David Karr was the President of the Fairbanks-Whitney Corporation, a large water supply firm / via Getty Images.

Rich and red: The USSR’s prize assets

The wealthy young Americans who laboured for decades to help the communist cause

Artillery Row

Wealthy communists sounds like an oxymoron. A political party predicated on egalitarianism and confiscation of private wealth seems an unlikely home for individuals with substantial amounts of money and assets. Yet over the decades a small but not insignificant number of such people either joined Western communist parties, donated large amounts of money to their coffers, or assisted the Soviet Union during its conflicts with the capitalist world.

Whether motivated by disgust with the capitalist system and the poverty they saw around them, the belief that communists were the only stalwart opponents of fascism, or guilt about their own privileges, a small number of people from the upper class cooperated with communism. For some it was not ideology, but adventure, egotism or romantic attractions that drew them. Precisely because they did not fit the stereotype of the working-class communist, they stand out.

The Millionaire Was a Soviet Mole: The Twisted Life of David Karr, by Harvey Klehr.
Encounter Books, £18.99

When David Karr died in Paris in July 1979, he was known as a well-to-do American businessman with extensive contacts and interests in the Soviet Union. Within a few days of his death, however, the French press was filled with claims that he had been murdered and speculation about illegal dealings with a variety of shady characters, including prominent Soviet officials. When his estate was finally settled, nearly a decade later, after contentious battles involving three ex-wives, a widow more than 30 years his junior, five children and a horde of lawyers, his assets totalled more than $15 million, the equivalent of $53 million in today’s dollars.

The story of how he had accumulated his fortune, a tale I have recounted in my new book The Millionaire Was a Soviet Mole: The Twisted Life of David Karr (Encounter Books), is that of a young man who began life with few assets other than an overweening ambition, dogged determination, a willingness to cut ethical corners in fields ranging from newspaper reporting and public relations to finance, and an ability to ingratiate himself with powerful and wealthy people. In these respects, Karr was little different from other strivers who parlayed modest beginnings into successful careers.

Karr may well have believed that he was using the Russians as much as they were using him

One notable feature of Karr’s life, however, was his long flirtation with communism. As a young man growing up in an upper-middle-class New York family, David Katz, as he was born, was attracted to the Communist Party of the United States (CPUSA) in the 1930s, concerned about the rise of fascism. He wrote for its newspaper, the Daily Worker, worked for communist organisations and devotedly followed the party line. Despite years of investigation, however, the FBI was never able to find proof that he had joined the CPUSA, and Karr either had a change of heart after the Nazi-Soviet Pact, or was shrewd enough to gradually disassociate himself from an increasingly unpopular creed as the Cold War heated up in the late 1940s.

His flirtation with communism, however, remained an albatross as he worked his way into the higher ranks of American business. Politicians such as Senator Joseph McCarthy, corporate enemies and conservative newspaper columnists excoriated him as a subversive intent on undermining American capitalism from within. Even as CEO of Fairbanks Whitney, a major corporation, he had difficulty obtaining security clearance.

Much of Karr’s wealth was accumulated in the 1970s, long after he had abandoned his communist beliefs to concentrate on making money. He had been ousted as CEO after a series of business failures, dabbled in showbusiness, and moved to Paris. There he partnered with Armand Hammer, the controversial CEO of Occidental Petroleum. The Hammer family had been among the first Westerners to profit from doing business with the young USSR. Armand met Lenin in 1921 and, in return for a concession to manufacture pencils, agreed to launder Soviet money to benefit communist parties in Europe and America.

In the 1920s, he and his father had lived lavishly in Moscow and in the early 1930s, he had marketed Tsarist jewels, many confiscated from the Russian nobility, in the US. After years of absence during which he took control of a large oil company, Hammer returned to Moscow with Karr in 1972 to resume business. Karr soon split with Hammer and in the age of détente began to assist Western companies to arrange to produce and sell goods in the USSR. Not so coincidently, he also agreed to assist Soviet intelligence; a KGB memo published after the fall of the Soviet Union described him as “a competent KGB source”.

Karr had no access to American secrets, but he was friendly with well-placed and prominent people. In 1976 he provided advice to and enjoyed the confidence of three Democratic candidates for president, Sargent Shriver, Henry “Scoop” Jackson and Jerry Brown. He reported on a private meeting with Democratic nominee Jimmy Carter. He served as a go-between for Senator Ted Kennedy and Soviet leaders, and he offered to convey Soviet proposals on arms control to the Ford Administration.

His assistance to the Soviet Union was handsomely rewarded. Multinational firms hired him to facilitate their businesses in the Soviet Union. He arranged the financing for the Kosmos Hotel, the first Western-built hotel in Moscow since the Russian Revolution. He obtained the rights to market Misha the Bear, the symbol of the Moscow Olympics, and even when his efforts to obtain television rights to the Olympics for ABC failed, he received a consolation prize: his Soviet patrons forced Hammer to add him to the consortium marketing the commemorative coins for the Olympics.

