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Comrade Billionaire

By Alexander Mosyakin

Armand Hammer, an American businessman, a public figurehead and philanthropist, had a striking life rich in twists and turns that were surprisingly even often related to the Baltic states

Zigzags of fate

He was born on May 21, 1898, in New York in a family of poor Jewish immigrants from southern Ukraine. His grandmother was a socialist, and his father became a labor movement activist and one of the founders of the U.S. Communist Party. There were three sons in the family - the eldest was named Harry, the youngest Victor, and the middle son got a the proletarian name of Armand (for arm-and-hammer, communist or socialist symbols) . Having graduated Columbia medical college, Julius Hammer opened a low-profit pharmaceutical company. Armand followed in his father's steps when Julius took upon himself the son's responsibility for a lethal abortion and went to jail in shackles, Armand assumed leadership of the family business and became the first American to earn one million dollars by his work, while still a student.

In March 1919 New York saw the opening of the Martens Bureau - unofficial representation of the Soviet Union, apparently trying to establish contacts with U.S. business and political circles to achieve diplomatic recognition for the Bolshevik state, also secretly supporting Communist movements overseas. Hammer's company became their partners as Ludwig Martens, the so-called first Soviet Ambassador to the U.S., was an old family friend of the Hammers.

At the end of 1920 Martens Bureau was closed and its head was expelled from the U.S., leaving behind unfulfilled contracts and  debts. In he summer of 1921 Armand Hammer set out for Moscow, allegedly with the intention of paying off these debts. Martens took his guest along on a trip to the Ural Mountains region where the young physician-businessman saw horrifying scenes of starvation and suggested that the Bolsheviks buy grain in exchange for sellable goods, that had piled up high in local warehouses since the Czar's time.    

Lenin jumped at the idea and pressured for an agreement with Hammer's Allied Drug and Chemical Corporation under which 1 million bushels of grain were to be delivered to Soviet Russia in exchange for furs, black caviar and valuables from the Gokhran state treasury, nationalized by the Bolsheviks. Lenin attached great  importance to the agreement, seeing in it "the beginning of trade" and "a path to the American business world." He accepted Hammer at his working office in the Kremlin and, to show his appreciation, gave the American a concession on developing asbestos mines near Alapayevsk in the Urals. 

Bursting with impressions, Armand Hammer briefly returned to America and formed a new company, the Allied American Corporation. Later he and his brother Victor went to Moscow where he spent eight years. Hammer opened the first pencil factory in the Soviet Union and represented the interests of 37 American corporations in Moscow, including banks and even the Henry Ford Company. Upon returning to his native country, Armand Hammer remained "a friend of the Soviet Union," and a picture given to him by Lenin, signed for "Comrade Hammer," was displayed in honor at his house in California.

A life under surveillance

For seventy years Armand Hammer was the key Soviet agent of influence in the United States. In 1932, by orders of the Kremlin, he tried to establish closer relations with Franklin Roosevelt - at the time still a candidate for the presidency - and even financed his election campaign. After the alcohol prohibition was lifted in 1933 Hammer became known as America's Spirits King, starting the production of strong liquor. Bottles, spirits and oak barrels were supplied to him by Amtorg, the Moscow- founded American company for trade with the Soviet Union. Stalin's secretary Boris Bazhanov, who fled to the West, wrote: "Amtorg is a trade mission that does trade. But in fact it also stands for and performs functions of a political representation and an economic  representation, and a base for the whole undercover work of the Comintern  and the GPU (Soviet Secret Police).

Hammer was under strict watch constantly. The FBI opened a file on him numbered 61,280, kept by FBI head John Edgar Hoover. On March  6, 1952, Hammer was summoned to the FBI city branch in New York. This visit and the investigation opened against him could have cost Hammer many years behind bars. But the death of a key witnesses, illegitimate methods of gathering information and pure luck allowed Hammer get away with more than just a little scare. Since then he kept hush his ties with Moscow, building a legend of his life-story, the true facts of which came into the open only after his death.

Big laundry 

Armand Hammer's first contact with the Baltics took place in 1921 when in August he traveled to Moscow via Riga, but in December a ship carrying grain for Russia arrived at the port of Tallinn. Since then Hammer's cargo was handled in Tallinn and a U.S. diplomatic representation worked in Riga, visited by Hammer on a regular basis. 

The Bolsheviks recruited Hammer even on his first trip to Moscow, and on his return to New York, bid him carry in 75,000 U.S. dollars for funding the American Communist Party (an equivalent of over half a million US dollars today). This was an extremely dangerous mission, as Hammer had been detained in South Hampton and searched by agents of the British Scotland Yard while only on his way to Moscow. Therefore Hammer and his friends decided that the Allied American Corporation should be used to transfer money to the Kremlin's agency in America.

