A respected Washington consulting firm has urged 200 of the nation's largest institutional stockholders to oppose a settlement in a pending lawsuit against Occidental Petroleum Corp. over financing of a museum to house the art collection of Occidental chairman Armand Hammer.
In letters mailed Friday to pension plans, mutual funds and other organizations that maintain large portfolios, Institutional Shareholders Services Inc. concluded, "If ever there has been a case for real shareholders with significant holdings in the company to object (to such a settlement), this is it."
Nell Minow, general counsel to the firm, said Institutional Shareholders Services had never before urged direct intervention by institutional owners of large blocks of stock in a shareholder lawsuit. But, Minow asserted, "this case was such a clear outrage that entering it was irresistible."
An Occidental Petroleum spokesman declined to comment on the new development in pending shareholder litigation that is scheduled for an April 4 hearing in Delaware at which a judge will hear arguments on whether a proposed settlement should be accepted. The litigation was filed in Delaware because Occidental is incorporated there.
Two Occidental stockholders, the huge California Public Employees Retirement System and New York investor Alan R. Kahn, are opposing the settlement of a separate lawsuit by two other stockholders. If the Delaware judge accepts the proposed settlement, all pending litigation over the museum would be terminated.
Institutions own 36% of Occidental's 293 million outstanding shares.
Minow said she would not have challenged construction of the Hammer museum if Occidental had asked its stockholders to approve the program before it was implemented. "There is something to be said for corporate charitable contributions and I like to see companies recognize that they have a responsibility to the community," she said. "In this case, the company might make a contribution to the Los Angeles County Museum of Art.
"(The situation) certainly doesn't justify building the 20th-Century equivalent of the pyramids for Dr. Hammer."
At issue is a plan by Occidental to build and endow the Armand Hammer Museum of Art and Cultural Center, which is under construction in Westwood. Scheduled to open in November, the museum has been the subject of a series of revelations during the litigation, including disclosure that Occidental, and not Hammer, actually financed key elements of what is considered Hammer's personal art collection.
Hammer decided to build the museum entirely with Occidental money after a falling out with the county art museum, to which he had originally pledged the collection.
Questions have arisen over the museum's business plan and internal Occidental documents have appeared to show Occidental may have switched millions of dollars from the museum budget to other accounts to bring the construction cost below the $60-million figure specified in the settlement proposal.
"The proposed settlement gives nothing to the shareholders," said Minow in a letter to the 200 pension plans, mutual funds and other organizations. "In fact, it agrees to a formula that could bring the costs of the museum up to $120 million--or even higher. Since the suit has been filed, a number of questions have been raised. The proposed settlement addresses none of these issues."
Minow's letter encouraged each of the 200 institutional shareholders, which include the main California and Pennsylvania public-employee pension plans, to write directly to the Delaware court urging that the settlement be rejected. Last week, the judge, Vice Chancellor Maurice Hartnett, ordered Occidental to provide sworn, written answers specifying where the money came from to purchase virtually every piece of Hammer's art collection.