Sour Grapes

Not long ago, Leon Yehuda (Lennie) Recanati, who owns the controlling interest in the Recanati Winery, sold boxing rings to American soldiers in Iraq. The sale was made through Excalibur, a company that went public in England last month, which Recanati established with English partners.

Not long ago, Leon Yehuda (Lennie) Recanati, who owns the controlling interest in the Recanati Winery, sold boxing rings to American soldiers in Iraq. The sale was made through Excalibur, a company that went public in England last month, which Recanati established with English partners. The company locates and supplies equipment to the U.S. forces in Iraq, Recanati relates willingly, as he describes his extensive business interests: real estate in Holland, chemicals and removal of toxic wastes in Ramat Hovav, south of Be'er Sheva, a bit of high-tech. The only subject on which he's reticent is the winery that bears his name. It is precisely the most thrilling business he's ever had that has become an arena in which he is repeatedly hurled to the floor, bruised and battered.

Not everyone who loves wine or who owns a collection of rare wines can also be the owner of a winery. Recanati, 51, was lucky twice. In addition to his love for wine and his large collection (more than 2,000 bottles, from all over the world), he also had everything that was needed to move from the status of fan to that of player.

"Wine was always drunk in my parents' house," he recalls. "My father would bring wines from abroad and we would occasionally drink. We also had a vineyard of grapes for eating at our house on Mount Carmel, and we would make white wine out of them. Later, when I grew up, I visited wineries all over the world and I always had the dream of creating my own winery, though not in terms of a business - and I also never thought it would bear my name - but out of pure love of the subject. And then we had just sold IDB [a huge holding and development corporation owned by the Recanati banking family], so the timing was right and the opportunity was there, too."

Four years ago, he believed he was on the brink of realizing the dream. He was on the way to getting $10 million from the IDB sale and intended to use part of the money to buy himself a winery as a gift - or more exactly, to enter into partnership with the brothers Shlomi and Moshe Ben Ari, who at the time seemed to him to be "very nice guys with an excellent background."

The Ben Ari brothers are scions of an old winemaking family that came to Palestine from Romania at the end of the 19th century. The head of the family, Leib Avdek (an acronym for "president of holy court"), purchased land in Zichron Yaakov, on Mount Carmel, from someone who lived in Lebanon and had built an estate on the site. The estate included vineyards, from which the family made a living in the generations that followed. After the establishment of Israel, "Avdek" was changed to "Ben Ari," in memory of the founding father, Leib (which means "lion" in Yiddish; "Ben Ari" means "son of lion"). Leib's children and grandchildren continued to grow grapes and market them to the association of winemakers.

An old dream

For a time, it seemed as though Moshe (55) and Shlomi (46) were going to break the family tradition. Moshe went off to Italy to study veterinary medicine and Shlomi attended medical school at Ben-Gurion University of the Negev in Be'er Sheva. Moshe subsequently opened a private clinic in Tel Aviv; Shlomi specialized in gynecology. But in the end the "farming genes" triumphed. At the end of the 1990s Shlomi left his medical practice to formulate a business plan with his brother, which included the production of a high-quality wine that everyone could afford.

"The connection between wine and medicine is the small crack through which one looks at nature," Shlomi says about his career change. "I say that we have to let nature do most of the work and intervene as little as possible."

The brothers rolled up their sleeves and set to work. With the help of an expert, Dr. Pini Sarig, they located suitable vineyards in Moshav Ben Zimra, in Upper Galilee; they found winemaker Lewis Pasco, who has a master's degree in winemaking from the University of California at Davis and who had worked at wineries in California's Napa Valley and at Tishbi Winery in Israel; and they checked out suppliers of equipment from Italy and oak barrels from France. Everything was clear and just about ready to go, apart from the money. They needed $450,000, and that was just for starters.

"At this stage we started looking for an investor. We were in negotiations with several investors and in the end we got to Lennie [Recanati], too," Shlomi relates. "He was in IDB at the time, busy with his own things, he was the director of many companies, and we understood that he wouldn't be an active partner. He [was] someone who likes wine, combined with a financial background. We had the know-how. We created the package. We presented the idea, he liked it, and he understood that he was going to be a 50-percent partner."

