Occidental Denies Hiding Museum Construction Costs : Art: Executive acknowledges in court papers that internal memorandum discussed shifting costs of Westwood facility to other accounts, but says no transfers were made.

Occidental Petroleum Corp. on Tuesday denied that it ever attempted to conceal construction costs of a Westwood museum being built to house the art collection of company chairman Armand Hammer.

Ronald Asquith, the Occidental vice president in charge of construction of the Armand Hammer Museum of Art and Cultural Center, said in an affidavit filed in Wilmington, Del., that allegations that Occidental engaged in a scheme to artificially lower the apparent cost of the museum “are false.”

“There has never been any plan,” Asquith said in the affidavit, “to transfer museum construction costs from the museum account to elsewhere on Occidental’s books to conceal the true cost of the construction.”

Occidental filed the court papers after attorneys for dissident shareholders accused the company of engaging in a “fraudulent scheme” to falsify the true amount required to build the museum. The shareholder lawyers filed their documents after The Times reported last week that Occidental had apparently decided to move millions of dollars in museum costs to other corporate accounting categories.

Three pending shareholder lawsuits challenge Occidental’s decision to build and endow the museum. A proposed settlement in one of the cases would require Occidental to limit construction costs to $60 million.

Documents obtained by The Times indicated that the company had considered and decided to move some museum costs to accounting categories apparently related to renovation of Occidental’s Westwood office building, the bottom four floors of which are being gutted and reconstructed as part of the museum.

In the court filing, dated Tuesday, Asquith said an internal memorandum shows that he authorized a key separation of costs for the museum from costs to be attributed to a building maintenance account. But he said he discovered later “a mistake in the preparation of the minutes” of the meeting at which the decision was made. “I immediately recognized the error,” Asquith said in his affidavit.

The court filing consists of an affidavit by Asquith and a copy of minutes of a meeting at which Asquith contends he rectified his original mistake.

The new court documents also confirm that Occidental and its contractors held discussions on whether to change accounting allocations for $2,266,066 in museum costs but that a proposal to actually switch the money was never carried out.

The litigation is being handled by a Delaware court because Occidental is incorporated there.

At the time the story was published, Occidental declined to respond to a set of written questions by The Times inquiring about decisions recorded in Occidental internal documents and specific amounts of money transferred from museum accounts to other bookkeeping categories.

“These discussions (of transfer of the $2,266,066) related exclusively to an effort to ensure that Occidental’s books were accurately recorded,” Asquith said in his affidavit. “From time to time, there have been good faith and open discussions respecting the proper allocation of costs to the appropriate accounts, including discussions relating to a list of items comprising the $2,266,066 figure.

“Such discussions were not part of any ‘secret’ scheme. There has never been any attempt to ‘conceal’ these discussions.”

Asquith emphasized that the current total budget for the museum includes the entire amount involved in discussions of shifting of costs from one account to another. Asquith said in his affidavit that, despite discussions of making such accounting transfers, none of the money involved was ever actually shifted from a museum account to a non-museum account.

He said Occidental Petroleum established a separate subsidiary, Oxy Westwood Corp., and a separate account in the books for maintenance and tenant improvements in Occidental’s 16-story office building. But Asquith specifically denied that the tenant improvement account had ever been used to conceal construction costs related to the Hammer museum.

Asquith confirmed that Occidental efforts to drive down the museum construction cost had lowered the price of the museum from $78.4 million before top Occidental executives ordered massive reductions to a currently projected $59-million budget. Asquith also confirmed that the cost-cutting means the museum will open in November with its auditorium, restaurant and library unfinished.

“Ironically, (the dissident shareholders’) own papers acknowledge the fact that, to ensure Occidental’s compliance with the $60-million cost limitation . . . work on certain items originally part of the project has been suspended.” The affidavit identified the three facilities as among the suspended work, but noted that “it is my understanding that these portions of the museum will be completed if other funds become available.”

The Asquith affidavit also confirmed that Occidental had removed a $258,000 VIP reception lounge called the “Hammer Memorabilia Room” from the project, along with a $25,000 fireplace that would have been part of the lounge. “Such revisions to construction plans are a customary and appropriate method to adhere to a construction budget,” Asquith said.

“Thus, the budget process reflects nothing but Occidental’s adherence to the $60-million settlement limitation,” he said.