Judge Orders Occidental to Account for Art : Funding: A ruling in favor of dissident shareholders also authorizes depositions relating to the building of the controversial Hammer museum.

A Delaware judge has ordered Occidental Petroleum Corp. to provide details by Monday on the source of money used to purchase virtually the entire art collection of Occidental Chairman Armand Hammer.

In an order made public Wednesday, the judge also authorized lawyers for dissident Occidental shareholders to take depositions from a top Occidental executive and the administrator of the Armand Hammer Museum of Art and Cultural Center, which is under construction in Westwood.

In issuing the order, Delaware Vice Chancellor Maurice Hartnett ruled in favor of shareholders, who have charged Occidental may have engaged in a “fraudulent scheme” to artificially lower the cost of the museum.

Hartnett is hearing the case because Occidental is incorporated in Wilmington, Del. Occidental officials declined to comment on the latest court move.

The actual cost of the Hammer museum project and the origin of money used to finance Hammer’s extensive art holdings are key elements in shareholder litigation that seeks to overturn Occidental Petroleum’s commitment to build and endow the museum. The dissidents contend the expenditure--which could total as much as $85 million--is a waste of company resources.

Hartnett had previously scheduled an April 4 hearing on a proposed settlement in the shareholder lawsuit, in which the California Public Employees Retirement System, the state’s largest pension plan, is a plaintiff. New York investor Alan R. Kahn is also a lead plaintiff opposing the settlement, which technically was reached in a third lawsuit involving other shareholders.

The new ruling by Hartnett came after shareholder attorneys, including the office of California Atty. Gen. John Van de Kamp, filed papers contending that Occidental had falsified its books to create the illusion that it had reduced the construction cost of the Hammer museum to less than $60 million.

Susan Henrichsen, a deputy attorney general representing the state pension plan, said in a court filing last week that Occidental’s denials that any museum costs were artificially shifted “fails to rebut or resolve questions regarding the good faith” of the settlement agreement that requires the museum construction cost to be held to $60 million.

Ronald Asquith, an Occidental vice president, said in response to a memorandum that appears to show he approved the cost-shifting that the document was prepared in error and that he attempted to correct the mistake a week later. But Henrichsen contended that the explanation “does not, however, address similar evidence set forth in minutes of other meetings.” The money cap was established in the proposed settlement. If Occidental cannot hold the cost to $60 million or less, the entire settlement agreement could disintegrate.

Hammer, 91, decided to build the museum two years ago after a falling out with the Los Angeles County Museum of Art, to which he had originally pledged to will his collection.

Shareholder lawyers filed their papers alleging a fraudulent scheme to falsify Occidental’s books after The Times disclosed on Feb. 21 that internal Occidental Petroleum documents indicated the company may have used accounting devices to switch millions of dollars from the museum budget to other corporate accounting categories apparently unrelated to the museum.

The new court order noted that shareholder attorneys “have raised the question of the good faith of the parties in settling this action.” Hartnett concluded that the new questions over cost-switching and lingering questions about who actually purchased Hammer’s extensive art holdings “established that their (the shareholders’) concerns were bona fide.”

In a separate court filing last week, Asquith denied such a plan ever existed. In the new court order, Hartnett directed Occidental to make Asquith and Hillary Gibson, a key Hammer aide who functions as the museum’s chief administrative officer, available for depositions in Los Angeles, perhaps as early as next week.

Meanwhile, additional Occidental documents obtained by The Times appear to confirm that the company may have acted on part of the cost-switching plan sometime last August. Earlier, The Times disclosed that internal memoranda showed that on Aug. 17 a meeting of Occidental Petroleum and construction company officials focused on a proposal under which McCormick Construction Co., which is building the museum, would resubmit bills for $2,266,066 in museum costs. These bills would then be charged against different Occidental accounts.

In his court statement, Asquith said consideration had been given to how to reapply the amount in question in museum accounting, but denied any of the costs were transferred.

But in a letter dated Sept. 1, 1989, from McCormick Construction to John Yates, an Occidental official, the contractor provided a table showing that museum construction costs totaling $1,181,944 had been reassigned from the original museum budget categories to other accounts. The letter acknowledges that as a result of the Aug. 17 meeting on reassigned costs “various adjustments have been made.”

The shifted costs, the document indicates, included temporary construction, drainage systems, metal decking and $226,652 apparently devoted to rectifying problems caused by the unexpected discovery of an underground spring at the museum site.