THE TERRIBLE SECRET Part III

Review by Joseph T Major of DOSSIER: The Secret History of Armand Hammer by Edward Jay Epstein

(Random House; 1996; ISBN 0-679-44802-0; $30.00)



The men of Leybutin's Anti-Corruption Command raided a lavish penthouse apartment not far from the Visotny Dom that had been the Moscow home for a famous American capitalist who had been doing business with the Moscow leadership for half a century. He lived in a style worthy of the Tsars, courtesy of a grateful Soviet government. He bestowed some of the art treasures he had been permitted to export from Moscow on kings and heads of state abroad to buy entrée to their banquets and receptions. Those in the West who had followed his fortunes with suspicion said that he was the prototype of the kind of businessman Lenin expected to "sell the rope" with which he would be hanged. Leybutin, dazzled and disgusted by the treasures that he found in the penthouse, saw a different pattern of light and shade as his investigators showed him the evidence of fantastic kickbacks that had been paid to members of the Soviet government. It was of no interest to him what this entrepreneur's loyalties may have been, if he had any beyond self-interest to begin with. What mattered was that, for Russia, he had acted like a malignant distemper.

Moscow Rules, Robert Moss, p. 383


For far too many American Jews, Bar Mitzvah is just another party. For example, in one of Harry Kemmelman's novels Rabbi Small got into trouble when he refused to preside over one for a very adult congregation member, who seemed to be unaware that he had been Bar Mitzvah ever since he had turned thirteen. But back in the real world, whatever that is, "Avraham ben Yehuda Maccabee mimichpachat 'Hammer'", who died at the age of ninety-two planning his Bar Mitzvah, remained as ignorant of the Law as his secular identity Dr. Armand Hammer did of the civil laws of the world, or for that matter the laws of economics.

Edward Jay Epstein's previous flyer into the world of foreign relations was Deception: The Invisible War Between the KGB and CIA (1989), which can be regarded as an English translation of Anatoly Golitsyn's New Lies for Old (1986). Since New Lies for Old was written in English, this says something. Also, both Deception and New Lies for Old assert that the Soviet Union was working on a plan to control Europe within ten years. Oops!

But it seems that Armand Hammer himself was living in a world of Deception, wherein he traded New Lies for Old ones, as well as physical things. If Hammer had ever been asked and had felt himself able to honestly express himself, he might have echoed James Branch Cabell's Dom Manuel and James Blish's Traitors Guild of High Earth, for whom "Mundus vult decipi" ("The world wishes to be deceived"). But in the end he was high among those deceived.

Had Ayn Rand known about Hammer's career, she would have recognized him, albeit not in his political avatar. The way he appears in Moss's Moscow Rules (see above), Moss's and Arnaud de Borchgrave's The Spike (as "Vladimir Merchant"), and Allen Drury's The Hill of Summer (as "Fabrizo Gulak"), is focused more towards the latter. Moss, de Borchgrave, and Drury were quite generous to the fellow. As a businessman, Hammer was quite good at getting government grants.

His first entry upon the world stage that he was, in his own mind, to dominate for seventy years came when his father went to jail. Dr. Julius Hammer had been a mainstay of the Socialist Labor Party, the fiery radical Marxist-De Leonist organization then still headed by its founder and Chief Ideologue, Daniel De Leon. (Another member of this organization was Mack Reynolds, and he would derive most of the eccentric political and economic theories expressed in his fiction from SLP theories.) Julius Hammer met Vladimir I. Ulyanov (Lenin) as he was then at The Seventh Congress of the Second International in 1907, and became his man, helping split the SLP in 1919 to form the Communist Labor Party, which became part of the CPUSA.

Armand grew up wanting to follow in his father's footsteps, both in career and in politics. For a fanatic revolutionary, Dr. Julius lived remarkably well, with servants, resort vacations, and two sons in college. His medical business, Allied Drug and Chemical, was kept from bankruptcy only by financial legedermain, its proceeds being diverted to Julius Hammer's personal life and political activities.

Then in 1920 Julius Hammer went to jail. Pro-choice activists will be gratified to learn that it was not for having performed an abortion, but for having performed an abortion where the mother also died, that Dr. Julius Hammer was given 3 to 12 years at Sing Sing, for manslaughter. Moreover, it seems that Armand had actually performed the abortion. This left the Hammer enterprises in something of a quandary. Fortunately, there was something that could be done.

