{"id":14674,"date":"2023-02-08T20:49:23","date_gmt":"2023-02-09T01:49:23","guid":{"rendered":"https:\/\/ramonaleone.com\/magazine\/?p=14674"},"modified":"2026-04-20T05:27:25","modified_gmt":"2026-04-20T10:27:25","slug":"war-dogs","status":"publish","type":"post","link":"https:\/\/mindseyemag.com\/magazine\/war-dogs\/","title":{"rendered":"War Dogs"},"content":{"rendered":"

The e-mail confirmed it: everything was finally back on schedule after weeks of maddening, inexplicable delay. A 747 cargo plane had just lifted off from an airport in Hungary and was banking over the Black Sea toward Kyrgyzstan, some 3,000 miles to the east. After stopping to refuel there, the flight would carry on to Kabul, the capital of Afghanistan<\/a>. Aboard the plane were 80 pallets loaded with nearly 5 million rounds of ammunition for AK-47s, the Soviet-era assault rifle favored by the Afghan National Army.<\/p>\n

Reading the e-mail back in Miami Beach, David Packouz breathed a sigh of relief. The shipment was part of a $300 million contract that Packouz and his partner, Efraim Diveroli, had won from the Pentagon to arm America\u2019s allies in Afghanistan. It was May 2007, and the war was going badly. After six years of fighting, Al Qaeda remained a menace, the Taliban were resurgent, and NATO casualties were rising sharply. For the Bush administration, the ammunition was part of a desperate, last-ditch push to turn the war around before the U.S. presidential election the following year. To Packouz and Diveroli, the shipment was part of a major arms deal that promised to make them seriously rich.<\/p>\n

Reassured by the e-mail, Packouz got into his brand-new blue Audi A4 and headed home for the evening, windows open, the stereo blasting. At 25, he wasn\u2019t exactly used to the pressures of being an international arms dealer. Only months earlier, he had been making his living as a massage therapist; his studies at the Educating Hands School of Massage had not included classes in military contracting or geopolitical brinkmanship. But Packouz hadn\u2019t been able to resist the temptation when Diveroli, his 21-year-old friend from high school, had offered to cut him in on his burgeoning arms business. Working with nothing but an Internet connection, a couple of cellphones and a steady supply of weed, the two friends \u2014 one with a few college credits, the other a high school dropout \u2014 had beaten out Fortune 500 giants like General Dynamics to score the huge arms contract. With a single deal, two stoners from Miami Beach had turned themselves into the least likely merchants of death in history.<\/p>\n

Arriving home at the Flamingo, his sleek condo with views of the bay, Packouz packed the cone of his Volcano, a smokeless electronic bong. As the balloon inflated with vapors from the high-grade weed, he took a deep toke and felt the pressures of the day drift away into a crisp, clean high.<\/p>\n

Dinner was at Sushi Samba, a hipster Asian-Latino fusion joint. Packouz was in excellent spirits. He couldn\u2019t believe that he and Diveroli were actually pulling it off: Planes from all over Eastern Europe were now flying into Kabul, laden with millions of dollars worth of grenades and mortars and surface-to-air missiles. But as Packouz\u2019s miso-marinated Chilean sea bass arrived, his cellphone rang. It was the freight forwarder he had employed to make sure the ammunition made it from Hungary to Kabul. The man sounded panicked.<\/p>\n

\u201cWe\u2019ve got a problem,\u201d he told Packouz, shouting to be heard over the restaurant\u2019s thumping music. \u201cThe plane has been seized on the runway in Kyrgyzstan.\u201d<\/p>\n

The arms shipment, it appeared, was being used as a bargaining chip in a high-stakes standoff between George W. Bush and Vladimir Putin. The Russian president didn\u2019t like NATO expanding into Kyrgyzstan, and the Kyrgyzs wanted the U.S. government to pay more rent to use their airport as a crucial supply line for the war in Afghanistan. Putin\u2019s allies in the Kyrgyz KGB, it seemed, were holding the plane hostage \u2014 and Packouz was going to be charged a $300,000 fine for every day it sat on the runway. Word of the seizure quickly reached Washington, and Defense Secretary Robert Gates himself was soon on his way to Kyrgyzstan to defuse the mounting tensions.<\/p>\n

Packouz was baffled, stoned and way out of his league. \u201cIt was surreal,\u201d he recalls. \u201cHere I was dealing with matters of international security, and I was half-baked. I didn\u2019t know anything about the situation in that part of the world. But I was a central player in the Afghan war \u2014 and if our delivery didn\u2019t make it to Kabul, the entire strategy of building up the Afghanistan army was going to fail. It was totally killing my buzz. There were all these shadowy forces, and I didn\u2019t know what their motives were. But I had to get my shit together and put my best arms-dealer face on.\u201d<\/p>\n

