Occidental Petroleum Corp. was accused Wednesday of engaging in a "fraudulent scheme" to "falsify" financial records to artificially lower costs to construct the Armand Hammer Museum of Art and Cultural Center in Westwood.
The accusation, filed on behalf of dissident Occidental shareholder Alan R. Kahn, was contained in court papers made public in Wilmington, Del. The filing came after The Times reported that Occidental used bookkeeping devices to switch millions of dollars of costs originally charged to the museum construction to other accounts.
New York attorney Sidney Silverman, representing Kahn, charged in an affidavit in Delaware Chancery Court that Occidental ordered the bookkeeping changes to falsely create the impression that it had reduced construction costs to $60 million or less.
A proposed settlement of another shareholder lawsuit seeking to block construction of the museum includes a provision--accepted by Occidental--limiting museum construction costs to not more than $60 million. If the true construction cost exceeds that amount, the settlement agreement could be nullified. The judge previously set an April 4 hearing on the proposal.
Occidental, Silverman charged, "has been caused to falsify its books and records in an attempt to hide the fact that the cost of the (Hammer museum) exceeds, or will exceed when completed, the maximum allowed by the settlement agreement."
Occidental Petroleum declined to comment on the filing.
Silverman demanded court authorization to take depositions from five executives of Occidental; McCormick Construction Co., the museum general contractor, and C.L. Peck/Jones Brothers Construction Corp., Occidental's construction management consultant.
The litigation was filed in Delaware because Occidental is incorporated there. The court action challenges commitments by Occidental to spend a total of $85 million constructing and endowing the Hammer museum. The museum, scheduled to open in November, is being built to house the personal art collection of Armand Hammer, Occidental's chairman.
Last summer, Occidental found that the museum was seriously over budget and slashed millions of dollars worth of facilities from the complex. Wednesday's action by Kahn is part of his attempt to block court approval of the settlement proposal. A hearing is set for April 4.