Armand's trip on his father's behalf (and in his place) to Russia in 1921 brought two important people into connection with him. That year heralded the first of several false thaws in Soviet policy that were to spur the dreams of wishful thinkers for seventy years; the Soviet capital-building New Economic Plan (NEP), heralded at the time as a return to capitalism. Being reliable politically, Armand Hammer was seen as an acceptable front man for Soviet economic enterprises abroad. And he got his confirmation from the very top; Lenin himself gave this progressive capitalist his marching orders in a personal meeting on October 22, 1921, a meeting which Hammer was to continue to identify with his entire life. (Curiously enough, Hammer never seems to have met his Soviet namesake, Vyacheslav Molotov.)

But another person who would figure heavily in Hammer's life also became aware of him then. The Communist Menace had been the focus of a Justice Department lawyer during the Red Scare days, and when that lawyer became Director of the Bureau of Investigation, not then Federal, he kept it still in his mind. And one of those famed and feared Secret Dossiers of J. Edgar Hoover was on Armand Hammer. When Hammer returned from Moscow, concession firmly in hand, he naturally became suspect.

Throughout the twenties, Hammer's affairs spread, if not prospered. His various financial dealings with the Soviets showed a tendency that would recur throughout his life; they were seemingly prosperous, but actually less so. His concession, an asbestos mine, turned out to be thoroughly worthless; a project to make pencils also came a cropper. (A warning to those who co-invest with the PRC government on such deals.) Perhaps he was distracted because he was still laundering money for the Comintern (see also The Secret World of American Communism, pp. 26-30). But then it did stick to his fingers for the longest time (op. cit., pp. 28-9).

When the original financial affairs had exhausted themselves, taking Hammer's money with them, he left the Workers' Paradise with five lessons well learned:


Rule 1. Always go directly to the top of the hierarchy. . .

Rule 2. Collaboration is an essential part of the process. . .

Rule 3. Ambiguity is a virtue and clarity a vice. . .

Rule 4. Expediency should be disguised by sentiment but should not be tempered by it. . .

Rule 5. The image of success should be maintained whatever the reality.

Dossier, pp. 118-9


I despair that someone, after reading this book, will produce a Business Principles of Armand Hammer which will advise the ambitious Yuppie to follow these practices. In the greater detail of the original, Epstein discusses how these practices deviate from genuine capitalism, and the degree to which they show the power of pull. Hammer was indeed a character from Atlas Shrugged, but like the public parasites Jim Taggart and Mr. Mowen of Amagalmated Signal, not the creative entrepreneurs of Rearden's and Dagny's kind.

Anyway, Armand Hammer found it easier to leave the Soviet Union than Alissya Zinovievna Rosenbaum [Ayn Rand] had. But then he had met Lenin. Also many other crucial progressive personalities, like the other sly dog who worked from "Ilyich to Ilyich" [Lenin to Brezhnev] Anastas Ivanovich Mikoyan, the quintessential cockroach, half Armenian and half Georgian. Mikoyan put Hammer on to the next phase in his career, that of fence. Well, art dealer in a line of valuables "expropriated from the expropriators" nobles's, church, and Tsarist art goods. And then there was his first biographer, Walter Duranty, whose career as a fellow traveler was just beginning.

As director of the Hammer Galleries, he managed to maintain a front far more impressive than reality. But then, the Hammer Galleries were also a conduit for Comintern and chekist cash. In an incident that would have warmed the cockles of the hearts of the anti-Rooseveltians had they but known, Hammer managed to get a Reconstruction Finance Corporation loan, intended to encourage businesses to recover from the Depression, and convert it to funds for Soviet espionage.

That front also got him into other useful places. Though he was already married, to the mother of his only son, Julian Hammer, he rather callously warehoused his wife Olga and set after a new one, more suited to his current social circles.

Angela Zevely, Mrs. Hammer-to-be, moved in higher circles, like Franklin D. Roosevelt's. This gave Hammer access like he had with the Soviet government, at a time when he had a crucial plan in mind.