While Karr and Hammer both had youthful flirtations with communism, it was Hammer who found a way to benefit financially while serving Soviet interests. Karr, who was often accused of being a Soviet asset in the 1930s and 1940s, did not begin to cooperate with the USSR until his youthful enthusiasm for communism had waned. Despite rumours linking him to various illicit Soviet activities, including arms sales to Idi Amin and Muammar Gaddafi, there is no evidence that his assistance to the USSR went beyond facilitating their access to Western financing and mutually profitable business relationships, for which he provided useful but hardly vital political and economic information.

By the time he consummated his relationship with the KGB, Karr was not a committed communist — if, indeed, he had ever been one. He no doubt agreed to assist because he realised it was a route to making money, but it also fed his desire to be at the centre of events. There is also evidence that he assisted Israeli intelligence in targeting a Black September operative who was assassinated in Paris in 1972. Throughout his life, Karr relished taking risks. He enjoyed manipulating people; with his outsize ego, he may well have believed that he was using the Russians as much as they were using him.

If Karr was a millionaire who was a Soviet mole for the money, other wealthy Americans had more personal motivations. One of the oddest was Martha Dodd Stern, whose father, William, was appointed ambassador to Germany by Franklin Roosevelt in 1933. Serving as his official hostess, Martha carried on affairs with diplomats and several leading Nazis, but her most consequential tryst was with a Soviet official with ties to the KGB (Soviet intelligence had several different names over the years; for convenience I have used the most well-known).

She fell in love and after he recruited her in 1934, she provided material from her father’s files, messages from the State Department, and gossip about her many lovers. Even after her Soviet contact was recalled to Moscow and later purged, Martha continued to hope that they might be married, encouraged by letters he was forced to write from the gulag professing his love for her.

If Karr was a Soviet mole for the money, other wealthy Americans had more personal motivations

Once back in the US, Martha overcame her sorrow at their separation and married a millionaire, Alfred Stern, whose wealth came from his first wife, Marion Rosenwald, daughter of one of the founders of Sears, Roebuck and Company. Following their divorce in 1936, he had received a settlement of $1 million ($18 million today). The Sterns lived in a luxurious apartment in New York with “two servants, a chauffeur and a personal secretary”. Alfred hoped to be appointed ambassador to the Soviet Union and was prepared to make a substantial financial contribution to the Democratic Party to advance his chances. That hope evaporated: FDR appointed Joseph Davies, husband of the cereal heiress Marjorie Merriweather Post, who built Mar-a-Lago, the Palm Beach estate now owned by Donald Trump. The credulous Davies offered a full-throated defence of the Moscow purge trials, published as Mission to Moscow. Undeterred, Martha remained in contact with Soviet intelligence, even though it regarded her a “a typical representative of American bohemia, a woman who has become sexually depraved, ready to sleep with any handsome male”.

Even though the KGB did not want her to involve her husband in her espionage activities, Martha was headstrong, explaining that he felt the CPUSA was not properly utilising his talents and that his contacts from his earlier marriage offered exciting opportunities for intelligence work. She also believed it was beneficial for her marriage. While the KGB did not regard Alfred’s potential as particularly useful and thought him a man of just average ability, it took him on to assuage her. In 1943 Alfred was persuaded to invest $130,000 (nearly $2 million today) in a sheet music company that would serve as a cover for Soviet espionage. Unfortunately for the Sterns, their partner Boris Morros frittered away the money; the KGB had to promise Alfred that it would cobble together some commercial deal that would enable him to recoup his money.

However, Morros, a braggart and name-dropper who had been pressured to work as a Soviet asset to get his aged father out of the USSR, had agreed to work for the FBI in 1947, and for the next decade served as a double agent. When the operation was ended in 1957, the American government indicted seven people, including Alfred and Martha Dodd Stern, on espionage-related charges.

Now living in Mexico, the Sterns were known among fellow communist expatriates “for their considerable wealth, ostentatious lifestyle and unorthodox marriage”, and refused to return to the US. When they asked to resettle in the USSR, the Soviets were not anxious to host them and they eventually moved to Czechoslovakia, where they lived in a luxurious villa and drove a Mercedes. Alfred, who fancied himself an expert on housing, advised the government on apartment construction (poorly — one project he touted lost more than a million dollars). Meanwhile, the couple made yearly contributions to the CPUSA of $6,000. Bored with the country, they relocated to Cuba in 1963, but returned to Prague in 1970. For years they tried in vain to have the charges against them dropped. Finally, in 1979, US authorities concluded that prosecution was no longer worth the trouble, but neither returned to America; Alfred died in 1986 and Martha in 1990.

Another wealthy heiress, ideologically committed to communism and romantically involved with a Soviet intelligence officer, also escaped prosecution. Louise Rosenberg Bransten, the only child of a wealthy San Francisco produce merchant, inherited more than a million dollars (more than $18 million today) from her family in the early 1930s. Married and then divorced from a communist journalist, she was active in pro-Russian activities in the Bay Area and had an affair with a Russian consular official who served as the KGB station chief in San Francisco. Described by the FBI as “the hub of a wheel, the spokes thereof representing the many facets of her pro-Soviet activities, running from mere membership in the Communist Party … to military and industrial espionage and political and propaganda activities”, she refused to answer questions from congressional committees in the 1940s, but continued to support communist causes financially.

