The Occidental Petroleum Corp. has reached a tentative settlement in a shareholder lawsuit over the Armand Hammer Museum of Art and Cultural Center, under construction in Westwood, in which Occidental would limit its contributions to charities organized by its founder, Armand Hammer.
In a twist to the story of how--and where--the Hammer collection will be displayed, the agreement disclosed Wednesday stipulates that the museum building will not carry Hammer's name but will instead be known as the Occidental Petroleum Cultural Center Building. The museum itself will still be named for Hammer.
The stipulation that Occidental Petroleum be identified by name is somewhat ironic, as Hammer announced that he was withdrawing his promise to give the collection to the Los Angeles County Museum of Art in January of last year partly because the museum balked at naming an entire wing for him in return.
Pending shareholder lawsuits charge that Occidental Petroleum's assets have been committed too liberally to support Hammer's personal charities. In addition to the museum, those organizations include the Armand Hammer United World College of the American West, in Montezuma, N.M., and the Armand Hammer Foundation. The tentative settlement precludes Hammer from disposing of his art collection--valued at between $250 million and $400 million--in any way except by donating it to the new museum. It guarantees that, if the Hammer museum exercises an option in 30 years to purchase Occidental's headquarters--to which the museum will be structurally joined--and later resells the property, the oil company will receive half of the profit from the transaction.
A plan approved by Occidental Petroleum's board permits the museum to exercise an option to buy the Occidental Petroleum building 30 years hence for $55 million--an amount roughly equal to its estimated value today.
The settlement agreement is not yet in final form. When it is completed, it must be approved by a Delaware chancery court judge. Attorneys involved said the agreement was reached in principle last week. No date for a hearing on approving the out-of-court settlement has been set.
For the moment, the settlement agreement applies only to a court action brought against Occidental in May by shareholders Joseph Sullivan and Alan I. Brody. Two other lawsuits seeking to interfere with financing of the museum by Occidental are pending, but if the Delaware judge approves the settlement, attorneys and Occidental officials said, it would effectively settle the remaining litigation as well.
One of the three lawsuits is pending in California but would be dismissed when the Delaware litigation is settled. The plaintiff in the third lawsuit, New York securities dealer and investment adviser Alan R. Kahn, said, however, that he opposes the settlement. Kahn filed an affidavit detailing his objections in the Delaware court last week.
In his affidavit, Kahn charged that the settlement agreement amounts to a financial mirage. It would have little practical effect on Occidental Petroleum donations to Hammer charities, he said, because it leaves intact the $86 million in construction and subsidy funding. Moreover, Kahn contended, the settlement effectively commits Occidental Petroleum to paying any cost overruns in the museum's construction--which Kahn estimated will total $10 million.
"The settlement . . . leaves Hammer in a better position than he was before these actions were instituted," Kahn said. He contended that the settlement will also commit Occidental Petroleum to pay $1.4 million in attorneys' fees to lawyers who brought the actions against the company.
In a response to requests for confirmation of the settlement, Occidental said the agreement "assures that the museum and cultural center will receive the Hammer collections and what Dr. Hammer considers adequate financial support."
"It provides for specific limitations," Occidental said, "in the amount of contributions which may be made by Occidental for these purposes in future years."
Under a formula detailed in the agreement, the amount of money Occidental Petroleum could contribute to Hammer charities would be limited to 1.33% of the total paid as dividends in any given year. Using 1988 as a base, attorneys and Occidental officials said, the settlement would limit such contributions to about $8 million this year.