Court Puts Cap on Hammer Museum Costs : LAW: Three shareholders’ groups protest the settlement, which the presiding judge said ‘left much to be desired.’

A Wilmington, Del., judge on Wednesday reluctantly approved a settlement limiting construction and endowment costs for the controversial Armand Hammer Museum now under construction in Westwood.

The ruling also limits the amount of money that Occidental Petroleum Corp. can give to charities affiliated with the 92-year-old industrialist and art collector.

Three groups of shareholders protested the settlement proposal, taking the position that the oil company’s board of directors’ intention to spend Occidental Petroleum’s money to build and support a museum for Armand Hammer was an inappropriate expenditure of corporate funds.

The settlement, among other things, put a $60-million cap on Occidental’s expenditures for the museum.

While the ruling was perceived to be a victory for Occidental, Vice Chancellor Maurice Hartnett, the judge who presided over the matter, said the settlement “left much to be desired.”

“If the Court was a stockholder of Occidental it might vote for new directors, if it was on the Board it might vote for new management and if it was a member of the of the Special Committee it might vote against the Museum project,” Hartnett wrote in his 20-page opinion. “But it’s options are limited in reviewing a proposed settlement to applying Delaware law.”

The hearing on the lawsuit, filed in May, 1989, was held in Delaware because Occidental is incorporated there.

Hammer, Occidental chairman and chief executive officer, said he was pleased with the court’s decision.

“Judge Hartlett’s ruling ends all shareholder lawsuits relating to them museum,” Hammer said in a statement issued by the company on Wednesday.

(Hammer still faces another court challenge from the neice of his late wife. Joan Weiss, sole heir of the late Francis Hammer, is contesting the executive’s ownership of much of the extensive art collection acquired during his marriage.)

The Armand Hammer Museum of Art and Cultural Center, now under construction adjacent to Occidental’s Westwood headquarters, is set to open on Nov. 28.

The settlement was opposed in court by the California Public Employees Retirement System, three other public employee pension programs in Pennsylvania and New York, and New York City private investor Alan R. Kahn, who owns 700 shares of Occidental.

Kahn could not be reached and his attorney, Sidney Silverman, declined to comment on the decision.

Deputy Attorney General Susan Henrichsen, who represented the California retirment fund, was disappointed.

She said the judge’s limit on corporate spending does not apply to an additional $36 million that Occidental has already paid to acquire an annuity to fund the museum’s operations, several million dollars more for renovations and salaries paid during construction or a 30-year rent-free lease of the museum space. Actual construction and endowment costs already exceed $90 million, Henrichsen said.

“This is a defeat for shareholders in general,” Henrichsen said. “What the court seems to be saying is that it is very difficult to bring a successful case against a corporate board of directors, even when their actions appear to be contrary to the best interests of the corporation and its shareholders.