In the 1920s Hammer cruised all over Europe. His permanent place of residence was the Kaiserhof hotel in Berlin. From Berlin he traveled to Hamburg, Paris and London, also to Riga and Tallinn where he stayed at Hotel de Roma, the best Riga hotel at the time, and other private-owned hotels. The trips were so frequent that he even obtained an Estonian passport. From the outside Hammer looked more like a courier or travelling salesman. But his job was more related to the secret transfer of Moscow-supplied money to Soviet agents in Europe and the U.S..

Instructions about the amounts to be received from "a friend" in Germany or the Baltic states and the name of the beneficiary was passed onto Hammer by his father. Having received cash, he either deposited the money on a specific account with a local bank or wired it to the New York office of his company, ordering his brother Harry to pay the given sum to any certain person. The company accountant and legal advisor Shapiro recorded the transactions in the ledger, disguising them as a loan to some Soviet company or payment for allegedly delivered goods or services, or simply as commission. As the transactions originated in Moscow, it was practically impossible to expose them, although the FBI knew that the money was indeed headed for agents of the Comintern and OGPU (formerly the secret police, later the Soviet political directorate).

The funding scheme improved with time. The Soviet trade organization (Gostorg) issued Hammer a bill of exchange to buy goods abroad, and he took the bill to a branch of the Lloyd's Bank and pledged for a loan. Since the bill was guaranteed by the Soviet government, Lloyd's Bank accepted it and gave Hammer's company the money to purchase goods. Hammer spent part of the money on the intended purchase and transferred the rest to "a reserve account" in a New York bank used for funding Bolshevik agents. Moscow immediately covered the resulting difference and these arrangements were likewise impossible to expose.

Operations carried out by Armand Hammer later came to be called money laundering, and the Baltic states that had excellent relations with the Soviet Union till the mid-1920s were the perfect place for the job. It was in Latvian and Estonian hotels and that Hammer got cash and bills of exchange from Moscow couriers. Hammer fully mastered the art of conspiracy therefore the conveyor belt of money laundering for Soviet intelligence and Comintern ran just about without a single hitch, despite being watched by several secret services from both sides of the Atlantic.

Project Kama 

In April 1922 the delegations of defeated Germany and unrecognized Soviet Russia, while in Italy for a Genova conference, met in the nearby village of Rapallo and signed an agreement containing secret military arrangements under which "it became possible to train German soldiers and officers in the ways and means of armament forbidden in the German territory and to build plants in Russia to make airplanes and other military vehicles set to be supplied to Germany," wrote British historian John Willer-Bennet. As part of the deal, Germany undertook to supply Soviet Russia with materials, equipment and engineers for producing arms bound for the Reichswehr. In return, Russia was to get industrial equipment and technologies required to upgrade the Red Army. This project, violating provisions of the Versailles treaty on demilitarizing Germany was code-named Kama. The German supervisor of the project was Col. Gen. Hans von Zekt of the Reichswehr General Headquarters, and his Russian counterpart was Arkady Rozengolts.   

To carry out the plan, German intelligence services put together a Sondergruppe R, establishing liaison with the Red Army or RKKA intelligence headquarters in Berlin. To supply materials, equipment and experts from Russia to Germany, an allegedly private investment company for the support of industrial companies (GEFU) was established, boasting offices in Berlin and Moscow and a capital of 75 million golden marks. Moscow allocated 100 million golden marks for the project and the Soviet foreign trade organization (Vestorg) and Hammer's Allied American Corporation provided cover for this supersecret venture. The Soviet Politburo passed resolutions to this end in May and July 1922.

The USSR and the Weimar Republic together devised military aircraft and aviation engines, tanks, artillery systems, warships, ammunition and chemical weapons, with officers trained at each other's military academies. Hammer's company took active part in this, with its branches in Moscow, Berlin, New York, London, Kiev, Petrograd [St.Petersburg]  and the Baltic states, which were turned into important cargo handling points. In Riga and Tallinn Hammer had rented warehouses at sea ports and railway terminals that received, sorted and forwarded military cargo sent from Germany to the Soviet Union and vice versa.

Baltic cover

Moscow needed its own bank in the Baltic region to take care of financial arrangements for such a grand-scale project. Estonia's Harju Bank, then the fourth largest in Estonia, fattened through trade with Soviet Russia, but since the Entente blockade it soon went bankrupt. Armand Hammer rushed to Tallinn. He paid the bank owners the USD 250,000 they asked for and in February 1924 Hammer and a company he had created for purchasing agriculture produce took over 51 percent  in the bank. The money to make the buy was taken from "a reserve account" in New York. The deal was carried out by Julius Hammer. Armand Hammer became the nominal owner of the bank, and made his uncle a director but in fact everything was run by Moscow.

