Ralphs in a Mess of Its Own Making
Let’s stipulate that in the eyes of the law Ralphs Grocery Co. is innocent until proven guilty.
That out of the way? Now, let’s examine the tale of unparalleled sleaziness outlined in the 106-page indictment of Ralphs handed up last week by a federal grand jury in Los Angeles. The document’s thrust is that, in 2003, Ralphs executives tried to undermine the United Food and Commercial Workers union through a full-bore criminal conspiracy.
The UFCW had called a strike that October against Safeway Inc.’s Vons and Pavilions chains in Southern California. Complying with a mutual-aid pact, Albertsons Inc. and Ralphs promptly locked out their unionized workers. A couple of weeks later, however, the union withdrew its pickets from Ralphs, hoping to pressure the other two chains into settling.
Needing to staff up quickly, the indictment says, Ralphs rehired hundreds of locked-out workers, a legal no-no, hiding the truth by employing them under fake names and Social Security numbers. The company shifted these workers from store to store so the unions wouldn’t catch them, and issued them manifestly fraudulent paychecks -- the union even found one made out to a 4-month-old child. Those defrauded included the IRS, the Social Security Administration and employee benefit trust funds, to which Ralphs failed to make remittances on behalf of the surreptitious workers. The scheme arguably prolonged the labor dispute, which lasted more than four months, cost union locals millions and brought many of their 59,000 members to the financial brink.
It’s worth noting that Ralphs already has confessed to most of these crimes, although on a smaller scale than the government alleges.
The company says that about 200 locked-out workers were rehired at scattered stores, and that it has trued up its payments to the trust funds and the government. Still, it hardly matters whether the rehired workers were a few or -- as the indictment alleges -- numbered nearly 1,000 working at 90% of the more than 300 Ralphs stores involved in the lockout. Ralphs says it’s willing to take its medicine, but when it tried to negotiate what it says would be a “fair and reasonable fine” with the U.S. attorney, the talks broke down.
For the most part, the company is shoving blame for the affair onto low-level management -- store and zone managers in Southern California. (This “rogue employee” defense is beloved of corporate bigwigs in the dock -- think WorldCom’s Bernie Ebbers and Enron’s Ken Lay.) My sources say that as many as nine zone managers -- who typically oversee 18 to 20 stores -- have been fired or forced into retirement, and two others have been transferred out of state.
Is this good enough? If the scheme was as extensive and coordinated as the indictment contends, it could scarcely have been implemented unilaterally from the bottom of the totem pole. At the least, corporate executives must have been willfully ignorant of what was happening on the ground, a condition that hardly absolves them of guilt.
Kroger Co., the parent of Ralphs, says the scheme violated company policy, but that policy sounds a little slippery. Prior to the strike and lockout, the company issued a rule book forbidding managers to “knowingly” rehire union members. This rule was noticeably more lenient than what was in place for earlier strikes, when the prohibition had been absolute.
The indictment says that when they briefed managers, Ralphs executives emphasized the word “knowingly,” sometimes with hand gestures. (One imagines an executive crooking his fingers to put figurative quote marks around that “knowingly.”) It wouldn’t be surprising if store managers got the message that their task was merely to maintain plausible deniability.
Nor does it seem that Ralphs was very proactive about ensuring that managers behaved. The company says it had a screening procedure in place, and that’s why people used fake names and Social Security numbers.
Yet the indictment charges that Ralphs took almost no action to prevent inappropriate hirings until January, when the union filed a complaint with federal labor regulators. There’s no indication, for instance, that Ralphs routinely checked the identities of its new hires with the Social Security Administration, which can verify the names, numbers and birth dates of employees within 24 hours. This surely would have uncovered workers who had fabricated Social Security numbers to evade detection, and possibly those who were using children’s, spouses’ or parents’ names and numbers.
Plainly, if the government can prove its charges, Ralphs will be in a world of hurt. Its liability exceeds the more than $100 million in fines carried by the 53 counts of the indictment. The 19,000 workers it locked out could be due back pay. Senior executives may still face indictment -- as may individuals who worked under fake names and shouldn’t be regarded as entirely innocent. The employee benefit trust funds and Kroger shareholders could sue for redress. The union could seek to nullify its contract.
The grocery strike/lockout of 2003-04 benefited nobody. The union accepted a contract that marginalizes its members. The three companies lost $1.5 billion in sales during the job action, and their profit margins have never returned to pre-strike levels. (That’s one reason Albertsons is for sale.) The companies’ mutual-aid pact is the target of a state antitrust suit.
Such is the harvest of the chains’ scorched-earth strategy in the contract talks, which brought decades of amicable labor relations to an end. One wonders if the chief executives of these companies ever stay up at night, asking themselves if the ends justified the means. A little insomnia is just what they deserve.
Golden State appears every Monday and Thursday. You can reach Michael Hiltzik at golden.state@latimes.com and view his weblog at latimes.com/goldenstateblog.
