A pair of sudden legal problems that could turn into a $1.5-billion setback for Occidental Petroleum sent its stock on a roller coaster Monday, prompting the company's famous chairman to put out the message that it will prevail in both cases and that it is in good shape.
"We're not concerned about any of these things, despite all the hullabaloo," Dr. Armand Hammer said.
The hullabaloo centered on a potential $800-million tax assessment by the Colombian government and a $724-million jury verdict in Cheyenne, Wyo., against an Occidental subsidiary.
After news of the difficulties spread during the weekend, traders on the New York Stock Exchange made Occidental the most actively traded stock Monday as 3,946,000 shares changed hands. After falling $1.75 per share, the price recovered slightly to close down $1.50 at $27.625.
In another development, Moody's Investors Service said it has placed Occidental's debt ratings "under review for possible downgrade" as a result of the continuing problems in the oil industry and the "uncertainties" arising from the double dose of bad news from Wyoming and Colombia.
The latest problem is the finding of an audit committee of the tax department in Colombia, where Occidental has recently made major oil discoveries and completed a costly pipeline, that the company owes $800 million more in taxes than it has paid.
Occidental said it understands that the audit committee decided that the company should be paying taxes based on its oil and gas holdings today rather than last April. The company has made several major discoveries in the meantime.
In a telephone interview Monday afternoon, the 88-year-old Hammer said that Occidental President Ray Irani is to meet today with top officials of the Colombian government in an effort to straighten out the "preposterous claim" that, Hammer said, has its roots in leftist opposition to Occidental's activities in Colombia.
Hammer said the audit committee was "spurred on" by a former president of the state oil company, whom he described as "a leftist and a radical who was against our building the pipeline and who has attacked us constantly. He is the one who has stirred up someone in the tax department."
Hammer said the dispute centers on Occidental's transfer in April, 1983, of half-interest in its holdings to a subsidiary, Cities Service, which had longstanding reserves in Colombia.
"We believe this is a preposterous claim that will not stand up in court," he continued. "It's a tempest in a teapot."
As previously reported, Occidental was also hit with a jury verdict of $724 million late last week in an antitrust and breach-of-contract case brought against a subsidiary, Natural Gas Pipeline Co. of America. The company has vowed to appeal.
Hammer said Occidental has prevailed on famed trial lawyer Louis Nizer, 84, a member of its board, to appear before the trial judge to ask him to set aside the verdict or reduce the damages. Failing that, the company will appeal to the 10th U.S. Circuit Court of Appeals.
As for Occidental's financial condition, Hammer said the company is more concerned about the condition of the oil industry than about its spate of legal problems.