Harju Bank began to play an important part in secret operations of the Kremlin, and its new owners soon took the bank to second place in Estonia in terms of assets. But clear skies over the bank soon became overcast. In May 1924 an American representative in Tallinn reported to the U.S. Department of State that Hammer had purchased the bank under instructions of Soviet leaders, using the Allied American Corporation and Harju Bank as a cover for secret operations, and that the fact was regarded with serious concern in Estonia. Information about Soviet links of the bank owner leaked to the Estonian press. Although Hammer categorically rejected the "slander spread by competitors," claiming that the Harju Bank purchase was pure business, and even succeeded in convincing the American Embassy about this, the Estonian authorities would not buy it. In May 1925 the Estonian government ordered closure of the Harju Bank over termination of payments.

But there were other underlying reasons for shutting down the bank. Throughout 1924 Moscow had been interfering with interior affairs of the Estonian state, and in December local Communists attempted a coup, dramatically increasing the anti-Soviet mood in Estonia. A cable then sent to Washington by the U.S. Embassy in Riga said: "All informed sources in Reval (Tallinn) believe that the Harju Bank intends to finance something more serious than the supposed purchase of cream butter. Suspicions are that Moscow authorities provided the whole or part of the purchase price of the bank in order to get the means for making secret money transfers abroad." This gave the Estonian government a bad scare and prompted it to close the bank for good.

From fake Faberge to Ventspils

Hammer's links with the Baltic states were not severed by this, however. They carried on with the trade of artifacts and antiquities set up by the Bolsheviks through the Hammer Gallery in New York and its European partners. They had great experience in the business. After the signing of the Tartu and Riga peace treaties in the early 1920s the Baltic states opened themselves up as a window to Europe in return for recognition by Soviet Russia. Armand Hammer wrote: "At the time Reval was one of the re-loading points for trade with Russia. But the majority of products received from Russia in exchange for food were contraband: artifacts, diamonds, platinum and God knows what else. All this was sent across the border illegally in exchange for food. In winter 1921 the Soviet commissariat for foreign trade had a branch in Reval that was buying products abroad to be sent through Reval, paying for them in golden bullion."

The Soviet Commissar for Foreign Trade, L.Krasin, created a grand off-shore in the Baltic states through which the Bolsheviks removed at least 500 tons of gold with the enormous value of some 700 million golden rubles between 1920 and 1922. This figure did not include contraband jewelry, antiquities, and much more. The hard currency proceeds were used to buy food, military equipment and rolling stock. Plenty of these proceeds were embezzled. 

When the Bolsheviks were selling out Russian culture heritage through the years of 1928-1933, they again remembered the Baltic window and the Baltic states became one of the central places selling cheap valuable articles from Soviet museums, libraries, churches and classes repressed by the Soviet rule. In addition, there was also brisk trade in fake icons, pictures by Russian realist painters (Aivazovsky, Shishkin, and others) and also copies of pieces by famous jewelers Faberge, Sazikov, Ovchinnikov, Bolen and others produced by the Bolsheviks in steady stream. 

The number of fakes on sale in antiquity shops in Riga and Tallinn was so great that Western embassies even issued a warning to their citizens not to make any purchases. The Hammers had an active part in this. Fake jewelry was sent to them from Moscow through diplomatic channels. Armand Hammer personally marked them with the standards of Faberge and other companies supplied to him by the OGPU, Soviet military intelligence, and the hot-selling items were scattered across America and Europe.  

But this was not the limit of their activities. The U.S. State Department for Tax Revenues made a report in April 1932 and based on an intelligence report by an American agent in the Baltic states, said that Armand and Victor Hammer both "continued to carry out secret assignments of the Soviet government and to this end were travelling between the U.S. and Europe," and Armand's Russian wife, Olga Vadina, was presumably "an OGPU agent."

Armand Hammer's extensive cooperation with Moscow resumed in the 1970s when he, by then an oil magnate, the owner of Oxydental Petroleum Corporation, and top Soviet officials conceived a series of grand projects. They intended to build large chemical plants across the Soviet Union for making products of double-use (chemical fertilizers and chemical weapons), as well as oil refineries in Russia, Ukraine and Lithuania that would use Western technologies to refine Soviet oil for subsequent export.

Huge industrial plants were built in Dzerzhinsk, Lisichansk, Mazeikiai and other places with money of the Soviet government and the American billionaire. Modern ports and terminals were needed to export their products, and it was decided to set up a network of these facilities in the then Soviet Baltic republics. With the help of money and know-how provided by Armand Hammer's corporation and his colleagues, the Tallinn port was renovated and large terminals were also built in Ventspils, Klaipeda and other places. For understandable reasons Hammer played down his participation in this construction boom, despite having great interests in this. He was not able to complete his last project, The Elders of Zion, related to joint production of U.S., Soviet and Israeli aviation companies for producing the latest commercial aircraft. Armand Hammer died of cancer on December 10, 1990.

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