Wage Law

Rather than proceed to trial on August 15, 2006, the Ralphs supermarket chain has indicated that it plans to plead guilty to charges that it illegally re-hired hundreds of locked-out workers using aliases during a 2003 labor dispute. In June SEC filing, Kroger Co., the owner of the Ralphs Grocery Co. chain, announced that it "expects to enter into an agreement that will include a plea of guilty to some of the charges" under a 53-count federal grand jury indictment.

Under Item 8.01 Other Events:

On June 29, 2006, the Company filed its Quarterly Report on Form 10-Q for its fiscal quarter ended May 20, 2006. In that Report, the Company disclosed, among other things, that its Ralphs Grocery Company subsidiary (“Ralphs”) expected to enter into an agreement that would include a plea of guilty to some of the charges contained in the indictment against Ralphs in the matter styled United States of America v. Ralphs Grocery Company , United States District Court for the Central District of California, CR No. 05-1210 PA.

On June 30, 2006, Ralphs entered into an agreement settling all matters related to the indictment. Under the terms of the agreement, which must be approved by the Court, Ralphs will plead guilty to five of the 53 counts in the indictment; these 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.

In addition, Ralphs will be placed on probation for a period of three years. If and when the Court approves the settlement, all remaining counts in the indictment will be dismissed. The agreement will resolve all pending and potential criminal claims against Ralphs related to this matter. In addition, a pending appeal at the National Labor Relations Board challenging the legality of the lockout by Ralphs of its employees during the strike will be dismissed.

While the Company can provide no assurance that the Court will approve the settlement, if the Court does approve the settlement the reserves established through the first quarter 2006 will fully cover Ralphs’ exposure in connection with these legal proceedings.

The plan to pay $50 million in back wages to approximately 19,000 workers represents about 7 weeks pay for each of the United Food and Commercial Workers Union workers who were locked out for 20 weeks in 2003 and 2004.

We look forward to our next case against Ralphs, and specifically, to propounding form interrogatory 2.8, wherein we can inquire whether Ralphs has ever been convicted of a felony, etc., and getting back a "yes."