Recanati: "They talked to a few investors, but nothing came of it and they approached me. They came with a business plan drawn up by a respected accountant, which looked interesting, and I decided to get involved. They were hard negotiators, but I was certain that life is stronger than everything and I believed we would get along."

Recanati brought into the partnership his good friend at the time, Yuval Gorali, the owner of Electro Star, an electrical appliances company and a collector and connoisseur of wine. In March 2000 Recanati, Gorali and the Ben Ari brothers signed a contract to create a winery in the industrial zone of Emek Hefer, in the Sharon region between Netanya in the south and Hadera in the north. It was a 50-50 arrangement, with each side putting up $450,000.

Intense curiosity

Everyone in the local wine industry remembers a few key years. The first was 1972, when Prof. Cornelius Ough, from UC Davis, visited Israel and said that the climate on the Golan Heights might enable production of ideal wine grapes. Four years later, in 1976, the first vineyards were planted on the Golan, and seven years after that, in 1983, CEO Shimshon Velner launched the first wine of the Ramat Hagolan Winery, which proved to everyone that Israel was capable of producing a world-class wine.

The revolution wrought by the Golan Heights winery in the local culture of wine is comparable to the media revolution fomented by Channel 2, the country's first commercial television channel. Thanks to this wine revolution, there are now about 120 wineries in the country, most of which were established in the past decade. Many of them are small boutique wineries that produce high-quality, prize-winning wine. If 10 years ago the average Israeli consumed about 3.5 liters of wine a year, the current average is seven liters, and in metropolitan Tel Aviv it exceeds 10 liters per person a year (with red wines accounting for 60 percent of consumption). The local wine market today produces some 50,000 tons of grapes and some 35 million bottles of wine a year, with revenues of between NIS 500 million and NIS 600 million, according to authoritative sources. Against the background of this economic growth, it's impressive to find the young Recanati Winery in the top echelon.

News of the planned establishment of the winery generated intense curiosity and expectation in the winemaking industry. The word was out that this was a winning combination - the aristocracy of winemakers and the aristocracy of bankers (Israel Discount Bank is one of the country's three major banks). Shlomi Ben Ari was appointed CEO for the first 18 months, in return for a salary of $10,000 a month and a chauffeur. Recanati was chairman of the board. The company logo, which is on the label of each bottle and looks like an ancient family emblem, was found by Recanati's wife, Lori, on an old Spanish ceramic tile; Shlomi's wife, Nili, a graphic designer, gave it the final touch.

Each of the four partners owned 25 percent of the company's shares. A year later, the ratio changed. Uri Shaked, a veteran of the wine industry in Israel and the exclusive distributor of Recanati wines in the country, joined as a partner and received 17.5 percent of the shares in return for an investment of $225,000. The result was to reduce the shares held by the Ben Ari brothers and Gorali to 17.5 percent each, while Recanati increased his holdings to 30 percent, in return for an additional investment and the use of his family name on the wine's label. Subsequently, Gorali, who was disappointed in the venture, sold his shares to Recanati, giving him a controlling interest (47.5 percent). Shaked (who declined to be interviewed for this article) also invested another NIS 1.6 million in the winery, and Recanati added NIS 7.7 million.

The impasse

The first series of Recanati wines was marketed in September 2001, accompanied by highly publicized launch celebrations and tasting events (in a PR event a year later, acrobats climbed down from the ceiling of the winery in Emek Hefer, to the astonishment of the guests). "It was very exciting to come out with the first series. We were warmly welcomed into the market and received good reviews," Recanati remembers. The reviews were, in fact, so good that the competition clucked with amazement. Daniel Rogov, the food and wine critic of Haaretz, accorded the new winery an especially flattering average grade. In his new English-language book, "Rogov's Guide to Israel Wines" (The Toby Press, 2004), the Recanati Winery gets four stars (out of a possible five) - a grade equivalent to "very good" and attesting to consistency of quality, Rogov says.

In addition to the stream of compliments, the new winery won a number of international prizes and also began to make money. Even though the underlying conception was "a strategy of quality wines at prices for everyone," Recanati says - that is, NIS 35 to NIS 150 per bottle, the latter for the Special Reserve - "I am pleased to say that the winery today is, for the first time, profitable and does not require additional investments." Last year the winery produced nearly 500,000 bottles, a third of them for export to the American, European and Japanese markets.

