Spies: The Rise and Fall of the KGB in America (92 page)

One of the oddest family odysseys in American history, involving communism, Soviet espionage, Russian art, and high finance, was that of the
Hammers. Julius Hammer, born in Odessa, had immigrated to the United
States in 1890, when he was sixteen. Quickly converted to socialism, he
married and fathered two sons, Armand, born in 1898, and Victor, in
1901, just a year before Julius graduated from medical school. One other
child, Harry, was a product of his wife Rose's first marriage. Julius had a history of shaky finances, filing for bankruptcy in 1906 and then being
charged by the special master with fraud for trying to hide assets from his
creditors. The business failures were caused by his purchase of a number
of drugstores, financed by personal promissory notes. He used the money
from the stores to finance his real passion, the Socialist Labor Party
(SLP), instead of repaying the loans. As youngsters, the Hammer children were sent away to live with family friends, Victor with Daniel
DeLeon, leader of the SLP.49

Julius Hammer had attended an international Socialist congress in
Stuttgart in 1907, at which he met Lenin. Among those he recruited into
the SLP was Armand, who joined while an undergraduate at Columbia.
In 1918 Julius left the SLP and the following year became a stalwart of
the revolutionary left wing of the Socialist Party and a financial supporter
-using smuggled Russian jewels-of Ludwig Martens, head of the Bolsheviks' unofficial diplomatic mission in the United States. One of his
motives for this venture was to provide an entree into Russia for the Allied Drug and Chemical Corporation, which he had formed, but there is
little doubt that his fervent support for Bolshevism was the primary factor. He also used Allied Drug to smuggle spare parts and equipment into
Russia via Latvia to evade American restrictions on trade with the Bolshevik regime. When the Communist Labor Party (later the CPUSA)
formed in 1919, Julius held party card number 1.50

Busily involved in politics, Julius recruited Armand, still a medical
student, to work in his medical practice in the afternoons. In August 1919
a Russian woman died a few days after procuring an abortion at Hammer's medical office, and Julius was indicted by a grand jury and convicted of manslaughter the following June. Armand later confessed to a
mistress that he had actually performed the operation and his father
shouldered the blame. While Julius went to prison, Armand assumed
leadership of the pharmaceutical company and quickly demonstrated a
talent for exploiting opportunities.

Julius's trial and conviction were not the only disasters the Hammer
family faced at this time. In the summer of 1919 a New York state legislative investigating committee (the Lusk Committee) raided the offices
of Martens's organization, seizing documents. Martens was later deported. Allied Drug was stuck with large amounts of goods destined for
Russia that could not be shipped and faced severe financial difficulties.
Now back in the USSR, Martens asked for someone to come to Moscow
to work out a deal that could save the company. Shortly after graduating
from medical school, Armand traveled to the USSR in 1921, where he struck deals to import American grain in exchange for Russian fur, lumber, and other commodities. His plans drew the attention of Lenin, who
asked to meet him and offered him the first American concession in the
new socialist society, an asbestos mine in the Urals. It came with a noncommercial price. Felix Dzerzhinsky, head of the Cheka (predecessor of
the KGB), decided to use Allied Drug and Chemical, whose business relationship with the USSR gave it a plausible reason to transfer money, as
a front to finance intelligence operations abroad. Allied Drug set up a
banking operation in the United States that had exclusive rights to send
money orders to the USSR. The American dollars shipped by Russian
immigrants in the United States would be paid in far less valuable rubles
to relatives in Russia. Armand, in turn, was given money to take back to
America to be distributed to Comintern agents. Armand's brothers and
father joined him in Moscow. Victor studied acting and "Armand doted
on him." While they entertained royally and lavishly at the Brown House,
their elegant residence, the Hammers kept their distance from old American Communist comrades who passed through. Jay Lovestone, a leading
American party official, assumed it was because of the Hammers' ties to
Soviet intelligence.51

Following Lenin's death, the Hammers faced increasing difficulties in
their dealings with Soviet authorities. The concessions given to selected
Western capitalists were scaled back and gradually eliminated. Armand,
meanwhile, traveled throughout Europe in 1924-25, tending to family
business and surreptitiously transferring money to the CPUSA and Soviet
organs. The laundered money paid for the American party's newspaper,
the Daily Worker; Soviet covert operations in the United States and England, and regular party activities in the United States, according to cables located in Russian archives.52

