When Gus Hall, long-time head of the Communist Party of the United States, died in 2000, the leftist journalist and editor Victor Navasky wrote a New York Times op-ed entitled “My Hunt for Moscow Gold,” gently poking fun at the notion that the CPUSA had been bankrolled by the government of the Soviet Union at the height of the Cold War. Navasky recalled asking Hall about it in 1983. Hall, 73 at the time, “scoffed at the idea that the party had received that kind of money in those years. He said with a chuckle that he had no firsthand knowledge, though, because at that time he had been serving an eight-year sentence in Leavenworth.”
By the time Navasky drafted this scoffing op-ed, however, researchers had disgorged abundant evidence from once-secret Soviet archives that showed how Hall had been lying through his teeth. The Washington Post had already reproduced a 1988 receipt for $3 million in cash signed by Gus Hall himself. FBI records logged more than $28 million of secret and illegal Soviet subsidies to the CPUSA during Hall’s tenure as head of the party. None of that troubled Navasky, who complained that even if Hall had done something illegal, the United States government had been guilty of far worse. It apparently never crossed Navasky’s mind that the affable Communist leader might have siphoned off some of those dollars to benefit himself and his family. Now, recently released FBI files demonstrate that not only was the CPUSA living off illegal Soviet subsidies, but that Hall himself was a corrupt grifter.
The Soviet money came to the CPUSA via Morris and Jack Childs, two brothers and high-ranking American Communists tasked by Hall with serving as liaisons with Moscow. Unbeknownst to him, they were also FBI informants in a case dubbed Operation SOLO. Morris negotiated for yearly subsidies on trips to Moscow; Jack received the cash, in small denominations, from KGB officers in New York. The money was put in safe-deposit boxes and doled out to Hall periodically when he requested it, with the FBI carefully noting both receipts and expenditures. The FBI, in fact, knew more about the CPUSA’s money than most of the senior leadership of the CPUSA itself did. Jack Childs, who distributed the money to Hall when asked, did not have to offer any accounting to either the party leader or to the Soviets. Hall cared only about having cash immediately available; when Jack was delayed in getting Hall $2,000 for some unspecified reason, Hall chastised him.
Hall told Morris Childs that from time to time he created a money crisis in the CPUSA to launch emergency fundraising campaigns. During these efforts, Hall would funnel some of the Soviet subsidies to the CPUSA and tell his comrades that they had come from donations that he himself had solicited from secret party benefactors. Nearly half of the Soviet money went to support the party’s national office; a fifth of it subsidized publications (more than half the entire income of the CPUSA paper, first called the Daily Worker and then the Worker, came from the 41 percent of its circulation that came from Communist countries); the rest was used for travel by delegates to party congresses at home and abroad, and for vacations for party members and cadres to the Soviet Union.
The Soviet Union, source of all this largesse, remained tolerant about how its money was being used as long as the result was an American party totally loyal to Moscow. Just prior to the 1964 election, Hall asked the Soviets for an additional $1 million, claiming that the party had been forced to borrow money to finance election activities. In January 1966, he had Jack send a coded message to the KGB: “We finished 1965 totally without funds and with little revenue.” At the time, there was more than $1 million of Moscow money in the safe-deposit boxes. In June of the same year, Hall sent another coded message: “Our situation today is seriously critical. All means of obtaining loans, etc. are exhausted.” At the time, $1,196,403 was available to him.
As the money began to accumulate, Hall concluded that it made sense to put some of it to work rather than leave it sitting in safe-deposit boxes. In 1963, he instructed Morris to invest up to $100,000 and to give some money to trusted individuals to invest. For the next several years, Hall badgered Morris about it; the problem, he was told, was how to arrange to pay taxes on the earnings. The FBI was worried that it would be facilitating the effort to make money for the CPUSA, but Morris was concerned that continued refusal or objections would prompt Hall to pull the money from his control. Finally, in November 1964, Morris bought $20,000 in stock of the First National Bank of Lincolnwood, Illinois, in the name of his wife, Eva. First National was run by her brother, Irving Projansky. Morris also invested $7,500 in Adler-Projansky Realty and Insurance in return for an 8 percent one-year note, and $11,500 in a jewelry store in Chicago.
Under Hall’s direction Morris also gave Isadore (Gibby) Needleman, a trusted Communist lawyer, a small amount to invest in the stock market and set up a brokerage account in the name of Matthew Hallinan, a CPUSA youth leader. Still another account was set up by John Abt and Lem Harris, who were instructed to invest in stocks with high yields. Prepping Morris for a Moscow visit, Hall wanted him to tell the Soviets that “they are darn fools for not setting up an investment agency over here themselves since there is a lot of money to be made in the investment fields.”
The FBI mused about having Morris invest money in government bonds. In the event that SOLO terminated, public disclosure would place the CPUSA and the USSR “in the untenable position of having contributed to U.S. Government operations and thereby endorsed U.S. action in Vietnam, the prosecution of the CPUSA, and other matter deemed by the international Communist movement to be utterly repulsive. You can well imagine the reaction of Communist China to such a revelation,” read one Hoover memo.
