Spies: The Rise and Fall of the KGB in America (74 page)

One of the KGB's longest-serving, although occasionally vexing, technical
sources was William Malisoff. Born in Russia in 1895, he immigrated to the
United States as a child and became a citizen when his father was naturalized. He got his BS from Columbia University in 1916 and received a doctorate from New York University in 1925 in chemistry. Described by former
professors as either brilliant or a cheater who faked laboratory results, from
his college days onward Malisoff was a committed Communist, a prolific
writer on science and society, and a political activist. He worked for several
chemical companies before becoming a director, executive vice-president,
and technical consultant to Consumers Union, an organization founded by
consumer activists with CPUSA ties (see chapter 3). In the early 1940s, he
created and ran his own company, United Laboratories, which undertook a
variety of technical tasks on contract. He used United Laboratories as a vehicle to obtain proprietary industrial information from several American
firms for the KGB. In a sense, the KGB was a hidden contractor to whom
Malisoff furnished stolen copies of the technical work he did for American
companies on a confidential, commercial basis.

Malisoff's relationship with the KGB New York station went back to
1933, when he was listed as a contact of Ovakimyan, then a KGB officer
under Amtorg cover who specialized in industrial espionage. Through
the rest of the 1930s his cover name, "Talent," continued to appear among
agents on the XY line. Not all industrial espionage involved high-tech
processes or secret material bearing on armaments. In 1937 the New
York station sent documents Malisoff obtained to Moscow Center for delivery to Polina Zhemchuzhina, head of the "Chief Administration of the
Perfume, Cosmetics, Synthetics, and Soap-Making Industry" (and wife of
Stalin confidant Vyacheslav Molotov). The New York station explained:
"'During Cde. Zhemchuzhina's stay in the USA, she received from us
various samples of perfume and cosmetic products from the American
company Alco which were obtained by the source Talent [Malisoff]. Now
the source has also received formulas for these 23 products from the
"Alco" Company, which we are sending you. The recipes were obtained
free of charge. We request that as soon as you receive the package, you
give these recipes to Cde. Zhemchuzhina."'32

When Moscow withdrew many of its field officers in the late 1930s,
it also drastically cut the KGB New York station budget, and in January
1939 Malisoff's monthly stipend was suspended. But the chief of the New
York station protested to Moscow:

"As of Jan. 1st, I have stopped paying the source `Talent' [Malisoff]. The
source took this very badly, for the most part because it makes it look like we
are only interested in the tech. materials he can get for us, rather than him
personally. Not to mention the fact that the source happens just now to be
going through a difficult financial period, I think that it would be absolutely
correct if, putting a new principle into effect, we should consider, in this particular case, the following circumstance:

The source `Talent' has been affiliated with us for many years. After
`Sound' [Gobs], he is the foremost of all our other Amer. sources who work
with us for ideological reasons. He is one of the few chemistry professors with
a grounding in Marxism to be found among all our friends, who is willing to do
anything for us, and for whom the interests of our homeland and the worldwide revolution are the principal ideals of his life."

He urged headquarters to make an exception and continue Malisoff's
$250 monthly subsidy (equivalent to $3,700+ in zoo8 dollars). Moscow
agreed.33

Not only did Malisoff provide information, but he also recruited and supervised other sources. One of his sub-sources was Paul Williams, a pioneering black airman and aircraft component designer. Born in Youngstown, Ohio, in 1907, Williams attended the Ohio Institute of Aeronautics
and became a pilot. The federal Works Progress Administration employed him as an aeronautics instructor from 1934 to 1937. After being
turned down for a job by Douglas Aircraft (he thought because of his
color), Williams heard that the Spanish Republican government was paying foreign pilots $1,ooo a month. He told the FBI in 1955 that he arrived
in Spain in August 1937 and flew one mission but was told that the Spanish Republican air force had enough volunteers that it no longer needed
foreign mercenaries. He returned to the United States in December 1937
and discovered that he was a useful symbol for the Communist-aligned
Veterans of the Abraham Lincoln Brigade (VALB). (The VALB and the
CPUSAs Daily Worker promoted stories that he had been a combat pilot
in Spain.) The VALB found him jobs teaching aviation courses for the
Federation of Architects, Engineers, Chemists and Technicians (FAECT,
a small Communist-aligned CIO union) and for the International Workers Order (a Communist-aligned fraternal insurance company). Among
his FAECT students were Julius Rosenberg and Michael Sidorovich. In
1939 he started his own aircraft components design business, Williams Aeronautical Research Corporation, and hired them as his staff, along
with Ethel Rosenberg as company secretary.