In 1925 Soviet officials gave the Hammers a new concession to manufacture pencils. Three years later Soviet investigators began to scrutinize
the books, concerned that too much money was being expatriated, and
Pravda criticized working conditions in the factory. Late in 1929 the concession was terminated. Victor Hammer, meanwhile, married Varvara
Sumski, an aspiring young Russian actress, in mid-1925. Their son,
named Armand in honor of his uncle, was born in 1927. The marriage
soon foundered; Varvara's mother caught her committing adultery and
told Victor. Varvara and Victor separated. When Victor left the USSR in
1929, he wanted to take young Armand, who had an American passport,
but he was not allowed to do so.53

Through all the Hammers' complicated business affairs British and American intelligence agencies harbored suspicions that they were serving covert Soviet interests; regarded Julius, Armand, and Victor as Soviet
agents; and uncovered bits and pieces of the money laundering. The
Hammer family had obviously been an integral part of an extensive Comintern operation involving illegal transfers of money and material aid to
illegal agents shuffling between Europe and the United States. Documents in Vassiliev's notebooks add to the Hammer saga, however, with evidence that four of the Hammers were recruited by the KGB. Surprisingly, Armand was not among them.

The first Hammer recruited by the KGB was the patriarch of the
family, Julius. Despite his sacrifices for the Communist cause, Julius
came under suspicion of Trotskyism in the late 192os. He had known
Trotsky during the latter's sojourn in the United States and had not only
had personal contact with him after his arrival in the USSR, but had also
given him presents. In one letter Julius had asked Trotsky to keep Julius's
role in providing the Soviet state with an airplane "`secret so as not to
spoil my future usefulness to the cause,"' which the KGB interpreted as
a plea to conceal his usefulness for the Trotskyist cause. Additional
damnation came from a 1932 report received from someone close to
writer Max Eastman who claimed that the funding for his translation of
Trotsky's book on the Russian Revolution had been provided by Julius
Hammer.54

The economic losses suffered by the Hammer concessions due to the
siphoning off of money for Comintern operations also led to allegations
that they were "`engaged in extorting money from the Soviet govt."' The
KGB's counterintelligence division in 1930 concluded that despite his
long-standing ties to the Communist movement, "`capitalist tendencies
are not alien to H. [Hammer], such as amassing personal funds not only
by working as a concessionaire but also in other indirect, peripheral ways,
for example, by buying valuable items in the USSR and exporting them
abroad and other profiteering methods."' He was also accused of "`making money even by means of fraud and fictitious invoices."' As a result, in
1930 the KGB's economic directorate (not its foreign intelligence arm) ordered him to leave the Soviet Union."

Shocked by this decision, Julius Hammer wrote an impassioned statement defending his service to the Soviet cause:

"This is not only a blow to my fondest wishes and plans to remain to work in
the USSR, and once the settlements with Glavkontsesskom [Chief Concession
Committee] on the concession turned over to the government are completed, to find a job in some state institution or a scientific institution, besides many
years of general practice as a physician, as well as broad experience as a
chemist and pharmacologist, I could also, thanks to long experience as an organizer and administrator, work as a manager-in the best sense of this word
-and thereby take a direct part in building socialism in the USSR. But besides this, I take this denial as an undeserved punishment, since throughout
the nearly 8 years I have been in the USSR I have always been devoted to Soviet power and an avid friend of Soviet-Amer. communications and trade....
I am compelled not only to inform you about my active work in the socialist
movement in the NAUS [North American United States] for decades, but also
to disclose to you regarding my real polit. position what, for technical and
business reasons and so that I could be more helpful to the interests of the
USSR, I had to keep secret from the broad public, especially from Amer. commercial circles and the govt., with the consent of the Amer. Com. Party [American Communist Party]. For more than zo years I worked actively with Cde.
Reinstein (from the Comintern) in the then-left Socialist Labor Party in the
NAUS, sometimes in the position of a candidate member of the CC [Central
Committee] of the party. In 1919, when the Com. Party was established in the
NAUS, I was a delegate to the clandestine congress of the Com. Party. In
1919-1990 I supported, with active work and money totaling about 5o,ooo
dollars, the work of Cde. L. K. Martens, who was representing the RSFSR
[Russian Socialist Federal Soviet Republic] govt. in the NAUS on a mandate
from the NKID [People's Commissariat of Foreign Affairs]. (Cde. Martens is
now in Moscow at Lubyansky proyezd, 3, Apt. 53, Phone 5-78--79.) He can
corroborate this. Besides the aforementioned 5o,ooo dollars, even before my
son arrived in the USSR I loaned the Soviet govt. at the time, without any
guarantee, another iio,ooo dollars (oil equipment), and the Soviet govt. repaid the 16o,ooo dollars to my son in 1999.