Epstein presents Stalin as being willing to hedge his bets. Amazed like everyone else by the speed and efficiency of his allies the Nazis' conquest of France, he (or so Epstein says) decided that every dead German was a good one, and therefore it was desirable to build up their enemies. This sounds like some of the anti-Rooseveltians who wanted the U.S. to support the Nazis and the Communists alternately until they had worn each other out fighting.

It can be determined, however, that Hammer publicly promoted proposals remarkably similar to the "destroyers for bases" deal and Lend-Lease. His schmoozing with his fianceé's friends and other Roosevelt associates ended up paying off, for on Thanksgiving Day (!) 1940, Hammer met the President (albeit for only five minutes). Hammer was then sent to meet and work with Harry Hopkins. Perhaps his chekist friends let him know that Hopkins was already in with them. On the other hand, we've only got Hammer's word for much of this, and Epstein makes a point of how mendacious he was.

He did, however, get a tangible proof of his insider status, namely the only licence to distill drinking alcohol issued during the war. All the other distillers had had to convert to industrial alcohol production, but Hammer's United Distillers continued to put Gold Coin rotgut whiskey on America's shelves at $5 a quart (remember, these are 40's dollars). Since Hammer's cost of production was 1 a quart, you can perhaps get an idea where Mack Reynolds might have got those ridiculous ideas about the "real prices" of goods.

Not surprisingly, under such circumstances even an incompetent could make millions. When the war ended, however, real distillers started taking business away from him. So Hammer looked around for another government concession, though one would think he should have learned something at the Soviet pencil factory. This led him into a confrontation with the FBI.

Hoover had been tracking the Hammer family for years. However, this meant that Hammer had outlived many of his accomplices. And as well, he was by now skilled at shifting the blame, capable of saying that the "Hammer" in a Soviet telegram (such as Document 4, The Secret World of American Communism, p. 29) was his late father. Moreover, he understood the lubricative powers of money, which was why some prominent Congressmen were quite willing to attest to his probity. (One you may even recognize: Albert Gore, Sr., whose namesake son would get Hammer a good seat at the 1988 inauguration. Well!) So Hammer was cleared effectively.

In the fifties, United Distillers began faltering. Not only was it uncompetitive, but the owner was siphoning off large sums of money for personal expenses. Hammer looked around for new worlds to conquer. This entailed getting married again, which entailed dumping not only his second wife but also his mistress Bettye Jane Murphy and their unborn child (a daughter, named Victoria Varella).

Frances Tolman, the third Mrs. Hammer, had money. This was dangerous. However, instead of his previous methods of squandering money, Hammer decided to spend it sensibly (by comparison), and bought into Occidental Petroleum.

Oxy, as it was called, was as much shadow as substance; while it did indeed own genuine oil and gas reserves, Hammer also made grandiose announcements not backed by reality. Still, for a Hammer company that was a vast improvement. The most important reserve turned out to be the Libyan one, which acquisition would turn out to have grave consequences later on.

This acquisition, and the return of his passport (which he had been denied after his trip to Russia), enabled Hammer to go back to being the international secret master of diplomacy. In 1961 he met with both Kennedy and Khrushchev, trading on that forty-year-old meeting with Lenin. Everything was looking up.

Enter a hunter, who for once seemed to have a valid target. Also in 1961, Anatoli Ivanovich Golitsyn had come to America, his legend of a vast Soviet plan to whisper into the ears of James Angleton, CIA chief of Counterintelligence. Among his tales was that of a Capitalist Prince, who had fathered a son in Russia, and who worked hand in glove with the KGB. Angleton's principal suspect was Averell Harriman. His deputy Raymond Rocca thought it was Hammer, who fitted Golitsyn's description better. The "son," for example, could have been Hammer's namesake nephew. (Angleton's assistants seem to have had better judgment than the boss; it had been Bill Harvey, not Angleton, who first suspected Kim Philby.)

The Libyan deal had an interesting side-effect. Hammer had negotiated with Libyan prime minister Omar Shelhi for his valuable Libyan oil concession. The negotiations had included baksheesh for Omar. In 1969, the monarchy was overthrown, and while Colonel Gadhafi was temporarily willing to continue the concession, Hammer was thoughtful enough to mention nothing about the additional payoffs, which meant he had a source of funds for certain purposes.