Although Williams willingly admitted to the FBI that he had been in
the CPUSAs orbit, participated in its activities, gave speeches and attended meetings, and even had a Communist Party card with his name
on it, he denied actually being a Communist since he never paid any dues.
He explained that he was simply grateful to the party for its assistance
and had thought well of its stand against racism. But, he claimed, by 1940
he had become disillusioned and felt the party was just using him as a
Negro symbol. Around the same time the Rosenbergs, who had worked
nights at his company and rarely been paid, hoping to make money if one
of Williams's patents proved commercially successful, left his firm. With
his company unsuccessful, Williams then went to work at the U.S. government aeronautical research facility at Wright Field (later Wright-Patterson Air Force Base) in Ohio. He was fired in 1947 for having falsified
application materials about his education and background and concealing an arrest. By the time the FBI interviewed him in 1955, he was working as a draftsman in Washington, D.C., living with his fourth wife, and
was a practicing Jehovah's Witness. Williams denied ever participating in
espionage but did admit that in 1940, while he was running Williams
Aeronautical, someone at Amtorg had offered him a commission if he
would buy a new type of propeller manufactured by Curtis Aircraft, ostensibly for his company, and transfer it to the Soviet Union. He did try
to make the purchase, but Curtis refused to sell.34

While not a very productive technological source, Williams had a
longer and more intimate relationship with the KGB than he was willing
to admit to the FBI. With the cover name "Tal-i," he appears as a Malisoff sub-source in 1939. The relationship continued to 1942, but by that
point Moscow Center had received reports that caused it to become
upset with Williams's tendency to drop names. Williams's company had
been organized with Malisoff's help, and Moscow Center sternly told the
New York station: "`A report on `Tal-1's' [Williams's] company by an outsider-Julius Rosenberg-which was obtained through `Sound' [Gobs]
states that Tal-1' introduced `Talent' [Malisoff] as one of the people working behind the scenes who was in contact with Mikhail Kaganovich [Soviet
aviation official]. Thus, with the founding of his first company, `Talent' has
become known to persons unaffiliated with us as an agent of the Sov.
Union.' Stop doing business with "Tal-i" and his company. The company
has done nothing for us but use up resources and expose "Talent's" identity." No additional documents link Paul Williams to the KGB.35

Malisoff also had a role in recruiting one of his friends, Earl Flosdorf,
in the mid-1930s. Flosdorf, who had the code name "Outpost," was a
chemist who taught at the University of Pennsylvania in the Department
of Biochemistry. He was credited with inventing a method to freeze-dry
blood plasma (an advance of immense value to military medicine that
saved many wounded soldiers in World War II) and a skin test to measure
susceptibility for whooping cough. He also served as a consultant to the
War Department on issues relating to bacteriological warfare. As a hobby,
he collected antique cars and even acquired an 1895 Hurtu-Benz roadster, reportedly the oldest-running gas powered automobile in America.31

Flosdorf's specialization in biochemistry interested the KGB. In the
mid-193os Moscow Center put emphasis on bacteriological warfare as a
priority for technical intelligence. A 1937 directive to the KGB New York
station stated: "'It is absolutely essential that we receive a culture of parrot disease, `Psittacosis' . . . as it's called. This microbe was found in sick
parrots in Europe (in Germany) and America. Interest in the microbe
came about in connection with the enormous death rate among owners
of sick parrots, since many petty bourgeois families owned parrots. Germany is putting especially strong efforts into studying this microbe; having chosen it as one of its weapons in the coming war. The mortality rate
among those infected by this disease-loo%." '37

Collecting antique automobiles was an expensive hobby, and Flosdorf worked for the KGB on a paid basis. Initially he assisted the KGB in
1936-38, and Thomas Black, who served as a courier to him in 1942, told
the FBI in 1950 that his KGB superior had mentioned that it had earlier
paid Flosdorf $z5,ooo-an enormous sum at the time-for one of his
apparatuses and its biochemical process. A retrospective KGB appraisal
stated: ""Outpost" [Flosdorf]-significant resources through the University of Pennsylvania, gave valuable materials from 36 to '38, including
means of biological attack. Created a device that dries out materials for
germ warfare. Relations with him-on a material basis." The KGB deactivated Flosdorf at the end of 1938, along with many other agents as
part of its purge-induced reduction in force.38