Frederick Vanderbuilt Field (Photo by Al Fenn/The LIFE Picture Collection via Getty Images)

Several other scions of wealthy families became prominent communists but at considerable financial cost. Frederick Vanderbilt Field grew up in a Fifth Avenue mansion, his mother a member of the fabled Vanderbilt family, whose wealth, derived from transportation, had made them among the richest people in America. His parents’ Massachusetts home had 15 domestic servants. He attended Hotchkiss and Harvard and seemed destined to inherit tens of millions of dollars. Influenced by studying with Harold Laski at the London School of Economics in the late 1920s, he joined the Socialist Party of America after returning to the US, occasioning sensational articles in the New York press and scandalising his family.

By the early 1930s Field was a communist, working at the Institute for Pacific Relations on Far Eastern issues. It was a commitment that cost him a significant share of a $75 million estate from an uncle. Along with his friend Phillip Jaffe, who had built a fortune through a greeting card company, he financed Amerasia, a pro-communist journal later enmeshed in espionage charges. He chaired the American Peace Mobilization, a communist front that opposed American involvement in World War Two until Germany invaded the Soviet Union, whereupon it changed its name to American People’s Mobilization and called for America to join the war.

He adorned numerous communist fronts and was jailed for contempt in the early 1950s. As trustee of the Civil Rights Congress, he refused to turn over the records of contributors to its bail fund after CPUSA leaders convicted under the Smith Act jumped bail when the Supreme Court upheld their convictions. He served a nine-month sentence, then moved to Mexico.

Field explained that his “economic independence made it easier for me than for most people to follow my convictions”, but he ruefully admitted in his autobiography that a series of bad investments had cost him a third of his fortune and political contributions to communist causes another third. He was not, he insisted, a “financial angel” for the communists, but only a “minor cherub”.

One of Field’s friends, Lement Upham Harris, made an even greater commitment to the CPUSA. His father had founded a large Wall Street brokerage firm. Lem grew up in a smart Tuxedo Park mansion and attended prep schools and Harvard. Interested in agriculture, he went to Russia in the 1920s and lived and worked on collective farms. Entranced, he became a communist activist for the rest of his life, organising farmers and helping to oversee communist finances. Although he lived a comfortable life, his party commitments cost him the lion’s share of his parents’ money. He remained a devoted communist, in his later years running a travel agency that specialised in trips to communist countries.

This handful of radicals demonstrated the ability to amass fortunes

Harris and Field were two of the key figures who facilitated the CPUSA’s relationships with other wealthy communists and communist sympathizers. One of their associates, Stanley Levison, played a key role in one of the most controversial and scandalous episodes in American political history — the FBI’s wiretapping of Martin Luther King Jr. Levison, a New York lawyer and businessman, had worked on the Communist Party’s covert financial activities, beginning in the late 1940s. By the early 1950s, he was a key figure along with Lem Harris, supervising party investments in a variety of businesses and a source of significant financial contributions to the CPUSA, funnelling some $50,000 a year from his family and friends into its coffers.

Among his close contacts were two brothers, Jack and Morris Childs, who, unbeknownst to Levison, were also FBI informants and reported on his role as the CPUSA’s investment officer. When the FBI realised in 1957 that Levison had also become a close adviser to King, it feared that communist money, some of it from the Soviet Union, might be financing the civil rights movement or that the CPUSA might be manipulating King via Levison. Despite warnings from President Kennedy and his brother, Attorney General Robert Kennedy, King continued his relationship with Levison, in part because the government could not tell him that the information came from the Childs brothers. Determined to keep abreast of King’s contacts, the FBI got authorisation from Robert Kennedy to wiretap him. Although nothing incriminating about Levison turned up, there was plenty of detail about King’s sexual promiscuity.

Several ex-communists became very wealthy after they left the CPUSA and devoted their talents to business rather than revolution. Lowell Wakefield worked as a communist journalist in the South in the early 1930s and later wrote for the Daily Worker. He quit after the Nazi-Soviet Pact, returned to his native Washington state and in 1946 started a fish and canning company for Alaskan king crab, pioneering the process of freezing the crab at sea and marketing them as a luxury item. By the mid-1950s, his company had 85 per cent of the American market, and the one-time communist became a major philanthropist and prominent citizen of Alaska.

William Sennett joined the CPUSA as a teenager in Chicago during the Depression. He fought in Spain with the Abraham Lincoln Brigade and worked as a labour organiser in the 1940s before serving in the party underground. He resigned following Khruschev’s denunciation of Stalin and went to work in the trucking industry, eventually becoming president of Transport International Pool, which he built into a multi-million-dollar corporation with 66 branches in the US and 26 abroad. Remaining a radical, he funded a socialist newspaper, In These Times, and rent control initiatives in California.

Unlike those wealthy communists who inherited or married into wealth, this handful of radicals demonstrated the ability to amass fortunes, but most had long since abandoned the Communist Party. Even fewer did it without the aid of the Soviet Union.

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