Indeed, on the basis of this reptile fund, Hammer then began a career of being "the embodiment of the citizen-diplomat". The one genuine political change for which he bore some responsibility was not particulary connected to these, though. In 1970, Hammer caved in to Libyan demands and accepted their terms for the oil concession, the most significant of which was that Libya would control the pricing. The stage was set for the price rises of 1973.

But by then Hammer would be having other problems, being caught in the backwash of Watergate. What followed was a medical miracle. One of those donations from the reptile fund was to CREEP for $100,000. They tried to make an example of him, but found that a sick, dying man with serious heart trouble was just too pathetic to prosecute, and on March 23, 1976 Hammer plea-bargained to three misdemeanor charges, sitting in the courtroom in a wheelchair surrounded by medical personnel and equipment. Confession worked like a miraculous tonic, as he was fully restored to health and back at work on March 24.

The Hammer Galleries had always been a source of valuable artwork; after all, Hammer had had his own set of Fabergé stamps to stamp on items. And he was indeed to deal consistently in forged art. Even when he bought genuine works they were usually lesser works of Grand Masters he would have bought portraits on black velvet of Elvis by Rembrandt and wide-eyed children by van Gogh. Actually, he personally didn't. The Armand Hammer Collection was paid for by Occidental Petroleum, but disposed of personally by Hammer. Not only that, his new mistress Hilary Gibson formerly Martha Kaufman, was an art expert paid by Occidental. Art imitated life, so to speak.

In the final decade of his life, Hammer chased endlessly after responsibility. He tried every approach he could think of to get to meet Reagan, who apparently found him three times as interesting as FDR had, at least they met for three times as long. After throwing money, (or promising to, anyhow), at every charity Prince Charles liked, he even offered to jump through a window would the Prince command it, a level of obedience previously offered only to Lenin. (One could wish that Charles had taken him up on the offer.) He even sucked up to Menachem Begin, his protestations for Libyan consumption of membership in the Unitarian Church all forgotten. But for all of that Hammer couldn't get the Nobel Peace Prize.

His last "citizen-diplomat" deal bore the sinister name "Elders of Zion" and was being carried out with the assistance of Robert "Cap'n Bob" Maxwell given what later happened to "Roseglub" and his financial house of cards, an appropriate parallel, and too, perhaps a cooperation comparable to the Hiss-Maclean discussions of 1946. But in spite of everything, the "Elders of Zion" was only a tripartite Soviet-Israeli-American airplane co-production deal.

It's somewhat ironic that it was his fatal cancer that forced Hammer to leave a partridge shooting fund-raiser for cancer research. But as I said, Hammer was less than totally aware of the Law. One isn't supposed to name a child after a living relative; yet Hammer had both a nephew and a great-grandson named after him. Perhaps it would have been as well were he dead.

This time he couldn't fake it. On December 10, 1990, reality finally caught up with Armand Hammer. As it would with his latest partner, his financial deals came apart after his death. Occidental had to take a huge charge and post a loss of $2.5 billion to cover closing down the joint enterprises with the communist countries all worthless, just like that asbestos mine back in the twenties. The estate faced a phalanx of lawsuits. The huge pledges he had pledged had never been paid. His third wife Frances's estate claimed that he had exploited her money. A string of employees, great and small, brought forth unpaid claims. Ex-mistresses Bettye Murphy and Hilary Gibson, and Bettye's daughter Victoria Varella turned up to get their share. All these, however, had to divide up not the fabled billions of the Hammer fortune, but a mere $40 million.

Perhaps it was just as well for Armand Hammer that he did not outlive the empire in which he had invested so much psychic energy and real money. As much the highlight of his youthful hopes, it was as well the repository of his terrible secrets. From its ruins, so much like the ruins of his grand plans, the dire traces of his schemes and plans have finally emerged.

Yet, in the end, did the Communists get all that much for their money and effort? Going by his record, it would seem to be that they didn't. In the end, General Leybutin's conclusion would seem to be the most likely: "It was of no interest to him what this entrepreneur's loyalties may have been, if he had any beyond self-interest to begin with. What mattered was that, for Russia, he had acted like a malignant distemper." Not just for Russia, either, but for the entire world, and for those around him.