Sitting in the restaurant, Packouz tried to clear his head, cupping a hand over his cellphone to shut out the noise. \u201cTell the Kyrgyz KGB that ammo needs to get to Afghanistan!\u201d he shouted into the phone. \u201cThis contract is part of a vital mission in the global war on terrorism. Tell them that if they fuck with us, they are fucking with the government of the United States of America!\u201d<\/p>\n

Packouz and Diveroli had picked the perfect moment to get into the arms business. To fight simultaneous wars in both Afghanistan and Iraq<\/a>, the Bush administration had decided to outsource virtually every facet of America\u2019s military operations, from building and staffing Army bases to hiring mercenaries to provide security for diplomats abroad. After Bush took office, private military contracts soared from $145 billion in 2001 to $390 billion in 2008. Federal contracting rules were routinely ignored or skirted, and military-industrial giants like Raytheon and Lockheed Martin cashed in as war profiteering went from war crime to business model. Why shouldn\u2019t a couple of inexperienced newcomers like Packouz and Diveroli get in on the action? After all, the two friends were after the same thing as everyone else in the arms business \u2014 lots and lots and lots of money.<\/p>\n

\u201cI was going to make millions,\u201d Packouz says. \u201cI didn\u2019t plan on being an arms dealer forever \u2014 I was going to use the money to start a music career. I had never even owned a gun. But it was thrilling and fascinating to be in a business that decided the fate of nations. Nobody else our age was dealing weapons on an international level.\u201d<\/p>\n

Packouz and Diveroli met at Beth Israel Congregation, the largest Orthodox synagogue in Miami Beach. Packouz was older by four years, a skinny kid who wore a yarmulke and left his white dress shirts untucked. Diveroli was the class clown, an overweight kid with a big mouth and no sense of fear. After school, the pair would hang out at the beach with their friends, smoking weed, playing guitar, sneaking in to swim in the pools at five-star hotels. When Packouz graduated, his parents were so concerned about his heavy pot use that they sent him to a school in Israel that specialized in handling kids with drug problems. It turned out to be a great place to get high. \u201cI took acid by the Dead Sea,\u201d Packouz says. \u201cI had a transcendental experience.\u201d<\/p>\n

Returning home, Packouz drifted through two semesters at the University of Florida. Short of cash, he studied massage because it seemed like a better way to make money than flipping burgers. Nights, he sat around with his high school buddies getting high and dreaming of becoming a pop star. He wrote angsty rock ballads with titles like \u201cEternal Moment\u201d \u2014 but it was hard to get a break in the music industry. With a shaved head and intense blue eyes, Packouz was plenty smart and plenty ambitious, in his slacker fashion, but he had no idea what to do with his life.<\/p>\n

Efraim Diveroli, by contrast, knew exactly what he wanted to be: an arms dealer. It was the family business. His father brokered Kevlar jackets and other weapons-related paraphernalia to local police forces, and his uncle B.K. sold Glocks, Colts and Sig Sauers to law enforcement. Kicked out of school in the ninth grade, Diveroli was sent to Los Angeles to work for his uncle. As an apprentice arms dealer, he proved to be a quick study. By the time he was 16, he was traveling the country selling weapons. He loved guns<\/a> with a passion \u2014 selling them, shooting them, talking about them \u2014 and he loved the arms industry\u2019s intrigue and ruthless amorality. At 18, after a dispute with his uncle over money, Diveroli returned to Miami to set up his own operation, taking over a shell company his father had incorporated called AEY Inc.<\/p>\n

His business plan was simple but brilliant. Most companies grow by attracting more customers. Diveroli realized he could succeed by selling to one customer: the U.S. military. No government agency buys and sells more stuff than the Defense Department \u2014 everything from F-16s to paper clips and front-end loaders. By law, every Pentagon purchase order is required to be open to public bidding. And under the Bush administration, small businesses like AEY were guaranteed a share of the arms deals. Diveroli didn\u2019t have to actually make any of the products to bid on the contracts. He could just broker the deals, finding the cheapest prices and underbidding the competition. All he had to do was win even a minuscule fraction of the billions the Pentagon spends on arms every year and he would be a millionaire. But Diveroli wanted more than that: His ambition was to be the biggest arms dealer in the world \u2014 a young Adnan Khashoggi, a teenage Victor Bout.<\/p>\n

