The Bankers of the Communist Party USA

By: Jaiveer Mariwala

Harvey Klehr is a professor of politics and history at Emory University, and the author of several books on American communism and Soviet espionage in America. We sat down with him last week to talk about the Communist Party of the USA and how it received funding from the Soviet Union. The interview is part of a larger project that seeks to understand the collapse of the CPUSA and the role of its leadership in its final stages. Excerpts from our conversation follow.

I know the Communist Party of the USA consistently received funding from the Soviet Union, but when did this process start, and how significant were the contributions initially?

The Communist Party USA was receiving money and resources from Moscow from its foundation in 1919. Initially, the Soviets were giving their American counterparts jewels and small bundles of money that couriers were then bringing back to the United States. I wrote a book with John Haynes in 1993, The Secret World of American Communism, and in it we print a number of the documents about the transfers of money in the 1920s. The party was getting a substantial amount of funding from the Soviet Union. In fact even Armand Hammer, the future American industrialist, was involved in funneling this money during the 30s. [Hammer’s parents were both communists, and he lived in the Soviet Union after their arrest in 1920 until 1930, and was allegedly involved in smuggling funds to the CPUSA. He later disavowed the party and founded Occidental Petroleum.]  

Did these contributions continue to grow steadily in the subsequent decades?

The contributions fell during the decades of 30s and the 40s, but for different reasons. The money declined a little bit in the 1930s as the party became larger and was able to generate more of its own income through its membership. In the 1940s, however, the decline was much sharper. There was hardly any Soviet funding at all, in part because during World War II the Soviets were fighting for their own lives. There was also the sheer difficulty of transferring money to the United States in that period. It wasn’t until the late 50s, around 1957, or 1958, that the contributions began to rise again, and became very, very substantial. 

How was the Soviet Union making the money transfers during this period, especially given that this was the peak period of McCarthyism and the red scare, and that communism paranoia was at an all time high?

They couldn’t transfer the money [as cash] directly to the United States during this time even if they wanted to, because at the time all flights between the U.S. and the Soviet Union were cancelled. The money was instead routed through Canada, with the help of the Canadian communists. The Soviets would fly the money over to Canada, and the Canadians would then send it over the border with the help of an American “mule.” The American who used to receive the money in the 60s, 70s, and 80s was Jack Childs, the brother of Morris Childs, both of whom were FBI informants.

FBI Informants? Tell us more.

Well, Morris was the more interesting of the two. He had been a fairly high-ranking party leader for many decades in Chicago, and was even trained at the Lenin School in Moscow. Then he became editor of the Daily Worker, the party’s newspaper, in 1946. The following year he was pushed aside from the leadership in a kind of internal power struggle and also suffered a major heart attack which kept him out of action for a few years. He had also visited Moscow around that time to see some of his Jewish relatives and was horrified to hear about the anti-Semitism in both the party and the general population. All this made him disillusioned, so he quietly had little to do with the party from about ’47 till ’52. But he didn’t publicly drop out or anything like that, he just faded away. 

In ’52, the FBI approached him and his brother Jack, who was then a kind of lower-level apparatchik in New York. The two of them agreed to work for the FBI. Morris then gradually re-established his ties to the Party in the subsequent years and Jack—as I mentioned—was the guy that received a lot of the Canadian subsidies for the use of the party.

How long did the two of them end up informing for the FBI?

All the way through the 80s, and they never got caught. In fact in 1959, Morris was authorized by Gene Dennis—the chairman of the CPUSA—to establish contact with the Soviets and become the link through which Soviet money would flow to the American party. He traveled to Moscow and over the next two decades, he and his brother Jack made something like fifty trips abroad, and brought in $25 to $30 million in subsidies from the Soviet Union. It was a lot of money!

It started at a relatively modest amount. The first year it was around $150,000, but by the 1980s it was over $2 million a year. And throughout this time, the FBI subsidized the brothers’ involvement.

Could you explain what you mean when you said the FBI “subsidized” their involvement? And why were the willing to let the Soviet Union keep funding the CPUSA?

To be clear, it was the largest of counterintelligence investigation in FBI history at the time. They spent a lot of money. They paid both of the brothers salaries; they covered their expenses; they created a cover business for them; they even subsidized their office expenses. They did it because it was an incredible window into both the Communist Party of the United States and the Soviet Union. The money was worth the insight.

At one point in the 70s Morris and Jack, between the two of them, held something like $800,000 in Soviet money in safe-deposit-boxes in the United States. Gus Hall would ask them for whatever amount he needed, you know, whether it was $3,000 or $50,000. They would then go to their FBI safe-deposit-box, take the money out and give it to the him. The FBI recorded the serial numbers of all that money taken out, because they wanted to trace where it came from, and where it went. So the FBI was in effect a kind of the passive banker of the American Communist Party. It’s a great story.

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