The completion on Nov. 2 of a long-awaited report concluding that the cosmetics giant broke French laws by cooperating with an Arab League boycott against Israel has reignited a nasty three-year controversy pitting L'Oreal against French-Jewish organizations and involving Israel.
In addition, the U.S. Commerce Department has been asked to look into the report, according to an executive at the American Jewish Congress.
News accounts of the report began appearing in the French press last week.
"The top managers at L'Oreal clearly expressed their intention to follow the rules of the very boycott that French legislation had no less clearly condemned," wrote David Ruzie, a French professor of international law, who prepared the report and who was a co-author of France's 1977 anti-boycott law.
Although L'Oreal agreed in December 1991 to have an independent investigator look into the closing in 1989 of a Helena Rubinstein factory in Israel and its correspondence with the Arab League, the company Monday rejected Ruzie's report.
"We never accepted Mr. Ruzie as the investigator. He showed himself to be biased from the start," said Gerard Unger, a L'Oreal spokesman.
"Furthermore, his report is incomplete and does not shed any new light on this matter," Unger continued. "We have seen all these documents before."
Ruzie conceded that he had analyzed only documents that had been leaked to the press. Most of them, including letters from L'Oreal executives responding to questionnaires from Arab officials, belonged to papers seized during court-ordered searches of L'Oreal headquarters and homes of executives in March 1991.
Ruzie said L'Oreal could not be prosecuted in France, however, because the law's three-year statute of limitations had expired.
According to Will Maslow, general counsel of the American Jewish Congress in New York, the Commerce Department is weighing a request to investigate whether Cosmair Inc., the American licensee of L'Oreal, violated U.S. laws prohibiting participation in the Arab League boycott of Israel.
The request was made two months ago by Gil Frydman, a nephew of Jean and David Frydman, who were involved in a dispute that is at the root of the controversy.Maslow said he urged Gil Frydman, who lives in New York, to ask Commerce's Office of Antiboycott Compliance to review the L'Oreal case.
"They said they would look into it," Maslow said. Gil Frydman could not be reached for comment. An official with the boycott office declined to confirm or deny the existence of a L'Oreal inquiry.
Maslow said it's uncertain whether the U.S. would have any jurisdiction over the L'Oreal case.
"There has to be a violation in American commerce," Maslow said. "Either the French company had to do it here, or an American subsidiary." A spokeswoman for Cosmair said she is unaware if the firm was contacted.
Ruzie said the case against L'Oreal hinged on the Israeli plant shutdown in 1989. L'Oreal has maintained that the closing was just one of 25 around the world done for financial reasons.
The firm confirmed a report that L'Oreal chairman Lindsay Owen-Jones had lunch on Nov. 25 with Uri Savir, managing director of the Israeli foreign ministry, and Jean Kahn, president of the Representative Council of Jewish Institutions in France.
According to the Israeli publication Globes, during the lunch Savir turned down L'Oreal's offer of financial reparation and asked instead for an apology and for the company to reopen the Rubinstein plant in Israel.
The L'Oreal spokesman declined to confirm those details but said the possibility of investing in Israel was discussed. The dispute at the heart of the affair is between former L'Oreal chairman Francois Dalle and Jean Frydman, a former executive with Paravision, the L'Oreal film distribution subsidiary.
Dalle founded Paravision with Frydman, who subsequently left the company. In a French civil suit, Frydman claimed he was forced out of Paravision because of his business ties to Israel in an effort by L'Oreal to end the Arab boycott of its products, which lasted from early 1988 -- the year Rubinstein was acquired -- until July 1989.
Frydman agreed in December 1991 to drop charges against Dalle in exchange for a letter of apology and an inquiry into whether L'Oreal violated the 1977 boycott law.
An independent investigator, Jean-Louis Bismuth, a co-author along with Ruzie of the boycott legislation, was appointed and L'Oreal agreed to finance his investigation. But Bismuth died last April before completing his report.At that time, some Jewish groups proposed that Ruzie complete Bismuth's inquiry but L'Oreal refused to accept him, charging that he had already decided that the firm was guilty.
Ruzie prepared his report independently with the backing of key French Jewish organizations.
The L'Oreal spokesman said the company would still be willing to cooperate with an investigation into the boycott. However, nine months later L'Oreal still has not proposed a replacement for Bismuth.
"Believe me, I have searched myself for a suitable candidate," said L'Oreal attorney Jean Veil. "I wanted a Jewish person and I wanted a specialist in this area and I could not find anyone who wanted to accept."
--with contributions from JOANNA RAMEY and CAROL EMERT, Washington
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