To get into the game, Diveroli knew he would have to deal with some of the world\u2019s shadiest operators \u2014 the war criminals, soldiers of fortune, crooked diplomats and small-time thugs who keep militaries and mercenaries loaded with arms. The vast aftermarket in arms had grown exponentially after the end of the Cold War. For decades, weapons had been stockpiled in warehouses throughout the Balkans and Eastern Europe for the threat of war against the West, but now arms dealers were selling them off to the highest bidder. The Pentagon needed access to this new aftermarket to arm the militias it was creating in Iraq and Afghanistan. The trouble was, it couldn\u2019t go into such a murky underworld on its own. It needed proxies to do its dirty work \u2014 companies like AEY. The result was a new era of lawlessness. According to a report by Amnesty International, \u201cTens of millions of rounds of ammunition from the Balkans were reportedly shipped \u2014 clandestinely and without public oversight \u2014 to Iraq by a chain of private brokers and transport contractors under the auspices of the U.S. Department of Defense.\u201d<\/p>\n

This was the \u201cgray market\u201d that Diveroli wanted to penetrate. Still a teenager, he rented a room in a house owned by a Hispanic family in Miami and went to work on his laptop. The government website where contracts are posted is fbo.gov<\/span>, known as \u201cFedBizOpps.\u201d Diveroli soon became adept at the arcane lingo of federal contracts. His competition was mostly big corporations like Northrop Grumman, Lockheed and BAE Systems. Those companies had entire departments dedicated to selling to the Pentagon. But Diveroli had his own advantages: low overhead, an appetite for risk and all-devouring ambition.<\/p>\n

In the beginning, Diveroli specialized in bidding on smaller contracts for items like helmets and ammunition for U.S. Special Forces. The deals were tiny, relatively speaking, but they gave AEY a history of \u201cpast performance\u201d \u2014 the kind of track record the Pentagon requires of companies that want to bid on large defense contracts. Diveroli got financing from a Mormon named Ralph Merrill, a machine-gun manufacturer from Utah who had worked for his father. Before long, Diveroli was winning Pentagon contracts.<\/p>\n

Like all the kids in their pot-smoking circle, Packouz was aware that Diveroli had become an arms dealer. Diveroli loved to brag about how rich he was, and rumors circulated among the stoners about the vast sums he was making, at least compared with their crappy part-time jobs. One evening, Diveroli picked Packouz up in his Mercedes, and the two headed to a party at a local rabbi\u2019s house, lured by the promise of free booze and pretty girls. Diveroli was excited about a deal he had just completed, a $15 million contract to sell old Russian-manufactured rifles to the Pentagon to supply the Iraqi army. He regaled Packouz with the tale of how he had won the contract, how much money he was making and how much more there was to be made.<\/p>\n

\u201cDude, I\u2019ve got so much work I need a partner,\u201d Diveroli said. \u201cIt\u2019s a great business, but I need a guy to come on board and make money with me.\u201d<\/p>\n

Packouz was intrigued. He was doing some online business himself, buying sheets from textile companies in Pakistan and reselling them to distributors that supplied nursing homes in Miami. The sums he made were tiny \u2014 a thousand or two at a time \u2014 but the experience made him hungry for more.<\/p>\n

\u201cHow much money are you making, dude?\u201d Packouz asked.<\/p>\n

\u201cSerious money,\u201d Diveroli said.<\/p>\n

\u201cHow much?\u201d<\/p>\n

\u201cThis is confidential information,\u201d Diveroli said.<\/p>\n

\u201cDude, if you had to leave the country tomorrow, how much would you be able to take?\u201d<\/p>\n

\u201cIn cash?\u201d<\/p>\n

\u201cCold, hard cash.\u201d<\/p>\n

Diveroli pulled the car over and turned to look at Packouz. \u201cDude, I\u2019m going to tell you,\u201d he said. \u201cBut only to inspire you. Not because I\u2019m bragging.\u201d Diveroli paused, as if he were about to disclose his most precious secret. \u201cI have $1.8 million in cash.\u201d<\/p>\n

Packouz stared in disbelief. He had expected Diveroli to say something like $100,000, maybe a little more. But nearly $2 million?<\/p>\n

\u201cDude,\u201d was all Packouz said.<\/p>\n

Packouz started working with Diveroli in November 2005. His title was account executive. He would be paid entirely in commission. The pair operated out of a one-bedroom apartment Diveroli had by then rented in Miami Beach, sitting opposite each other at a desk in the living room, surrounded by stacks of federal contracts and a mountain of pot. They quickly fell into a daily routine: wake up, get baked, start wheeling and dealing.<\/p>\n

Packouz was about to get a rare education. He watched as Diveroli won a State Department contract to supply high-grade FN Herstal machine guns to the Colombian army. It was a lucrative deal, but Diveroli wasn\u2019t satisfied \u2014 he always wanted more. So he persuaded the State Department to allow him to substitute Korean-made knockoffs instead of the high-end Herstals \u2014 a swap that instantly doubled his earnings. Diveroli did the same with a large helmet order for the Iraqi army, pushing the Pentagon to accept poorer-quality Chinese-made helmets once he had won the contract. After all, it wasn\u2019t like the military was buying weapons and helmets for American soldiers. The hapless end-users were foreigners, and who was going to go the extra mile for them?<\/p>\n