Hall also used the SOLO funds as a personal piggy bank—and because Hall used Morris as a conduit, the FBI grew concerned that Hall’s financial shenanigans would implicate Morris and Jack (the Bureau’s informants, remember) in financial fraud. Jack Childs gave Hall $6,500 for a down payment on his home in Yonkers in 1960. In 1966, he doled out almost $1,000 for vacation expenses for Hall’s daughter, Barbara Conway, and her husband, having already purchased 1,000 shares of stock worth nearly $9,000 for their son-in-law. On three occasions in 1966, Morris transferred $20,000 to Hall. Some of it went for party expenses, but part was used to take out a mortgage on Conway’s home in New Haven in Morris’s name. Hall told Morris to use the mortgage payments to buy government bonds and deposit them in his account at the Lincolnwood Bank. Morris told Hall, “this is a most dangerous practice,” but the party leader was unmoved. FBI boss J. Edgar Hoover snappishly noted that “this is another instance where Hall had used our informants to feather the financial nest of his daughter who is the ‘apple of his eye.’” Hoover grew worried that the IRS might investigate Morris; the solution was to have Morris declare the interest, pay taxes on it, and then deduct that as a business expense on his taxes. The whole scheme meant he lost money that was “converted to the benefit of Gus Hall’s children.”
Hall’s son, Arvo, was also a beneficiary of Soviet money. With SOLO funds, Morris, in 1967, purchased a 1965 Mustang convertible for Arvo, who picked it up in March while returning to school at the University of Colorado. During the trip, the car had mechanical problems and Morris had to reimburse Arvo hundreds of dollars before arranging for the car dealer to send a mechanic to Boulder. In mid-April, the car was traded for a new 1967 Ford Fairlane. In May 1968, Eva Childs bought 100 shares of Penn Central stock on behalf of the Hall children after being pressured by Hall to “gamble” on stocks that would return a profit to his son, daughter, and son-in-law. She was reimbursed with $7,500 of SOLO funds.
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HALL’S CASUAL use of money for his personal benefit nearly threatened to bring down the IRS on him several times. In 1961, Needleman asked Jack to obtain false affidavits attesting that several people had made interest-free loans to Hall. The FBI told Jack to warn Hall that this would expose Hall and his friends to perjury charges and threaten to expose the use of Soviet money. Left unsaid was that it might also bring Jack into the IRS’s crosshairs, which could blow the whole SOLO operation. Again, in 1965, Hall frantically appealed to Morris, fearing that he was in imminent danger of being indicted for tax evasion. IRS agents had questioned his brother. Hall wanted Morris to contact someone in Washington. The FBI told Morris to do nothing, but whether the bureau intervened with the IRS is not known. Hall, however, was not indicted.
The use of laundered Soviet money for the personal benefit of the Hall family threatened to become public in 1968. Both the Senate Internal Security Subcommittee and one-time FBI informant Herbert Philbrick (the author of a book, turned into a hit TV show in the 1950s, called I Led Three Lives, about his penetration of the Communist Party) received an anonymous letter about the high living standards of the Hall family, with the names Jack and Morris Childs prominently featured. The FBI knew that any inquiry into the Hall children would lead to Morris and Jack, since “well over $100,000 in party funds have passed through the bank accounts of our informants and ultimately found their way into the pockets” of the children. Morris held Barbara Conway’s mortgage. The FBI apparently persuaded Philbrick and the Senate committee not to investigate, and there is no indication if it ever succeeded in identifying the sender of the letter. Hoover saw no use in Morris or Jack trying to intercede with Hall and even sounded a note of sympathy for American Communists of whom he’d taken advantage. “It is inconceivable,” Hoover noted, “that he would agree to any proposals which do not suit his fancy and obviously his purpose is to provide financial security for his loved ones, regardless of the cost to the Communist Party, USA, or any individual members thereof.”
Hall’s brothers, who operated a horse farm near Cherry, Minnesota, also apparently benefitted from Eastern Bloc largesse. Two of them, Toivo and Veikko Halberg (they had retained the original family name), operated a general store in Cherry, Minnesota, that barely provided a living. On a 1961 visit home, Hall heard from them that a small horse farm they owned could get substantial stud fees if they had an Arabian stallion. Intrigued, Hall started to badger the Childs to see if either the Soviet Union or Poland would provide him with pure-bred Arabian stallions, allegedly because he would use the stud fees they would generate for the CPUSA. Jack, wondering whether Gus was pulling his leg, told the party leader that he was not sure he could tell the Poles that the financial solvency of the CPUSA depended on the procreative accomplishments of several Arabian stallions. Hall was not amused, explaining that the party needed to be more imaginative to solve its financial problems.
The negotiations dragged on for years, complicated by the fact that, according to Hall’s wife, neither of his brothers would travel on a train, plane, or ocean liner, or venture more than 200 miles from home. Needleman made several trips (financed by SOLO money) to inspect horse farms in Poland and examine stallions. On one trip in 1966, he was accompanied by Hall’s young nephew, also named Toivo. That year, the Poles graciously agreed that they would not charge for the horses, but changes in U.S. tax laws delayed their importation for at least another year. The first Arabian, Madrygal, arrived in 1967 and was sold to a buyer in Kentucky the following year for between $15,000 and $20,000. More Arabians followed in succeeding years. One Polish stallion, Harbit, imported in 1969, sired 152 registered purebred Arabians, and Halberg Arabians of Iron, Minnesota, became a well-respected and highly regarded breeder.
