Spies: The Rise and Fall of the KGB in America (49 page)

The connection with Graze was broken in late 1939, when Akhmerov
returned to Moscow and the illegal station ceased to operate. But in Feb-
ruaiy 1941 Moscow instructed Gayk Ovakimyan, New York legal station
chief, to make contact with him at the Civil Service Commission with an
eye for opportunities to develop or insert sources in the FBI, the Dies
Committee, and the Immigration and Naturalization Service (INS). The
message advised: "`At one time `Arena' [Graze] gave us very valuable materials."' While "`we worked with him under the guise of providing assistance to a fraternal movement, he realized that his materials were
being passed to us."' But Ovakimyan was arrested in May, and the KGB
New York station, already at a low ebb, did not follow up. Moscow dispatched a new station chief, Vasily Zarubin, and in November 1941 sent
him suggestions on reviving old agents: ""Arena,' [Graze] .... deactivated with Jung's [Akhmerov's] departure, must be brought back and
used.... `Arena,' if he continues to work in the civil service, is of interest for his very specific capability of obtaining interesting information."'
But it was not until April 1942 that Akhmerov, back in the United States,
reestablished contact and found that Graze was no longer at the Civil
Service Commission. He had moved first to the Office of Price Administration and, in 1943, fearing he would be drafted unless he had a militaryrelated position, took a routine administrative job with the Navy Department, severely curtailing his access to useful information. In a report
summarizing his work directing the New York station from 1942 to mid1944, Vasily Zarubin noted that after his revival Graze "`has never had
access to information that interests us, and `Mer' [Akhmerov] uses him
mostly for an apartment in which he can stay during his visits to Carthage
[Washington]. In addition, `Arena' can be used as a talent-spotter and
courier."' There are numerous references to "Arena"/Graze as a part of
the KGB's agent network from 1942 to 1945 but, as Zarubin's summary
suggests, few mentions of specific information that he supplied. In 1946
there is a reference to his having earlier supplied "materials on radar,
sonar, and other naval equipment," likely from the period after Zarubin
left in mid-1944.43

While less of a source than he had been earlier, Graze did become part of the KGB's support structure for its clandestine operations. Not
just Akhmerov but also his wife, Helen Lowly, a courier for the KGB's illegal station, stayed at Graze's apartment when on missions to Washington (hotels and housing were in notoriously short supply during the war).
The KGB also kept a camera there, and operatives photographed material furnished by a variety of sources. (The Grazes' apartment was not,
however, used as a safe house for meetings between KGB officers and
agents because it shared a thin wall (through which sound easily carried)
with an apartment occupied by an American Army G-2 lieutenant
colonel.) In November 1944 liaison with Gerald shifted from the illegal
station under Akhmerov to the legal station run by Anatoly Gorsky.
Joseph Katz became the Grazes' liaison and he trained Gerald in photography, but it was a difficult task. Gorsky reported:

"Materials for `Raid' [Perlo] are photographed by `Arena' [Graze]. We used to
think that he was a good photographer. In practice, however, it turned out that
`Arena' has no idea how to take photographs. `X' [Katz] led a thorough and detailed tutorial with him, but `Arena' nevertheless ruined two batches of `Tan's'
[Magdoff's] and `Raid's' materials. Now he is slowly getting the hang of it.
`Arena' himself was very eager to start photographing materials, but his wife
opposed it for a long time because she did not want to be put at risk and only
agreed `grudgingly.' As we have already written, `Arena's' wife works somewhere of interest to us, but `X' has so far not been able to get any substantial
or interesting material from her."

Ruth Graze worked in a section of Army G-2 that evaluated the state of
Japanese radio and radar manufacturing. Katz was annoyed to learn that
she had recently had access to a valuable report on Mitsubishi equipment, and he reported: "`It did not occur to her to take notes of any kind
or to make a copy of it, even though she had had it in her house. I suggested that it wouldn't be a bad idea to photograph this report, seeing as
he has a camera and is familiar with photography techniques. They were
both horrified at the thought. I explained to her that in my opinion, her
place of work was of enormous interest and assured her that we would
take all possible precautions to ensure her own safety and the safety of the
work itself."' But there is no indication that Ruth's reluctance to become
an active source was ever overcome.44

Gerald Graze also continued to function as a talent spotter. He had
first been recommended to Soviet intelligence by Victor Perlo through
Jacob Golos. Graze then brought Perlo to Akhmerov's attention in 1939,
and the latter told Moscow Center:

Perlo works at the Brookings Institution in Washington. An old friend. At one
time, Arena had been connected with Storm [Josef Peters] through Perlo. A.
["Arena"/Graze] and P. had belonged to the same fraternal group. When A.
joined us for good, he withdrew from this group. They occasionally meet as
friends...... Arena considers him a loyal and very well-developed fraternal
member [Communist]. During my last meeting with Storm, I asked him in
passing about Perlo. At one time, he had spoken to me of him as a good
worker. Storm affirmed the same thing, saying that he was a good, loyal, and
developed Marxist. They are using him for the fraternal's [CPUSAs] purposes."

But nothing was done in 1939, in part because Moscow Center didn't
want to work with Peters, who it feared had been exposed to American
counterintelligence by Whittaker Chambers's defection. However, Akhmerov's reconnection with Graze in 1942 revived the Perlo matter. After
numerous delays and false starts caused by the need to coordinate among
the CPUSA, GRU, and KGB, Victor Perlo and his group of highly productive sources became KGB assets.45

Along with all the other agents put at risk by Bentley's defection, Gerald Graze was deactivated in November 1945. But Bentley never mentioned Graze to the FBI and likely had not heard of him from Perlo. He
left the Navy Department and soon found a job with the U.S. government's Public Health Service, not an agency of much interest to Soviet intelligence. Joseph Katz was assigned to reestablish the KGB's connection
with Graze in 1948, but he could not be located at the time, and the matter was dropped. Senator Joseph McCarthy in a speech to the Senate on
20 February 1950 listed eighty-one cases of what he called serious government security risks. Gerald Graze was number twenty-nine on the list,
but McCarthy used only numbers in the speech, not real names. The
names were later made available to a subcommittee of the Senate Foreign Relations Committee (referred to in the press as the "Tydings Committee" from its chairman, Senator Millard Tydings), and eventually the
real names leaked to the press. Graze, however, had resigned from his
government post, likely to avoid scrutiny. McCarthy never pursued his
case, and Graze attracted almost no public or press attention. In later
years he headed the grants management office at the Albert Einstein College of Medicine, became executive director of the research foundation
of the City University of New York, and retired in the 1g8os after returning to the National Institutes of Health as special assistant to the associate director for administration. He died in 1999; his obituary never
mentioned his few moments of public notoriety when his name had been bandied about as a security risk, and nothing was written, because it was
unknown, that he had been a Soviet agent from 1937 to 1945.46

After being questioned by FBI agents about possible involvement with
Soviet espionage, former State Department official Laurence Duggan
jumped to his death in December 1948 from his sixteenth-floor office at
the Institute of International Education in New York. A few days later a
reporter asked Congressman Karl Mundt, a member of the House Committee on Un-American Activities, when the committee would name
other Soviet spies, and he tactlessly responded, "We'll name them as they
jump out of windows." Enraged, Duggan's prominent friends-including
former undersecretary of state Sumner Welles, former first lady Eleanor
Roosevelt, poet Archibald MacLeish, and prominent journalists Drew
Pearson and Edward R. Murrow-all defended his reputation and integrity. Attorney General Thomas Clark announced that Duggan was "a
loyal employee of the United States Government." Several generations of
historians agreed. As late as 1995 historian Arthur Schlesinger, Jr., denounced Yale University Press for publishing a book that referred to Duggan as a Soviet source, angrily writing that it "should not have permitted
this book to blacken the name of a man whom many knew as an able public servant." All of them were wrong. Duggan was a Soviet spy, albeit a
nervous one requiring repeated reassurances and KGB handholding.47

Laurence Duggan was born in 1905, the son of Stephen Duggan, a
professor of international relations at City College of New York and
founder of the Institute of International Education (IIE), a pioneer in
international student exchanges. He studied at Phillips Exeter Academy
and Harvard University, graduating in 1927. With the assistance of Sumner Welles, a friend of his father, Duggan got a position at the State Department in 1930. With all the right elite credentials and the backing of
Welles, he was on track to rise rapidly.