The Pentagon\u2019s buyers were soldiers with little or no business experience, and Diveroli knew how to win them over with a mixture of charm, patriotism and a keen sense of how to play to the military culture; he could yes sir<\/em> and no sir<\/em> with the best of them. To get the inside dirt on a deal, he would call the official in charge of the contract and pretend to be a colonel or even a general. \u201cHe would be toasted, but you would never know it,\u201d says Packouz. \u201cWhen he was trying to get a deal, he was totally convincing. But if he was about to lose a deal, his voice would start shaking. He would say that he was running a very small business, even though he had millions in the bank. He said that if the deal fell through he was going to be ruined. He was going to lose his house. His wife and kids were going to go hungry. He would literally cry. I didn\u2019t know if it was psychosis or acting, but he absolutely believed what he was saying.\u201d<\/p>\n

Above all, Diveroli cared about the bottom line. \u201cEfraim was a Republican because they started more wars,\u201d Packouz says. \u201cWhen the United States invaded Iraq, he was thrilled. He said to me, \u2018Do I think George Bush did the right thing for the country by invading Iraq? No. But am I happy about it? Absofuckinglutely.\u2019 He hoped we would invade more countries because it was good for business.\u201d<\/p>\n

That spring, when mass protests broke out in Nepal, Diveroli frantically tried to put together a cache of arms that could be sold to the Nepalese king to put down the rebellion \u2014 heavy weapons, attack helicopters, ammo. \u201cEfraim called it the Save the King Project, but he didn\u2019t give a shit about the king,\u201d Packouz says. \u201cMoney was all he talked about, literally \u2014 no sports or politics. He would do anything to make money.\u201d<\/p>\n

To master the art of federal contracts, Packouz studied the solicitations posted on fbo.gov<\/span>. The contracts often ran to 30 or 40 pages, each filled with fine print and legalese. As Diveroli\u2019s apprentice, Packouz saw that his friend never read a book or a magazine, never went to the movies \u2014 all he did was pore over government documents, looking for an angle, a way in. Diveroli called it squeezing into a deal<\/em> \u2014 putting himself between the supplier and the government by shaving a few pennies off each unit and reselling them at a markup that undercut his competitors. Playing the part of an arms dealer, he loved to deliver dramatic one-liners, speaking as if he were the star of a Hollywood blockbuster. \u201cI don\u2019t care if I have the smallest dick in the room,\u201d he would say, \u201cas long as I have the fattest wallet.\u201d Or: \u201cIf you see a crack in the door, you\u2019ve got to kick the fucker open.\u201d Or: \u201cOnce a gun runner, always a gun runner.\u201d<\/p>\n

\u201cEfraim\u2019s self-image was as the modern merchant of death,\u201d says Packouz. \u201cHe was still just a kid, but he didn\u2019t see himself that way. He would go toe-to-toe with high-ranking military officers, Eastern European mobsters, executives of Fortune 500 companies. He didn\u2019t give a fuck. He would take them on and win, and then give them the finger. I was following in his footsteps. He told me I was going to be a millionaire within three years \u2014 he guaranteed it.\u201d<\/p>\n

At first, Packouz struggled to land his own deals. Bidding on contracts on fbo.gov<\/span> was an art; closing a deal was a science. At one point, he spent weeks obsessing over an $8 million contract to supply SUVs to the State Department in Pakistan, only to lose the bid. But he finally won a contract to supply 50,000 gallons of propane to an Air Force base in Wyoming, netting a profit of $8,000. \u201cThere were a lot of suppliers who didn\u2019t know how to work FedBizOpps as well as we did,\u201d he says. \u201cYou had to read the solicitations religiously.\u201d<\/p>\n

Once a week or so, the pair would hit the clubs of South Beach to let off steam. Karaoke in a basement bar called the Studio was a favorite. Packouz took his performances seriously, choosing soulful music like U2\u2019s \u201cWith or Without You\u201d or Pearl Jam\u2019s \u201cBlack,\u201d while Diveroli threw himself into power ballads and country anthems, tearing off his shirt and pumping his fists to the music. Between songs, the two friends would take hits of the cocaine that Diveroli kept in a small plastic bullet with a tiny valve on the top for easy access. Packouz was shy around girls, but Diveroli cut right to the chase, often hitting on women right in front of their boyfriends.<\/p>\n