Released SOLO records do not indicate whether the stud fees materially contributed to the party’s coffers. As Needleman and Toivo prepared for another trip to obtain horses in 1967, Hall instructed the former to assure the Poles that he was willing to pay for them, but that it was not a “personal” deal “but in the interests of our organization.” In 1971, Hall told Morris Childs that his brothers had formed a corporation encompassing all the family businesses. Horse breeding, he explained, “of course, is not supposed to be their business but actually a business on behalf of the CPUSA.” In return for Gus Hall’s largesse, the Halberg family built a home for him on family property. Gus also left a cache of SOLO money with his brothers in 1967. They put it in a sealed steel container and buried it in concrete inside the home.
The FBI did mount a counterintelligence operation in 1967 to damage the reputation of Halberg Arabians, leaking information to a Duluth newspaper and suggesting that either Gus Hall or the CPUSA had an interest in the farm. The brothers’ income-tax returns were examined. When the FBI’s operation was exposed in 1977, the elder Toivo Halberg indignantly denied the charges, claiming that he had bought the horse himself and that “they [the FBI] will think up any wild story.” Asked whether his brother Gus was involved, Toivo lied. “Of course not,” he said. “He’s a politician, not a horse man.”
As if these money issues were not enough, Morris’s decision to invest party funds in his brother-in-law’s Illinois bank enmeshed him, Hall, and the FBI in a spectacular and potentially devastating case of securities violation, mob money, and financial fraud. The Projansky family had purchased the First National Bank in Lincolnwood in 1964 from a group that had included prominent Chicago Democratic Party fixer Jacob Arvey. The bank had grown rapidly and attracted the attention of the SEC in 1966 for investments in two companies traded on the American Stock Exchange. The inquiry involved price manipulation of nine stocks, and there were suspicions of a mob connection, exacerbated when one of the men under investigation was murdered in March 1967. Bank officers, including Eva’s brother Irving, were implicated; Irving was indicted for securities violations in 1967 and convicted in 1971, while his son Stuart, also a bank officer, was acquitted.
As the story unfolded, newspaper reports told of investigators looking at “friends and in-laws” of bank officers. Morris, Jack, and Eva all had their brokerage records subpoenaed. After reviewing the evidence, the FBI concluded that Morris and Eva were probably involved: “In fact, they appear to have been part of a syndicate which was involved in manipulations and independently also purchased stock on their own in thousand share lots.” In April 1967, Morris and Jack told the Bureau that they expected the FBI’s assistance in the solution of their criminal predicament. The FBI, however, was loath to get involved; this was Childs family business. Legal difficulties might even enhance the Childs’ cover, since they were posing as wealthy businessmen. If the FBI tried to exert pressure to protect the Childs brothers, that could raise questions and endanger the security of SOLO. Gus Hall did become aware of the investigation; Morris had invested SOLO money in the family bank and one of the stocks and had also bought stock for Hall’s daughter. He wound up borrowing money to buy back the exposed stock at a loss to placate Hall.
Morris did worry that his involvement in the case would lead to newspaper stories about his Communist ties. A former bank officer hinted that he knew something “very shocking” about Morris. Both brothers were questioned at the SEC offices in New York in July 1967, and Morris’s and Eva’s names were printed in the Wall Street Journal story on the case. Hoover ordered that “nothing be done to forestall any prosecution.” Ultimately, Morris and Eva were named as unindicted co-conspirators by a New York grand jury but escaped prosecution.
Gus Hall’s embezzlement of Soviet funds intended for the CPUSA was not a unique crime. There are numerous examples of similar malfeasance by leaders of other political organizations, left, right, and center, as well as leaders of charities and nonprofits who gave in to the temptation to steal when they realized that the organizations they ran did not have internal accounting systems that would reveal their theft. Still, as head of the CPUSA from 1959 until he retired shortly before his death in 2000, Hall not only violated American laws by accepting Soviet subsidies, but also cheated the very organization he led.
Even though the Soviet Union did not know exactly how its money was being used, the KGB was aware that Hall was an embezzler. Oleg Kalugin, a high-ranking KGB officer in the United States before returning to Moscow to become Chief of KGB Foreign Counter-Intelligence (and, after his defection, an American citizen), noted in his 1994 autobiography that Hall “was as hypocritical as many of our party bosses,” denouncing “capitalist corruption while at the same time siphoning off party money (Moscow money) to set up his own horse-breeding farm.”
Recent years have seen a revival of the gauzy romanticizing of American Communists as a comradely band of selfless idealists. The rapturous reception this year of the reissue of Vivian Gornick’s The Romance of American Communism, first published in 1977, exemplifies this tendency. But what should not be lost is that the CPUSA was bought and paid for by the Communist Party of the Soviet Union. The supreme leader of American Communism for nearly 40 years was a serial liar and a thief.
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