State OKs Hammer’s Plan to Buy Back USC Art

The California attorney general’s office has approved a controversial proposal by industrialist Armand Hammer to buy back a painting collection he donated to USC 25 years ago. Hammer wants to add the USC collection to the Westwood museum that he intends to open in late November.

The state approval--sought by USC to ensure that the transaction would not violate California charitable trust laws--was confirmed earlier this week by the attorney general’s office, USC sources and Hammer’s New York attorneys.

It was not immediately clear whether the sale by USC to Hammer of the 49 paintings in question could be consummated in time for any of the work to be shown Nov. 28, when the Armand Hammer Museum of Art and Cultural Center is scheduled to open.

However, USC sources and Hammer’s lawyer confirmed that the decision by the attorney general’s office to approve the sale had brought to a close a testy confrontation between Hammer and the university over Hammer’s refusal to return to USC’s Fisher Gallery two paintings by the 17th-Century Flemish master Peter Paul Rubens.

The Rubens paintings “Venus Wounded by a Thorn” and “The Nativity,” which some Rubens experts suggested might have a combined value of $15 million to $30 million, have been on display at Occidental Petroleum Corp. headquarters for several years, after Hammer borrowed them back from USC.

It was not clear if Hammer would relocate the two Rubens paintings to the museum before the buyback is made final.

USC sources and Robert Fass, the New York lawyer representing Hammer and Occidental--of which Hammer is chairman and which has paid the entire costs of building the controversial museum--said there was also an agreement between the two parties on how to arrive at a fair market price for the collection.

Hammer and USC will both appoint independent appraisers, each of whom will value the entire collection, Fass and USC sources said. Fass said there will be separate provisions for additional appraisal steps if the two experts--who have not yet been named, he said--disagree substantially.

Fass said the appraisals and the final closing of the transaction will occur “as rapidly as the convenience of both parties permits,” but he emphasized that Hammer and USC have “absolutely no idea” of the amount of money that will change hands.

Fass and James Cordi, a deputy state attorney general, said state charitable trust officials had agreed to approve the buyback after Hammer supplied a letter declaring his intent to incorporate the paintings into the museum’s permanent collection.

When Hammer first proposed that he repurchase the collection late last year, questions arose over whether tax laws might be violated by his buying back artworks for which he received a substantial tax deduction when he donated them and whether state charity laws might make it difficult for the paintings to pass out of the hands of a nonprofit organization.

Museum experts questioned by The Times earlier this year said they were unaware of any buyback transaction between a museum and a wealthy donor.

The Hammer declaration spelling out how he will employ the artworks, Cordi said, convinced state officials that the original justification for the tax deduction in 1965--that the pictures in question would be accessible to the public in a museum--would continue to be satisfied if the paintings were simply transferred from one art center to another.

Requirements that the donated works remain in the safekeeping of a public trust would be met, Cordi said, because the paintings will go to Hammer’s museum, which has attained nonprofit status with state officials and the Internal Revenue Service.

The museum recently won a shareholders lawsuit that challenged Occidental’s decision to spend $96 million to $130 million building and endowing the museum. The case, which is being heard in Delaware, where Occidental is incorporated, is under appeal by the losing shareholders.

Hammer faces separate litigation by the niece of his late wife, Frances, who contends that, as Frances Hammer’s sole heir, she has a 50% community property interest in Hammer’s large personal art collection. The collection, valued at as much as $450 million, forms the basis of what will be shown at the Hammer museum. That collection is separate from the USC paintings.

Hammer and the university became embroiled in a dispute earlier this year after Hammer resisted a series of university requests for return of the two loaned Rubenses and after he proposed the buyback.