All the partying wasn\u2019t exactly conducive to running a small business, especially one as complicated and perilous as arms dealing. As AEY grew, it defaulted on at least seven contracts, in one case failing to deliver a shipment of 10,000 Beretta pistols for the Iraqi army. Diveroli\u2019s aunt \u2014 a strong-willed and outspoken woman who fought constantly with her nephew \u2014 joined the two friends to provide administrative support. She didn\u2019t approve of their drug use, and she talked openly about them on the phone, as if they weren\u2019t present.<\/p>\n

\u201cMark my words,\u201d she told Diveroli\u2019s mother repeatedly, \u201cyour son is going to crash and burn.\u201d<\/p>\n

\u201cShut up!\u201d Diveroli would shout, the coldblooded arms dealer giving way to the pissed-off teenager. \u201cYou don\u2019t know what you\u2019re talking about! I made millions last year!\u201d<\/p>\n

\u201cCrash and burn,\u201d the aunt would say. \u201cMark my words \u2014 crash and burn.\u201d<\/p>\n

In June, seven months after Packouz started at AEY, he and Diveroli traveled to Paris for Eurosatory, one of the world\u2019s largest arms trade shows. Miles of booths inside the Paris Nord Villepinte exhibition center were filled with arms manufacturers hawking the latest instruments of death \u2014 tanks, robots, unmanned drones \u2014 and serving up champagne and caviar to some of the most powerful political and military officials on the planet. Packouz and Diveroli were by far the youngest in attendance, but they tried to look the part, wearing dress pants, crisp shirts and sales-rep ties. \u201cWait until I am really in the big time,\u201d Diveroli boasted. \u201cI will own<\/em> this fucking show.\u201d<\/p>\n

At a booth displaying a new robotic reconnaissance device, Diveroli and Packouz met with Heinrich Thomet, a Swiss arms dealer who served as a crucial go-between for AEY. Tall and suave, with movie-star looks and an impeccable sense of fashion, Thomet had blond hair, light-blue eyes and an eerily calm demeanor. He spoke fluent English with a slight German accent, adding \u201cOK\u201d to the beginning and end of every sentence (\u201cOK, so the price on the AKs is firm, OK?\u201d). He seemed to have connections everywhere \u2014 Russia, Bulgaria, Hungary. Serving as a broker, Thomet had created an array of shell companies and offshore accounts to shield arms transactions from official scrutiny. He had used his contacts in Albania to get Diveroli a good price on Chinese-made ammunition for U.S. Special Forces training in Germany \u2014 a deal that was technically illegal, given the U.S. embargo against Chinese arms imposed after the Tiananmen Square massacre in 1989.<\/p>\n

\u201cThomet could get body armor, machine guns, anti-aircraft rockets \u2014 anything,\u201d Packouz recalls. \u201cHe was one of the best middlemen in the business, a real-life Lord of War.\u201d<\/p>\n

Like Diveroli, Thomet had been in the business since he was a teenager, and he recognized that the two young upstarts could be useful to him. Thomet was singled out by Amnesty International for smuggling arms out of Zimbabwe in violation of U.S. sanctions. He was also under investigation by U.S. law enforcement for shipping weapons from Serbia to Iraq, and he was placed on a \u201cwatch list\u201d by the State Department. Given the obstacles to selling directly in the United States, Thomet wanted to use AEY as a front, providing him an easy conduit to the lucrative contracts being handed out by the Pentagon.<\/p>\n

With Thomet on their side, Diveroli and Packouz soon got the break they were looking for. On July 28th, 2006, the Army Sustainment Command in Rock Island, Illinois, posted a 44-page document titled \u201cA Solicitation for Nonstandard Ammunition.\u201d It looked like any other government form on fbo.gov<\/span>, with blank spaces for names and telephone numbers and hundreds of squares to be filled in. But the document actually represented a semi-covert operation by the Bush administration to prop up the Afghan National Army. Rather than face a public debate over the war in Afghanistan, which was going very badly indeed, the Pentagon issued what is known as a \u201cpseudo case\u201d \u2014 a solicitation that permitted it to allocate defense funds without the approval of Congress. The pseudo case wasn\u2019t secret, precisely, but the only place it was publicized was on fbo.gov<\/span>. No press release was issued, and there was no public debate. The money was only available for two years, so it had to be spent quickly. And unlike most federal contracts, there was no dollar limit posted; companies vying for the deal could bid whatever they wanted.<\/p>\n

Based on the numbers, it looked like it was going to be a lot<\/em> of money. The Army wanted to buy a dizzying array of weapons \u2014 ammunition for AK-47 assault rifles and SVD Dragunov sniper rifles, GP 30 grenades, 82 mm Russian mortars, S-KO aviation rockets. The quantities were enormous \u2014 enough ammo to literally create an army \u2014 and the entire contract would go to a single bidder. \u201cOne firm fixed-price award, on an all-or-none basis, will be made as a result of this solicitation,\u201d the tender offer said.<\/p>\n

