California's largest public employee pension plan has entered a bitter legal dispute between Occidental Petroleum Corp. and a small group of shareholders who contend that company funds have been improperly used to assemble Armand Hammer's art collection and build his new museum.
The California Public Employees Retirement System, which holds 2.4 million shares of Occidental Petroleum stock, asked a Delaware court to turn over to the company a large portion of Hammer's private art collection and to order the sale of the Armand Hammer Museum and Cultural Center under construction in Westwood.
The Sacramento-based California Public Employees Retirement System also asked the Delaware court to issue injunctions barring Occidental from making additional donations to the Armand Hammer Foundation, which holds title to much of Hammer's art collection.
The pension plan also seeks an order barring Occidental from continuing to pay a salary to Hammer, who founded the oil company in 1957. Hammer, 91, receives $1.5 million a year under a contract that requires Occidental to pay his salary to his foundation for up to 10 years after his death.
The public employees pension plan asked that the court order apply to all art held in Hammer's collection but bought with Occidental money. It argued that the Armand Hammer Museum and Cultural Center should be sold on grounds that the project is a waste of Occidental's money. Estimates of the total cost to build and endow the museum run as high as $160 million.
The pension plan's demands were filed in Wilmington on Monday. The fund, which serves 750,000 state and local government workers, is the 17th-largest single Occidental shareholder. In 1988, the pension fund had assets of more than $45 billion. Occidental has more than 269 million shares outstanding and closed Tuesday on the New York Stock Exchange at $29.88 a share.
The pension fund also asked the Delaware Chancery Court to order the sale of a $36-million annuity bought by Occidental to provide operating and endowment funds for the museum during the first five years of its existence.
A court spokesman said a hearing date will be set next week on the pension fund's request.
An Occidental spokesman declined to comment on the petition by the pension fund.
The court petition by the fund comes after disclosure in court documents unsealed last month that the $5-million purchase of the so-called Codex Hammer, a collection of drawings by Leonardo da Vinci, was made indirectly by Occidental. The foundation earlier said it had bought the drawings.
The Da Vinci drawings are a central element of Hammer's art collection, whose total current value has been estimated at between $250 million and $400 million.
The Hammer museum, scheduled to open in November, 1990, was established in 1987 after Hammer withdrew from a longstanding commitment to donate his collection to the Los Angeles County Museum of Art.
The change of heart occurred after the museum balked at accepting a series of conditions set by Hammer for the display of his collection.
This touched off a bitter estrangement between Hammer and the museum, which earlier this year declined to renew Hammer's term on its board of directors.
In court documents unsealed last month in response to a petition by The Times and the Wall Street Journal, minutes of the 1980 meeting of Occidental's board, at which the $5-million Da Vinci purchase was approved, show that the board action came after Hammer told the directors "that ultimately, the (Da Vinci drawings) would become a part of the permanent collection (of the) Los Angeles County Museum of Art."
In the petition, the pension plan seeks court permission to file a separate complaint in a lawsuit originally filed against Hammer and Occidental by dissident shareholder Alan R. Kahn. Ruling against a request for an injunction that would have halted construction of the Hammer museum, Vice Chancellor Maurice Hartnett concluded that true ownership of Hammer's art collection is clouded by "the most unusual and troubling circumstances."
Hartnett's decision said the case was complicated by "the issue of who really owns the art" and the "egocentric nature" of Hammer's relationship with the county Art Museum.
In a sworn statement filed with the petition Monday, Dale M. Hanson, the pension plan's executive officer, said the fund had decided to enter the court action because the museum, "although funded by Occidental, serves only to permit . . . Hammer to have a museum bearing his name and subject to his control."
Hanson's statement contended that the millions of dollars committed to the museum "are unreasonable and a waste of Occidental's assets." The pension system said it also opposed a tentative settlement in a separate shareholder lawsuit, which limits the percentage of profits Occidental can donate to Hammer charities because it "will place Occidental in a worse position than it was before these actions were commenced."
The plan also charged that Hammer improperly went ahead with his plan to construct the museum without approval by the Occidental board. In a sworn court statement, Hammer acknowledged that some planning and construction activities were undertaken after they were approved by the board's executive committee, without waiting for concurrence by the full board.
In its court documents, the pension plan contended that more than $1 million was paid to the museum's architects without Occidental board approval and that "large payments" were made to tenants of Occidental's headquarters building to induce them to vacate their space to permit construction to start.
The museum, at the intersection of Westwood and Wilshire boulevards, is designed to include the bottom four floors of the existing Occidental building.