As part of rebuilding the American networks, in November 1941
Moscow Center ordered the New York station to contact Flosdorf and
attempt reactivation: ""Outpost"-Flosdorf, a chemistry PhD at the University of Pennsylvania in Philadelphia and chair of the bacteriology department. A good friend of "Talent's" [Malisoff's], through whom he was recruited. He worked on assignments from the War Department. He
knew about the latest research in the field of biological warfare. He
worked on a mater. [material/cash] basis, although he was sympathetic
toward the USSR. He was deactivated in November of '38. He should
be reactivated. We are sending "Outpost's" signature as proof that the
person coming to him was sent by us." The New York station sent Black,
one of its veteran American couriers, to see Flosdorf; the date is not clear
but appears to be in mid-1942 or later. In addition to Flosdorf's signature, likely on a receipt, Black carried with him a letter from Dr. Grigory
Rabinovich, a Soviet contact of Flosdorf's in the 1930s. It read:

"My Dear Dr. Flosdorff: It is of particular pleasure to me to hear from my
friends in the United States that you are in good health and progressing in
your research work. I remember our short meetings in the Benjamin Franklin
Hotel, and I shall never forget your very kind assistance you rendered to me
and my country at those peaceful times when I was in the USA as a representative of the Soviet Red Cross. I am now working in the same organization and
trying to do my best in taking care of our wounded Red Army men. I am absolutely sure that you will not refuse to continue to be helpful to us in case of
need as you did it before. My best regards and sincere gratitude. Very truly
yours, /s/ Dr. G. L. Rabinovitch 5/7/42."

Grigoiy Rabinovich was a medical doctor and had been in the United
States in the 193os as a representative of the Russian Red Cross. He was
also, however, a professional KGB officer and had worked chiefly on antiTrotsky matters but also on technical intelligence, particularly related to
medical and biological matters, where his medical degree gave him the
necessary background and his Red Cross cover provided access. Black,
who discussed this episode with the FBI in 1950, reported that Flosdorf
indicated he was willing to reestablish his prior relationship. Black also
said that while he had nominally presented himself as representing the
Russian Red Cross, both he and Flosdorf understood that they were discussing his previous KGB connection, not Red Cross work.39

Black also told the FBI that this 1942 meeting was his sole contact with
Flosdorf and that another Soviet agent would have followed up on the contact if it had been pursued. But in October 1943 Moscow Center sent guidance to the KGB New York station on the organization of XY line work. It
suggested that Black be assigned to work directly for Leonid Kvasnikov,
chief of technical intelligence at the New York station, and that he be assigned two sub-sources, one of whom was Flosdorf. It is possible that this
was a suggestion never implemented, but it is also possible that in 1950 Black was seeking to minimize the extent of his espionage in his admissions
to the FBI. As for Flosdorf, after World War II he worked for the F. J. Stokes
Machine Company, a manufacturer of pharmaceutical equipment, as research director, and he lived in an elegant home in the Philadelphia suburbs, where he housed his outstanding collection of antique cars. In April
1958, following a series of arguments with his wife, he killed her with a shotgun in front of their horrified son and then turned the weapon on himself.40

When the FBI arrested Ovakimyan on 5 May 1941, the KGB New York
station temporarily suspended contact with all of its active XY line sources
as a security measure. By July 1941 it had reestablished contact with Malisoff. But the intense publicity about the arrest, increased industrial security triggered by the outbreak of war in Europe, and rapid flaring of
public anti-Communist sentiment after the Nazi-Soviet Pact chilled XY
line activities for a time. Even after the Nazi attack on the USSR and the
U.S. entrance into the war as a Soviet ally in December 1941, some of the
XY line sources of the 1930s, who often had been motivated by money,
hesitated in the face of greatly increased wartime security. Two of Malisoff's sub-sources refused to continue to work and a third reported FBI
surveillance. In part as a way around security problems, in January 1942
the KGB New York station suggested agreeing with Malisoff's proposal
that he expand his business with the help of KGB funding. Moscow Center, however, was not interested and told New York: "We do not agree to
the idea of starting companies with "Talent's" [Malisoff's] help. This
method-tens of thousands of dollars. Initially, "Talent" listed 8 processes, and he proposes to start a company on the basis of each one. If we
finance Talent, it could lead to his identity being exposed."41