The solicitation was only up for a matter of minutes before Diveroli spotted it, reading the terms with increasing excitement. He immediately called Packouz, who was driving along the interstate.<\/p>\n

\u201cI\u2019ve found the perfect contract for us,\u201d Diveroli said. \u201cIt\u2019s enormous \u2014 far, far bigger than anything we\u2019ve done before. But it\u2019s right up our alley.\u201d<\/p>\n

The pair met at Diveroli\u2019s apartment to smoke a joint and discuss strategy. Supplying the contract would mean buying up hundreds of millions of dollars worth of ammunition for the kind of Eastern Bloc weapons that the Afghans used. Because such weapons were traded in the gray market \u2014 a world populated by illegal arms dealers, gun runners and warlords \u2014 the Pentagon couldn\u2019t go out and buy the ammo itself without causing a public relations disaster. Whoever won the contract to arm the Afghans would essentially be serving as an official front operation, laundering shady arms for the Pentagon.<\/p>\n

Normally, a small-time outfit like AEY wouldn\u2019t have a shot at such a major defense contract. But Diveroli and Packouz had three advantages. First, the Bush administration had started its small-business initiative at the Pentagon, mandating that a certain percentage of defense contracts go to firms like AEY. Second, the fledgling arms dealers specialized in precisely the sort of Cold War munitions the Pentagon was looking for: They had the \u201cpast performance\u201d required by the contract, and they could fulfill the order using the same supply lines Diveroli had developed through Thomet. Third, the only requirement in the contract was that the ammunition be \u201cserviceable without qualification.\u201d As Diveroli and Packouz interpreted it, that meant the Pentagon didn\u2019t care if they supplied \u201cshit ammo,\u201d as long as it \u201cwent bang and went out of the barrel.\u201d<\/p>\n

For the two friends, it was a chance to enter a world usually reserved for multinational defense contractors with armies of well-connected lobbyists. \u201cI knew it was a long shot,\u201d recalls Packouz. \u201cBut it seemed like we might be able to actually compete with the big boys. I thought we actually had a chance. If we worked hard. If we got lucky.\u201d<\/p>\n

Bidding on defense contracts is a speculative business \u2014 laborious, time-consuming, with no prize for second place. As they passed a joint back and forth, Diveroli decided it was time for Packouz to step up and take on a larger role.<\/p>\n

\u201cI don\u2019t really have time to source all these things,\u201d he told Packouz. \u201cBut I\u2019ve got good contacts for you to start with. I want you to get on the Internet and get a price from everyone and his mother. Any new sources you bring to the table, I\u2019ll give you 25 percent of the profit.\u201d<\/p>\n

This was Packouz\u2019s big chance. That night, he went online and searched defense databases for every arms manufacturer in Eastern Europe he could find \u2014 Hungary, Bulgaria, Ukraine, any place that might deal in Soviet-era weapons. He e-mailed or faxed or called them all. The phone connection was often bad, and Packouz had to shout to be heard. If the person who answered didn\u2019t speak English, he would say \u201cEnglish! English! English!\u201d and then spend minutes on hold while they tracked down the one guy in the outfit who spoke a few words. \u201cDa, da,<\/em>\u201d they would tell Packouz. \u201cYou buy, you buy.\u201d When he managed to make himself understood, he told the manufacturers that the ammunition had to \u201cwork.\u201d It also had to \u201clook good,\u201d and not be in rusty boxes or exposed to the elements.<\/p>\n

For six weeks, Packouz worked through the night, sleeping on Diveroli\u2019s couch and surviving on weed and adrenaline. He located stockpiles of ammunition in Eastern Europe at good prices. At the same time, Heinrich Thomet sourced a massive amount of ammunition through his Albanian connections. As the date for the final bid neared, Diveroli agonized. He paced day and night, a cloud of smoke over his head as he smoked joint after joint, muttering, worrying, cursing.<\/p>\n

\u201cEfraim was conflicted about whether to put a nine percent or 10 percent profit margin on top of our prices,\u201d Packouz recalls. \u201cThe difference was more than $3 million in cash, which was huge \u2014 but with either margin, profits were going to be more than $30 million. He figured everyone else was going to take 10 percent, but what if another bidder had the same idea as him and put in nine percent? So maybe he should go with eight percent. But then we might be leaving money on the table \u2014 God forbid!\u201d<\/p>\n

Finally, at the last possible moment, Diveroli went for nine percent. He scribbled a number on the form: $298,000,000. It was an educated guess, one he prayed wouldn\u2019t be undercut by the big defense contractors. There were just 10 minutes left before the application deadline. The two friends jumped in Diveroli\u2019s car and sped through the quiet residential streets of Miami Beach, making it to the post office with only seconds to go.<\/p>\n