However, in 2003 Recanati's relations with the Ben Ari brothers hit an impasse - to the point that last July, the brothers filed suit against Recanati in Tel Aviv District Court to the tune of NIS 2,677,000. Recanati filed a counter suit the same day, asking the court to order that their share of the financing be injected into the company, as the contract between them stipulates.

What went wrong? How did such a heartwarming story end up with board meetings that are held in the presence of lawyers and observers and mutual recording takes place? The Ben Ari brothers say that Recanati aimed from the start to dilute their holdings and push them out of the partnership. They even cite an example from the first launch event.

"The launch was intended for leading female socialites," Shlomi Ben Ari says. "About 100 women were invited by the wives of Lennie and Yuval. The launch cost more than NIS 100,000 - the kind of event that we, the Ben Ari family, are not used to. Lennie gets up for the greetings and thanks those who helped establish the new winery. I have no problem with him enjoying himself and having a good time, but our name isn't on the invitation, and when he gets up and thanks people at the launch he doesn't mention us. I'm paying for the event and Lennie gets up to thank everyone who helped and we don't exist. He has no partners. That's no coincidence. That's a chronicle foretold, and that's how we understand his view of us, as temporary and soon to vanish."

Recanati says he doesn't know what they want from him. "I didn't initiate this dispute and I also tried to prevent it. I tried to sit with them, to talk," he says. There are rumors in the industry that the brothers said they would sell their share of the business to him for $4 million.

"I have had business relations with people for many years," Recanati continues, "but I have never quarreled with a partner. I have no doubt that with sound logic, the dispute can be resolved, and I have no problem about sitting with them and continuing to work. I am not demanding their ouster from the winery; they are demanding my ouster."

He and Uri Shaked "have contributed a tremendous amount to the winery," Recanati says. "We have advanced it, we are a label. Dozens of wineries were established in this period which the public has never heard of - so now to come with a demand that I leave?"

Would you be ready to sell?

Recanati: "Never. It's not a matter of money and that's not what's at issue here, either. The winery is the business that's closest to my heart. It bears my name and I love it very much. It's a business with a great deal of soul."

Running a winery doesn't exactly mean romantic nights in the vineyard under a harvest moon. A winery is a capricious business that depends on the mercies of the climate as much as it does on its human resources, from the CEO to the winemaker, to the workers in the field. A crop that is not harvested exactly at the right moment is liable to ruin an entire season.

"You have to really love it in order to go into a business that demands a great deal of forbearance and a great many resources, and whose results you don't see right away," Recanati says. "What's being produced today will be sold in another two or three years. It's not easy. There is no other product in the world that has as many labels as wine. Yet even though this has not been an easy period [in Israel], we succeeded in penetrating the market and growing."

Recanati's friends confirm the impression that for the first time in his life, he has truly fallen in love with a business, that he lives the winery with every fiber of his being. He doesn't hesitate to attend exhibitions in New York or Paris to taste wine at the booths by himself. At the annual wine fair held at the Scottish House in Jaffa, he also poured wine for the huge crowds there, three days running.

Family business

Lennie Recanati was born in New York. His father, Jacob, studied maritime engineering there and met Elaine, Recanati's mother. When Recanati was a year old, his parents returned to Israel, where his father managed the family shipping business, El Yam. Elaine, he relates, was born in Russia. Her father, who is now 99, succeeded in getting the family onto a ship to Cuba and they lived there for three years. His family on his father's side is originally from central Italy, from a small village called "Recanati": "It's a charming place. I visited there and met with the mayor. They make wine and they are very proud of the Jewish community that lived there."

It's not clear what the origins of Recanati's Jews are. According to one theory, they were exiled during Roman times from southern Italy or from Sicily. Be that as it may, in the 16th century the situation of the Jews in Recanati took a turn for the worse and the community wandered to other regions in Italy. The Recanati family settled in Salonika, from where the head of the family, Leon Recanati, came to Palestine in 1933. In Salonika he had a company that sorted and packed tobacco, and afterward also bought tobacco. He arrived in Palestine with 32,000 pounds sterling, and in 1935, together with the Carasso and Albo families, he established the Palestine Discount Bank (afterward the Israel Discount Bank).

