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Mired in Controversy, L’oreal Announces New Investments in Israel

September 19, 1994
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Mired in controversy over its alleged compliance with the Arab boycott of Israel, the international cosmetics giant L’Oreal is about to make a multimillion dollar series of investments in several Israeli ventures.

The plans, which include a manufacturing plant, an export agreement and a focus on research and development, represent a bold departure for the company, which has been criticized for bowing to Arab pressure not to do business with Israel.

The question remains, however, whether these investments will mollify opponents of the company, who include several Jewish groups and at least two members of Congress.

In a telephone interview from his Paris office, L’Oreal Vice President Jean Pierre Valeriola said the company is taking these steps because “Israel is a country with a good economy, and we are trying to develop our market.”

L’Oreal has come under heated criticism since the 1980s for alleged compliance with the Arab boycott of Israel. As recently as this past July, New York Democratic Reps. Charles Schumer and Jerrold Nadler were calling for a boycott of the company to protest its policies toward Israel.

During a French investigation of charges against Loreal, French police raided the company’s Paris office and unearthed correspondence between L’Oreal and the Arab League’s boycott authorities. In the exchange of letters, the cosmetics giant said it would comply with the league’s demands in order to be able to resume doing business with Arab states.

One of the demands was for L’Oreal to close the Helena Rubinstein manufacturing plant in Israel. L’Oreal had purchased the Rubinstein company in 1984. The plant was closed in 1988.

L’Oreal officials have repeatedly denied that the company or any of its subsidiaries have ever complied with the boycott. “I understand the emotional side of the issue,” Valeriola said, “but I am confident that we never severed business with Israel, but increased it.”

The question of how to deal with L’Oreal — a company that despite its denials has been privately categorized by Jewish leaders as “vile,” “repulsive,” and “the worst boycott case ever seen” — comes as progress in the Middle East peace process has diminished the boycott’s effectiveness and importance.

“The boycott is slowly collapsing,” said Will Maslow, editor of the American Jewish Congress’ Boycott Report newsletter. “The Arab states are not strictly enforcing the boycott, but they have not made a public declaration that it’s over.”

Now, with this new commitment by L’Oreal to invest in Israel coupled with the new realities in the Middle East, how to approach the difficult question of when to forgive a company for alleged past transgressions is putting those who have long fought the boycott on different sides of this thorny issue.


After an initial $7 million investment in Israel in May, the Anti-Defamation League and B’nai B’rith sent letters to L’Oreal praising it for its move. After learning this week of L’Oreal’s most recent plans, Jess Hordes, the ADL Washington representative, explained his organization’s approach.

“You judge a company by what it does. L’Oreal is investing in Israel directly and openly,” Hordes said. “This is a signal that the boycott is not part of the company’s policy.”

B’nai B’rith also praised L’Oreal. “You don’t forget that the adherence (to the boycott) took place, but like the process of making peace, you move to a new plane with new realities,” said Dan Mariaschin, director of international, government and Israel affairs for B’nai B’rith.

But not everyone was as willing to look past the company’s history and believe that the fight is over.

Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center, said Valeriola told him in March that L’Oreal would send a delegation to Israel to study stepped-up production of its products — but it never happened.

“We’ve heard this before, and we’re concerned about the foot-dragging,” Cooper said. “At least they are talking about moving in the right direction, but we’ve got to wonder why is it taking so long?”

Schumer called L’Oreal’s new plans a “good step, but only a first step.”

The congressman said he would be meeting with L’Oreal officials in the coming weeks to discuss their investments.

The issue of L’Oreal compliance with the boycott has made headlines recently in part because of a suit brought in the United States earlier this year against the company by a French-Israeli businessman, Jean Frydman.

In his $100 million lawsuit, Frydman echoed charges he first brought in France in 1989 that he and his brother were ousted from a joint venture with a L’Oreal executive in order to appease the Arabs.

Frydman took out a full-page advertisement in The New York Times last month detailing the charges against L’Oreal, and the case has been the subject of major news articles in Business Week, the Washington Post and Newsweek.

The Frydmans lost their criminal case in France, but a subsequent French government investigation found that L’Oreal did, in fact, comply with the Arab boycott.

The French media also turned the spotlight on the company’s Nazi ties. Jacques Correze, chairman of L’Oreal’s Helena Rubinstein unit, resigned in 1991 after French papers publicized his 1948 conviction for wartime crimes.

L’Oreal made its first step toward reconciliation with Israel this past May, with a $7 million investment in its Israeli distributor, Interbeauty.

In July, L’Oreal pledged $1 million to help finance a campaign to stamp out the high rate of road accidents in Israel.

Later that month, the Wiesenthal Center and the National Council of Jewish Women joined Schumer and Nadler at a rally in New York, where the congressmen called for a boycott of L’Oreal.

The groups also called for the Commerce Department’s Office of Anti-Boycott Compliance to step up its ongoing investigation of the company’s American subsidiary, Cosmair. Officials at the Commerce Department refused to comment on the investigation.

The Jewish groups participating in the rally later distanced themselves from Schumer’s call for a boycott, but nonetheless maintained that L’Oreal was still in compliance with the boycott.


In preparation for its new push in Israel, L’Oreal is now putting the final touches on four new Israeli projects.

According to Valeriola, the L’Oreal executive, the company plans to invest $3 million to $4 million in an Israeli distribution company, independent of its investment in Interbeauty.

L’Oreal also plans to import to France from Israel at least $500,000 worth of jojoba oil a year for use in the manufacture of shampoo products.

Another project has L’Oreal officials traveling to Israel in early October to determine which shampoo and hair care products to begin producing in Israel.

L’Oreal will also enter into a research and development cooperative with Hadassah Hospital for three studies on product development.

When asked if the company has heard from the Arab boycott authorities since its May investment in Israel, Valeriola said there have been “no questions and no comments. Maybe I should say not yet.”

He added, “But we are developing our business without any consideration of contacts from other countries.”

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