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April 3, 2013

New Doheny Meats owner explains his purchase of scandal-ridden store

http://www.jewishjournal.com/los_angeles/article/new_doheny_meats_owner_explains_his_purchase_of_scandal_ridden_store

Philanthropist Shlomo Yehuda Rechnitz, right, receives the Chesed Award on March 4, 2012. Photo by David Miller

Philanthropist Shlomo Yehuda Rechnitz, right, receives the Chesed Award on March 4, 2012. Photo by David Miller

Shlomo Rechnitz, a prominent local businessman and philanthropist, has purchased Doheny Glatt Kosher Meat Market, the scandal-plagued kosher meat retailer and distributor.

Rechnitz, who co-founded TwinMed, a large medical supply firm, and owns a number of other businesses, purchased the store and its distribution arm for an undisclosed sum from its former owner, Mike Engelman.

The sale closed late in the day on Sunday, March 31, just one week after its former kosher certifier, the Rabbinical Council of California (RCC), revoked the store’s certification and hours before the beginning of a two-day holy period celebrating the end of Passover.

Starting on March 25, the day after the revocation, rabbis from the RCC reached out to Rechnitz, urging him to buy Doheny, and in an interview with The Jewish Journal on April 3, Rechnitz said he initially considered making the purchase as “a favor to the community.”

[Related: After Doheny Kosher scandal, what does the future hold for L.A.’s meat market?]

“Before I came out with the announcement that I was going to purchase [Doheny],” Rechnitz said, “there were already stores calling up different distributors, even being quoted prices 35 to 40 percent higher than their current prices.”

Doheny is believed to supply as much as 50 percent of the kosher meat and poultry in Los Angeles; its disappearance would have significantly reduced competition in the marketplace, which, Rechnitz said, “would have destroyed the kosher market in Los Angeles.”

RCC President Rabbi Meyer H. May said Wednesday morning that he was one of those who personally urged Rechnitz to buy Doheny Meats, and he was cheered by news of the sale.

“It’s really extraordinary,” May said. “He’s going to preserve the richness of the meat supply and preserve the price structure for consumers.”

Rechnitz was involved in the response to the Doheny scandal from its earliest hours. He was one of a handful of non-rabbis who attended a hastily organized meeting on Sunday, March 24, when Engelman spoke to the RCC’s leadership and rabbis from synagogues around the Pico-Robertson neighborhood about what he had done at his store.

Engelman, who had owned the shop for 28 years, was videotaped by a private investigator last month bringing unidentified products into his store at a time when its rabbinic overseer was absent. Engelman did not return repeated calls requesting comment, and has not spoken on the record since the scandal began.

At the March 24 meeting, Engelman reportedly told Rechnitz, May, and the other laypeople and rabbis present, that he had, on two or three occasions, brought unsupervised meat into the store.

According to multiple people who attended the meeting, Engelman claimed all the meat he had brought to Doheny was kosher, but he admitted some was not up to the RCC’s higher “glatt kosher” standard. Glatt kosher meat is more expensive than kosher meat, which itself carries a higher price tag than equivalent non-kosher products.

Rechnitz said that he believes Engelman with “99 percent” confidence.

Rechnitz did add a caveat.  “You can’t rely on someone like me, who got my information from someone who unfortunately has made mistakes, who wasn’t always as truthful as he should have been,” Rechnitz said.

Over the course of a week of negotiations, Rechnitz spent between eight and 10 hours with Engelman; he said he does not believe Engelman brought the unsupervised products into Doheny to respond to specific customers’ requests, as some have suggested.

Rechnitz said Engelman himself couldn’t fully explain why he brought the unsupervised meat into the store, but Rechnitz speculated that it may have been due to anger Engelman felt towards his main supplier, Agri Star, the large kosher meat processor based in Postville, Iowa. In 2009, Agri Star bought the Postville plant from the bankrupt Rubashkin-owned firm AgriProcessors, which had been shut down in the aftermath of the largest immigration raid in American history.

Money may not have been the motivating factor, Rechnitz said, “because it wasn’t that much of a difference, based on the quantity.”

In the private investigator’s video, a Doheny employee was seen unloading eight boxes from Engelman’s SUV and bringing them into the store. Based on additional videos received from the investigator, the May said the RCC estimates Engelman brought a total of approximately 1,200 pounds of animal products into the store over the weeks he was under surveillance.

Although Rechnitz’s initial reason to purchase Doheny was to maintain competing distributors for the city’s kosher-observant community, over the course of the week of negotiations he became a bit more optimistic about the business prospects for the company.

“I didn’t have time to send in a forensic accounting team,” he said, but Engelman told him that Doheny’s gross sales on the retail and distribution sides added up to approximately $8 million a year.

That said, Rechnitz said he hopes to remain a mostly silent investor in Doheny, and won’t aim to build its market share at the expense of other distributors.

Engelman won’t have any role in the business – Rechnitz said the agreement required the former owner to make a “complete” break, and included a non-compete clause – but the rest of the operation should remain mostly the same.

The RCC will once again certify Doheny’s retail and distribution operations, the name will remain the same and every current employee, Rechnitz said, has been offered his job.

The store, which is currently closed, could reopen as early as next Monday; Rechnitz said that the store, the utensils and dishes used there were being kashered -- ritually cleansed -- “just in case there was non-kosher meat being used.”

Rechnitz is currently Doheny’s sole owner; he said he is in negotiations with another investor who might buy into the business. The deal with Engelman included a non-disclosure agreement about the price, Rechnitz said, but he described the negotiations as “amicable” and described the final selling price as “sizable,” but not as big as it might have been prior to the scandal.

“It definitely came at a major discount due to the fact of what [Engelman] did, or what he tried to get away with,” Rechnitz said. “He definitely was not rewarded for his actions.”

Rechnitz has experience working with organizations at times of crisis. In his role as CEO of one of his companies, Brius Management Co., which manages multiple nursing homes across California, Rechnitz told a reporter in 2011 that his company looked mostly for “distressed facilities.”

In his philanthropic work, Rechnitz has also come to the aid of embattled organizations. Last year, in the wake of Hurricane Sandy, Rechnitz donated $1 million to an organization that supports Jewish day schools in the New York area. In 2011, Rechnitz donated $5 million to the Mir Yeshiva in Jerusalem, which was struggling under millions in debt following the death of its chief rabbi and fundraiser. That same year, Rechnitz also helped save Chabad of California’s headquarters from foreclosure.

But Rechnitz is also known for charitable giving of a very different sort. Every Saturday night, Jews line up outside his family’s home. Until six months ago, those who came walked away with checks; now they leave with gift cards to one of two kosher markets in the area near Fairfax and La Brea.

Rechnitz announced his purchase of Doheny at his synagogue on Sunday evening, March 31, just hours after the deal closed. He said the reaction there was muted – “It was kind of almost expected,” Rechnitz said, adding that his goal in making the announcement was to change the conversations that observant Jews in Los Angeles were bound to have over the two days that followed, the last two days of Passover, during which work and the use of any electronics is prohibited.

“I wanted to stave off two days of people creating rumors and completely defaming the place,” Rechnitz said.

In that regard, Rechnitz appears to have succeeded already. Just hours after Passover ended on Tuesday, April 2, after sundown, at least one person had reported the news in a comment on Facebook.

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