Leon and his wife, Matilda, had four sons: Harry, Daniel, Raphael and Jacob, Lennie's father. After Leon's death, in 1945, Harry, the eldest son, ran the bank. In 1970 a dispute broke out between him and his brothers, following which he left the family business and then left the country. Jacob ran the shipping company, which is still active today, while Raphael and Daniel led Discount Bank and IDB, the holding company. Daniel died in the mid-1990s and Raphael died in 1999. Raphael had been convicted in the scandal of bank share manipulations in the 1980s and forced by the commission of inquiry, headed by Supreme Court Justice Moshe Bejski, to leave the banking business (along with other leading figures). Jacob died in 1997; Elaine is still alive. The only one of the brothers who is still alive, Harry, is an art collector and patron of museums that he has established around the world, among them one in Caesarea, in homage to the Jews of Spain and Salonika.

Jacob's position in the shipping company led him and Elaine to make their home in Haifa. Until fifth grade, Lennie attended the city's prestigious Reali School. His parents then decided to send him to a Jewish boarding school in England, for boys only, located two hours north of London ("It's only in the past two years that girls have also gone there"). He remained at the school until the age of 18, taking his matriculation exams. "I was a mischief-maker in school and my parents thought an English boarding school was a good thing, that I would get the right kind of education."

Over the years the Recanati family has tried to avoid business or personal exposure, though not always successfully. Even though not all the cousins from Lennie's generation are fond of one another, they continue to maintain a united front. If they feel a yen for media exposure, it's in the economic pages, and only if it will promote their business interests. Lennie himself took that route only once, in connection with the launch of the winery, and even then he made do with businesslike replies, as befits the graduate of a British boarding school. "It was a consumer product that had to be promoted, and I pitched in," he says.

Eyes wide shut

On a table in the winery, a few bottles are opened and the wine is poured. Recanati plunges his nose deep into the decanter and devotes himself to the work of sniffing, taking the aroma in before indulging himself in a sip, eyes wide shut. But imbibing wine doesn't change his temperament. Far from opening up, he sits with hands folded across his chest, enclosed within himself. How did he get along with all those Brits in the boarding school? "Oh, you know, a boy acclimatizes very quickly," he says.

Didn't you miss your mom? After all, you were only 10 years old.

Recanati: "After I came to Israel on vacation it was hard for me to go back, but when I met my friends it was all right. They say it teaches independence and steels you."

The level of studies was of course high and the food was of course horrendous - not only English but kosher, too. The idea of sending his own children - Tal, 22, Yehonatan, 20, and Yasmin, 16 - to a British boarding school never crossed his mind. That's for egotistic reasons, he says, so they will be close by.

At the age of 18 he returned to Israel and volunteered for the elite Sayeret Haruv reconnaissance unit in the army. He didn't feel out of place: "I fit in without any problems. Only in basic training, the name `Recanati' piqued the officers a little. They gave me special hazing." In the 1973 Yom Kippur War he saw action in Suez City and witnessed the death of many of his buddies.

The post-army path was clear and included academic preparation to enter one of the family businesses. At first Recanati took economics at the Hebrew University of Jerusalem. During his studies, he emphasizes, "I worked in all kinds of junior jobs at Discount Bank, and also as a night watchman in a factory." After getting his B.A., he spent a year in New York working at the Discount Bank branch there, following which he did a master's degree in business administration at Columbia University. After graduating he received tempting offers from American firms, but preferred to return home with American-born Lori. The couple have a handsome villa in Herzliya Pituah, which they built themselves.

During his first summer vacation while at Columbia, Recanati returned to Israel and worked in a number of industrial plants. "At the end of my studies I was supposed to enter Discount Investments, but I wanted to work in an industrial plant first, to see what industry is. I liked it very much."

After completing his studies he worked in a Petah Tikva company that makes tins and then moved to Discount Investments, where he held a wide variety of senior positions, including a stint as chairman of Ilanot Batuha, a brokerage company. After selling his share of IDB he established a new investment company, Sulam.

The fact that Recanati didn't belong to the mainstream of the Discounters, like his cousins Leon and Udi, left him time to devote to hobbies and the good life. For the past few years he has been the manager of the Bnei Hasharon basketball team, and as a diver he takes every opportunity, of which he has plenty every year, to set sail and plunge into the waters of the most exotic underwater sites in the world. Not long ago he went to meet his son Tal, who is traveling in South America, and the two went diving off the Galapagos Islands.