The Pentagon can be a slow-moving bureaucracy, a place where paperwork goes to die. But because the Afghanistan solicitation was a \u201cpseudo case,\u201d it had been designed to move swiftly. On the evening of January 26th, 2007, Packouz was parking his beat-up old Mazda Protege when Diveroli called.<\/p>\n

\u201cI have good news and bad news,\u201d Diveroli said.<\/p>\n

\u201cWhat\u2019s the bad news?\u201d Packouz asked.<\/p>\n

\u201cOur first order is only for $600,000.\u201d<\/p>\n

\u201cSo we won the contract?\u201d Packouz asked in disbelief.<\/p>\n

\u201cFuck yeah!\u201d said Diveroli.<\/p>\n

The two friends, still in their early twenties, were now responsible for one of the central elements of the Bush administration\u2019s foreign policy. Over multiple bottles of Cristal at an upscale Italian restaurant, the pair toasted their amazing good fortune. Throughout the meal they passed Diveroli\u2019s cocaine bullet back and forth under the table, using napkins to pretend to blow their noses.<\/p>\n

\u201cYou and me, buddy,\u201d Diveroli said. \u201cYou and me are going to take over this industry. I see AEY as a $10 billion company in a few years. These fat cats in their boardrooms worrying about the stock prices of their companies have no idea what is about to hit them.\u201d<\/p>\n

\u201cGeneral Dynamics isn\u2019t going to be too happy right now,\u201d Packouz agreed.<\/p>\n

Despite the celebratory air, they both knew that their work had just begun. They had already managed to clear three different government audits, hiring an accountant to establish the kind of basic bookkeeping systems that any cafe or corner store would have. Now, a few weeks after winning the contract, AEY was suddenly summoned to a meeting with the purchasing officers at Rock Island.<\/p>\n

Diveroli asked Ralph Merrill, the Mormon gun manufacturer from Utah, to come along. An experienced businessman in his sixties, Merrill had provided the financial backing needed to land the contract, pledging his interest in a piece of property in Utah. Diveroli had also shown auditors his personal bank balance, by then $5.4 million.<\/p>\n

The meeting with Army officials proved to be a formality. Diveroli had the contracting jargon down, and he sailed through the technical aspects of the transaction with confidence: supply sources, end-user certificates, AEY\u2019s experience. No one ever asked his age. \u201cWe were supremely confident,\u201d says Packouz. \u201cI just think it never occurred to the Army people that they were dealing with a couple of dudes in their early twenties.\u201d<\/p>\n

In reality, the Pentagon had good reason to disqualify AEY from even vying for the contract. The company and Diveroli had both been placed on the State Department \u201cwatch list\u201d for importing illegal firearms. But the Pentagon failed to check the list. It also ignored the fact that AEY had defaulted on prior contracts. Initially rated as \u201cunsatisfactory\u201d by the contracting office, AEY was upgraded to \u201cgood\u201d and then \u201cexcellent.\u201d<\/p>\n

There was only one explanation for the meteoric rise: Diveroli had radically underbid the competition. In private conversations, the Army\u2019s contracting officers let AEY know that its bid was at least $50 million less than its nearest rival. Diveroli\u2019s anxiety that his bid of nearly $300 million would be too high had failed to consider the corpulent markups employed by corporate America when it deals with the Pentagon. For once, at least, taxpayers were getting a good deal on a defense contract.<\/p>\n

The first Task Order that AEY received on the deal was for $600,000 worth of grenades and ammunition \u2014 a test, Diveroli surmised, to make sure they could deliver as promised. Make a mistake, no matter the reason, and the Pentagon might yank the entire $298 million contract.<\/p>\n

After their celebratory dinner the night they received the contract, the two friends headed for Diveroli\u2019s brand-new Audi. As Diveroli arranged a line of coke on the dashboard, he warned Packouz not to make any mistakes with the grenades.<\/p>\n

\u201cYou\u2019ve got the bitch\u2019s panties off,\u201d Diveroli said, adopting his best movie-star swagger. \u201cBut you haven\u2019t fucked her yet.\u201d<\/p>\n

Diveroli and Packouz needn\u2019t have worried. They had barely gotten started on the order for grenades when the second Task Order arrived. This time, it was for more than $49 million in ammunition \u2014 including 100 million rounds of AK ammo and more than a million grenades for rocket launchers. There was no question now. The Pentagon was ecstatic to award the contract to a tiny company like AEY, which helped fulfill the quota set by Bush\u2019s small-business initiative.<\/p>\n

