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RALPHS TO SETTLE LABOR CHARGES WITH U.S. ATTORNEY
LOS ANGELES – June 30, 2006 - Ralphs Grocery Company, (“Ralphs”) a wholly owned subsidiary of The Kroger Co. (NYSE: KR), today confirmed that it has reached a settlement with the U. S. Attorney’s Office for the Central District of California for all matters related to the improper hiring of locked out Ralphs’ employees during the 2003-04 labor dispute.
Last December, a federal grand jury in Los Angeles returned a 53-count indictment of Ralphs. Under the terms of a plea agreement, Ralphs will plead guilty to five of the 53 counts in the indictment. If the plea agreement is approved by the United States District Court for the Central District of California, all remaining counts will be dismissed. The five counts include violating Social Security and Internal Revenue Service record keeping laws, violating ERISA reporting laws, identity fraud, and one count of conspiracy to violate federal law. Ralphs has agreed to pay a fine of $20 million to the government and to create a $50 million restitution fund that will be administered by a Special Master appointed by the Court. The purpose of the fund is to pay restitution to Ralphs’ employees who were locked out during the labor dispute and to reimburse the unions for lock out benefits paid to Ralphs’ employees who choose to make a claim for restitution. The Company will be placed on probation for a period of 3 years.
The plea agreement will resolve all pending and potential criminal claims against Ralphs related to this matter. A pending appeal at the National Labor Relations Board challenging the legality of Ralphs lock out of its employees during the strike also will be dismissed. Kroger has already established the appropriate financial reserves for the contemplated resolution of the matter.
“We believe in accountability,” said Dave Hirz, Ralphs’ President. “Most of our managers followed the law and adhered to company policies. Nonetheless, the illegal hiring of some locked out employees that occurred at Ralphs during the strike was wrong and we regret that it took place. It was against the law; it was against our Company’s policies; and it violated our core values of honesty, respect and integrity.”
“Ralphs did not support or condone these hiring activities and recognizes it must take responsibility for the actions of our employees and their managers and supervisors in this matter,” added Hirz.
The plea agreement arises out of conduct that occurred during a 2003-04 labor dispute in Southern California. Ralphs has previously acknowledged that during the 141-day labor dispute, some of its store managers and their supervisors violated company policy by illegally hiring some locked out employees. In order to avoid detection, many of these employees worked under false names and/or false Social Security numbers.
The Company has concluded the number of locked out employees who worked illegally is less than 300, or less than one percent of the 50,000 temporary workers employed by Ralphs during the strike.
“Hiring even one locked out employee during the labor dispute under a false identity was wrong,” said Mr. Hirz. “We are pleading guilty to one count of conspiracy because we have learned that in some cases, store managers and their supervisors worked together to rehire employees using false identities. The labor dispute was a difficult time for everyone in the Ralphs family and mistakes were made. This was not a company plan to prolong the labor dispute. We take this conduct very seriously. We are sorry that it happened. With the resolution of these legal matters and creation of a restitution fund, we hope we will be able to close this unfortunate chapter and fully focus on rebuilding the trust and confidence of our members and customers.”
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Kroger Contacts:
Media: Lynn Marmer
(513) 762-4441 |
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