`It's our baby'

The relations between Recanati and the Ben Ari brothers began to turn sour even before the first harvest, as an atmosphere of mutual distrust set in. The brothers' father died in August 2000, just as the winery's first grape crop began to be harvested. Recanati was on vacation abroad at the time and there was no one to sign checks. The mourning over the death of their father was mixed with hard feelings on the brothers' part. "We work hard, sweat, we were even late for the funeral, and Lennie was vacationing abroad," Shlomi says.

After that, quarrels broke out over every little thing: over the name of the original winery, Yasmin, which Recanati proposed (in the name of his daughter); over a secretary and her salary; over the choice of the CEO to replace Shlomi (they finally chose Doron Rand, a senior marketing executive in the winery, who continues to hold the CEO position); over the company events (the invitations and the programs) and the speeches that would be delivered and the thanks that would or would not be expressed there; and even over the fact that Recanati's son worked in the winery before his induction into the army. A year and a half ago they had all had enough and the gloves came off.

Since the initial $900,000 investment was enough for only one year, a second injection of funds was needed, but the contract gave the Ben Aris the option of not investing any more themselves for 18 months, and instead to request the money from Recanati. Recanati thus invested more than $1 million in addition, while Shaked added $323,000. However, after a year and a half, the business required further investment and the brothers again refused to put up the money.

The way the situation developed ended the friendship between Recanati and Gorali. Recanati talks about his former friend with deep sadness (Gorali could not be reached for comment). "Maybe true friendship is tested in situations of this kind," he says.

The friendship between them had been long and intensive, but was apparently sacrificed on the altar of the winery's operation.

Recanati: "At a certain stage Yuval felt uncomfortable with the additional investments that the winery needed. Maybe he thought there would be a different atmosphere. The problem was that the dream was of a boutique winery, where the guys come and everyone drinks wine, you sit next to the barrels and are involved in everything. But a winery of this size has to be managed commercially. There are office holders and they have to do what's best for the winery, and then he decided he wanted out. I took it hard. I told him to have patience, that every new business has its bumps at the beginning, and that this was perhaps not what he had wanted, but that he should look at the half-full glass. However, he had no patience. It was very emotional, for him and for me."

At the beginning of 2003, when Shlomi's term as CEO ended, the Ben Aris felt like "orphans" in the company. At board meetings they were in the minority, they state in their lawsuit, and Recanati easily pushed through decisions that infuriated them, such as "participation in various events, advertising in the alumni bulletin of the Recanati School of Business Administration at Tel Aviv University, business with commercial elements," and so on. (In his writ of defense, Recanati states that the Ben Ari brothers are confusing decisions made by the CEO and the distributor Uri Shaked, and decisions made by him, Recanati, as owner of the controlling interest.) Subsequently the Ben Aris hired a public relations firm to help them initiate articles about the naivete of former winemakers who are bilked by a smooth, cynical banker.

Recanati, who says he still seeks a reconciliation, has made do with only responding to the allegations, though he too recently hired a PR person to convey his position to the public.

In the latest development in the dispute, Shaked recently sent a letter to the board of directors requesting that they file a restraining order against the Ben Aris, which would prohibit them from talking about the winery or giving interviews on the subject. He is also requesting that the brothers compensate the company for the damage it has already sustained. Two weeks ago, the board - which consists of six members, including Recanati and Shaked - decided to file suit against the brothers.

Last week the 2004 grape harvest began. The Recanati Winery is working full-steam. The Emek Hefer site is seething with activity, waiting for the first grapes - which are grown around Jerusalem and in Upper Galilee. The winemaker, Lewis Pasco, is overseeing the work and CEO Rand is constantly on the run. Everyone is hoping that the magic will work again and that the grapes, along with Pasco's nose and palate, will produce a superb vintage. Recanati hopes for increased sales, as do the Ben Aris.

"The wine is good and the winery is working well," Moshe Ben Ari says. "But we are not romantics of the kind who will tell a lover who is leaving us, `All the best.' We want her to have all the best with us. From our perspective this is our baby, the only thing we did with our own two hands, and with tremendous sacrifices. Today we are in a war of attrition and survival. We never fought, we never did things like that. Maybe Lennie can afford to live like that - we are being ruined. Everything that is happening here is wrong and bad."