15 December – LAWFUEL – The Law News Network – A federal grand jury in Los Angeles this morning returned a 53-count indictment against Ralphs Grocery Company, the owner of about 300 Southland supermarkets, alleging that the company secretly rehired hundreds of locked-out employees under false names and false social security numbers during the 2003-2004 grocery workers labor dispute.
The indictment alleges that Ralphs required rehired locked-out employees to work under false identities to hide its illegal activities from labor unions, the Internal Revenue Service, the Social Security Administration and the National Labor Relations Board. According to the indictment, in secretly rehiring hundreds of locked-out employees under false identities, Ralphs falsified thousands of employment records, including forms filed with government agencies such as employment eligibility forms (INS Forms I-9), employee withholding allowance certificates (IRS Forms W-4), and income tax statements (IRS Forms W-2). The indictment also alleges that Ralphs falsified reports it submitted to trust funds responsible for providing pension and health benefits 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.
The indictment alleges that, in combination with a secret revenue sharing agreement that Ralphs executed with its two main competitors, Ralphs’ covert rehiring of locked-out workers 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 indictment alleges that Ralphs’ resulting ability to withstand a lengthier lockout provided it with increased leverage over the labor unions, whose financial resources were exhausted by the end of the lockout.
The case was announced this afternoon in Los Angeles at a press conference attended by United States Attorney Debra Wong Yang; Department of Labor – Office of Labor Racketeering and Fraud Investigations, Special Agent in Charge Marita Janiga; Department of Labor – Employee Benefits Security Administration, Regional Director Billy F. Beaver; Social Security Administration – Office of Inspector General, Special Agent in Charge David F. Butler; and IRS-Criminal Investigation Division, Special Agent in Charge Michael S. Kochmanski.
“All companies have responsibilities as members of the business community and employers of significant numbers of workers,” said United States Attorney Debra Wong Yang. “One responsibility is following the rules, regulations and laws governing business operations. The indictment accuses Ralphs of violating this responsibility in many ways, and demonstrates the government’s dedication to rooting out corporate malfeasance in all its forms, whether it involves polluting the environment, cheating investors or violating the rights of workers and their labor organizations.”
Gordon S., Heddell, Inspector General of the Department of Labor, stated: “Attempts by employers to circumvent a collective bargaining agreement through illegal hiring practices and identity theft schemes are detrimental to workers. We are committed to working with DOL agencies and other law enforcement agencies to vigorously investigate and prosecute these types of cases.”
According to the indictment, Ralphs engaged in illegal conduct throughout its lockout of approximately 19,000 grocery clerks and meat cutters employed at its Southern California stores, a lockout that lasted from October 12, 2003 to March 1, 2004. The labor dispute that prompted the lockout began after a collective bargaining agreement covering grocery workers employed by Ralphs, Albertson’s, Inc., and Vons (a Safeway Company) expired on October 5, 2003. On October 11, the seven local unions of the United Food and Commercial Workers Union, AFL-CIO-CLC, that represented grocery workers employed by the three supermarket chains, struck Vons. In response, on October 12, Ralphs and Albertsons announced that they were locking out all their grocery workers who were members of these unions. 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 United States history.
Ralphs allegedly took numerous steps to conceal its rehiring of locked-out employees, including 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’ illegal 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.”
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 to $100 million in back pay. The indictment alleges that Ralphs responded by making false statements to the NLRB to coverup 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.
The indictment specifically charges Ralphs with conspiracy to commit three objectives: to use false social security numbers, to commit identity fraud, and to falsify and conceal material facts in matters within the jurisdiction of the Internal Revenue Service and Social Security Administration. Additionally, the indictment alleges 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.
Special Agent in Charge David F. Butler, with the Social Security Administration, stated: “The coercive actions of Ralphs Grocery Company caused hundreds of their employees to commit federal felonies through the use of false names and Social Security numbers to complete federal employment documents. The company’s actions constitute intentional identity fraud on a large scale by a major company. This was done without regard to the damaging consequences to the record-keeping of the Social Security Administration or to the criminal liability forced on its employees.”
Ann L. Combs, Assistant Secretary of Labor for the Employee Benefits Security Administration, said: “The defendant intentionally filed false financial reports and misled plan officials to perpetuate criminal acts against employee benefit plans. We will vigorously prosecute this type of violation to ensure that workers, plan officials, and regulators receive complete and accurate information about employee benefit plans.”
IRS-Criminal Investigation Special Agent in Charge Michael S. Kochmanski stated: “IRS-Criminal Investigation is committed to pursuing and prosecuting employers that willfully fail to meet their employment tax obligations by paying wages under the table, not reporting cash wages, using fictitious or nominee employee names or using other schemes to avoid paying their payroll taxes. Major corporations, such as Ralph’s Grocery Company, must be held accountable to ensure the integrity of our tax system.”
The charges contained in an indictment are only allegations. A defendant is presumed innocent unless and until proven guilty in a court of law.
If convicted of all 53 counts in the indictment, Ralphs faces potential penalties that include five years of corporate probation, fines totalling 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 of its alleged crimes.
Representatives of Ralphs Grocery Company will be summoned to appear in United States District Court in Los Angeles for an arraignment early next year.