Once in Washington, Duggan gravitated to a circle of young, pro-Soviet left-wing enthusiasts. In 1934 a KGB informant, "S-17," met with
Duggan at the suggestion of Alice Barrows, a secret member of the
CPUSA who held a mid-level position in the U.S. Office of Education.
Barrows recommended Duggan "as someone who could be useful to us"
because of his strong Communist sympathies (he had voted for the
CPUSAs William Foster for president in 1932) and closeness to Welles,
then an assistant secretary of state. In October 1934 Peter Gutzeit, chief of the KGB legal station, reported: "'The meeting with Duggan took
place. He made a decent impression, an educated, sensible, and seasoned
man. With a positive reference for him and in view of his sentiments, we
may turn directly to the question of recruitment after an appropriate
check in two or three follow-up conversations.' "48

It was, however, a year before the KGB established a firm relationship
with Duggan. The illegal New York station assigned Hede Massing (see
chapter i) as his primary contact. She quickly developed a close relationship with both Larry, who "declared that he is sympathetic toward
the USSR," and his wife, Helen Boyd Duggan. Helen impressed her
KGB contacts. Although a meeting was not documented, KGB officer
Leonid Eitingon appeared to have met with Helen and described her in
the following way:

"Helen Boyd-wife of the ch-f of the Lat. Amer. div. at the State Dep. Lives with
her husband not far from Washington-half an hour's ride by car. Owns a house,
garage, and yard outside the city. The house is tastefully decorated. The rooms
are furnished in the antique Amer. style. The silver collections are interesting and
attest to her good taste and wealth. Helen Boyd, roughly z8 years old, works on
her own for the economic planning commission at the NRA [National Recovery
Administration]. An extraordinarily beautiful woman: typically American, a tall
blond, reserved, well-read, athletic, and independent. Disappointed after lack of
success at the NRA and would like to `do something real.' Her husband does not
have much influence over her. She could be exceedingly useful, if we could succeed in recruiting her. She was very courteous to "Redhead" [Massing] and invited her to stay for a week to discuss `Communism in America."'

Massing herself wrote:

"During this time I met with Helen very frequently and saw Larry twice. On
both occasions we held lengthy discussions about a future war and about the
Brazilian situation, regarding which Larry openly declared that he stands `on
the other side,' implying us.... Larry also spoke rather candidly about the extremely negative role played by the U.S. official Hugh Gibson in the PrestesBarron affair; he was deeply dismayed (and voiced his disapproval in the State
Department) that an Amer-n diplomat was functioning as a provocateur. He
asked my opinion and conveyed to me `more information concerning the participation of the Germans (Berger) in this affair, in case it is of interest to me.'
He spoke at length about Gibson's career as [Herbert] Hoover's right-hand
man and of his recent activities in China."49

The "Prestes-Barron affair" that Massing and Duggan discussed referred to an abortive coup in 1935 against Brazil's Vargas regime led by Luis Prestes with Communist International support. Brazilian authorities arrested Victor Barron, an American Communist sent to Brazil as the
Comintern's radio operator; a man carrying an American passport in the
name of Harry Berger; and Berger's wife, carrying an American passport
as Machla Lencsyski. U.S. ambassador Hugh Gibson intervened, believing three Americans had been arrested. But checks with the U.S. passport
office established that the Berger passport was false. The real Harry
Berger had died as an infant. The CPUSA, which ran a false passport operation for the Soviets, had procured a copy of the dead infant's birth certificate and supplied perjuring witnesses to support the passport application in the name of Harry Berger. The fake Berger was Arthur Ewert, a
German Comintern operative. Ewert's wife's false passport had been
gained using the U.S. naturalization papers of Machla Lencsyski. The
real Lencsyski claimed that her papers had been lost. However, her
brother was one of the perjuring witnesses to the fake Berger passport.
Once the Bergers' American citizenship was shown to be bogus, Gibson
dropped interest in them. But Gibson continued to negotiate with Brazilian authorities about Barron, who was an American. Duggan, then chief
of the State Department's Latin American Division, attempted to get
Gibson to drop official interest in Barron. But Gibson urged Brazilian
police to deport Barron to the United States in exchange for Barron's cooperation. This option ended in March 1935, when Barron died, having
jumped (the Brazilian police version) or been pushed from a high prison
window. The discussion shows that Duggan's attempt to short-circuit Ambassador Gibson was a spontaneous action of his own, not one ordered or
requested by the Soviets. Sometimes the actions of concealed Communists such as Duggan within the U.S. government on policy matters are
described as those of an "agent of influence" of Soviet intelligence, and
there were such incidents. More often, however, as with Duggan and the
Prestes-Barron matter, their actions were independent attempts to nudge
American policy in a direction that they thought would assist the Communist cause.50