During the raids on the `Reds' in the NAUS I paid several thousand dollars in order to put up bail for them and give them a chance to flee to the
USSR. Two such comrades-Fedotov and Volodin-are now here. When my
son A. Hammer arrived here in igzi, he followed my advice and, with Cde.
Lenin's support, took from the govt. the first concession (in the Urals) in the
history of concessions in the USSR and was the first to start trade between the
USSR and the NAUS by sending on credit two ships with grain for the starving workers in the Urals, for which he also received recognition from Cde.
Lenin. During my time in the USSR I continuously provided the Amer. Com.
Party and the international communist movement with a number of clandestine services, which need not be mentioned here (Cde. B. Reinstein of the
Comintern knows all the details and can report to you personally about this in
detail)....

All these years I have been a full-fledged member of the Amer. Com.
Party of the late Cde. Ruthenberg and am a member of the Amer. Com. Party
to this day, for which I have a certificate in 1930 from the Cde. Randolph, the
Amer. Com. Party's representative in the Comintern.... I hope that when you
review the facts I have presented, you will find it possible to permit me to remain in the USSR .-56

Likely not coincidentally, the following year Julius Hammer agreed to
add clandestine work for Soviet intelligence to his previous confidential
work for the Comintern. He was "`in 1931 recruited by the OGPU to
work among foreigners living in Moscow"' and "`signed a statement regarding voluntary cooperation with the Sov. security organs."' Given the
code name "Physician," he proved to be of little value as an agent, laying
out "`various plans for cultivating foreigners"' but doing nothing to carry
them out. An assessment noted that he "`yielded little benefit as an
agent."' Julius, however, "`raised the question with us of recruiting his
elder son [Armand], who supposedly had extensive contacts in U.S. business, political and military circles and could be a valuable agent for us."'
There is no indication that the OGPU, as the KGB was then known, recruited Armand, but Julius had another suggestion: "`that our organs recruit "S." ["Sonny"/Victor Hammer] and promised to provide any assistance he could."'57

The KGB recruited Victor Hammer in 1931. He "`gave his consent to
work with us and provided us with a signed statement to that effect."' He
was expected to help "`legalize"' Soviet agents in the United States and
obtain American documents they could use. A 1931 report included his
signed statement in Russian pledging to "`keep my conversation with the
OGPU representative in the strictest secrecy,"' establishing a mail drop
in Berlin, and setting out the password for meeting him in New York: "`I
have a letter and regards from Mrs. Perelman,"' with a response of
"`Thank you, how is she and how is her daughter Doly?"' After Victor
made several trips to the Soviet Union in the early 1930s to purchase or
obtain art objects to be resold in the United States and to see his son, Soviet officials denied him further permission to enter the country, and
there is no evidence of contact in the late 1930s. A later memo indicated
that Victor Hammer's "personal file contains no information on how he
was used."5s

The KGB once again became interested in Victor Hammer and his
Russian son and ex-wife in 1940. Victor had been trying for several years
to bring his family to the United States. He had asked the American Em bassy in Moscow to assist his son, familiarly called Armasha, and former
wife Varvara. Varvara visited the American Embassy in August 1941. Soon
afterwards she was questioned by the KGB and explained that starting in
1934 Victor had been urging her to move abroad with Armasha but she
had resisted, fearing that the Hammer family would seize him once they
were out of the USSR. As far back as 1930 Julius had offered her money
in exchange for Armasha, and in 1934 Victor had suggested she could
move to Paris and Armasha to the United States. Now Victor and his
mother had offered to bring both Varvara and her son to the United
States.59