that could
result in Ralphs, by its own estimate, being ordered to pay $50 million to $100 million in back pay.
The indictment alleges that Ralphs responded by making false statements to the NLRB to cover up the full extent of its unlawful conduct during the lockout. At the end of January 2004, a federal grand jury began investigating allegations that Ralphs had violated federal criminal laws by rehiring locked-out employees under false names and social security numbers. The indictment alleges that Ralphs acted to obstruct this investigation by falsely representing that certain key documents detailing the company’ s criminal conduct and senior management’s awareness of this conduct were protected by attorney-client privilege, which led the company to withhold and delay the production of these key documents.
In September 2004, the grocery union went to court with its own allegations of illegally hiring workers who had gotten caught up in the labor strife (See Grocery Workers Union Files Suit Against Chain For Hiring Back Workers ).
If convicted of all 53 counts in the indictment, Ralphs faces potential penalties that include five years of corporate probation, fines totaling up to twice the amount of gain it received as a result of its criminal conduct – which, based on the allegations in the indictment, could be more than $100 million – and the payment of restitution to the victims.