Packouz calculated that even with the tight margins, he stood to make as much as $6 million on the contract. But he wasn\u2019t so sure that AEY was going to be able to deliver. Diveroli had already hit the road, traveling to the Ukraine, Montenegro and the Czech Republic in search of suppliers. So Packouz would have to tend to most of the Afghanistan contract by himself \u2014 a job that any conventional defense contractor would have assigned to dozens of full-time, experienced employees.<\/p>\n

In February 2007, saddled with a gargantuan task, Packouz went by himself to the annual International Defense Exhibition in Abu Dhabi to look for suppliers. \u201cIt was bizarre,\u201d he says. \u201cI was just a kid, but I was probably the single biggest private arms dealer on the planet. It was like Efraim had put me into the movie he was starring in.\u201d To look the part of an international arms dealer, Packouz carried a silver aluminum briefcase and wore wraparound shades. He also had business cards printed up with an impressive new title, considering he was part of a two-man operation: vice president.<\/p>\n

In Abu Dhabi, Packouz hoped to find a single supplier big enough to meet most of AEY\u2019s demands. The obvious candidate was Rosoboron Export, the official dealer for all Russian arms. The company had inherited the Soviet Union\u2019s global arms-exporting empire; now, as part of Vladimir Putin\u2019s tightly held network of oligarchic corporations, Rosoboron sold more than 90 percent of Russia\u2019s weapons. The firm was so big that Packouz could have just given them the list of ammunition he needed and they could have supplied the entire contract, a one-stop weapons shop.<\/p>\n

But there was a catch, the kind of perversity common in the world of arms dealing: Rosoboron had been banned by the State Department for selling nuclear equipment to Iran. The U.S. government wanted Russian ammo, just not from the Russians. AEY couldn\u2019t do business with the firm \u2014 at least, not legally. But for gun runners, this kind of legal hurdle was just that \u2014 a hurdle to be jumped.<\/p>\n

Packouz went to the main Russian pavilion every day to try to get an appointment with the deputy director of Rosoboron. The giant exhibit was like a souk for arms dealers, with scores of Russian generals in full-dress uniform meeting with businessmen and sheiks. Finally, on the last day, Packouz was given an appointment. The deputy director looked like he was ex-KGB \u2014 big and fat, in his sixties, with thick square glasses. As Packouz spoke, the man kept surveying the pavilion out of the corner of his eye, as if he were checking to see if he was being watched. Packouz showed him the list of munitions he needed, along with the quantities. The director raised his eyebrows, impressed by the scale of the operation.<\/p>\n

\u201cWe have very good interest in this business,\u201d he said in a thick Russian accent. \u201cYou know we are only company who can provide everything.\u201d<\/p>\n

\u201cI\u2019m aware of that,\u201d Packouz said. \u201cThat\u2019s why we want to do business with you.\u201d<\/p>\n

\u201cBut as you know, there is problem. State Department has blacklist us. I don\u2019t understand your government. One month is OK to do business, next month is not OK. This is very not fair. Very political. They just want leverage in dealing with Kremlin.\u201d<\/p>\n

\u201cI know we can\u2019t do business with you directly,\u201d Packouz said. Then he hinted that there was a way to get around the blacklist. \u201cIf you can help us do business with another Russian company, then we can buy from them.\u201d<\/p>\n

\u201cLet me talk to my people,\u201d the Russian said, taking one of Packouz\u2019s newly printed business cards.<\/p>\n

It was the last Packouz ever heard from the Russian. Several weeks later, as he was arranging supply routes for the deal, Packouz was informed that AEY would not be given overflight permission for Turkmenistan, a former Soviet satellite that had to be crossed to reach Afghanistan. \u201cIt was clear that Putin was fucking with us directly,\u201d Packouz says. \u201cIf the Russians made life difficult for us, they would get taken off the American blacklist, so they could get our business for themselves.\u201d<\/p>\n

Packouz managed to obtain the overflight permission through a Ukrainian airline \u2014 but the episode was an ominous reminder of how little he understood about the business he was in. \u201cThere was no way to really know why the heads of state were doing things, especially when it came to something like invading Iraq,\u201d he says. \u201cIt was such a deep game, we didn\u2019t know what was really happening.\u201d<\/p>\n

With the flights to Kabul arranged, Packouz hit the phones looking for more ammunition. The cheaper the better: The less the ammo cost, the more he and Diveroli would pocket for themselves. They didn\u2019t need quality; antique shells, second-rate mortar rounds \u2014 all of it was fine, as long as it worked. \u201cPlease be advised there is no age restriction for this contract!!!\u201d AEY advised one potential supplier in an e-mail. \u201cANY age ammunition is acceptable.\u201d<\/p>\n

Of course, if the Pentagon really cared about the Afghan National Army, it could have supplied them with more expensive, and reliable, state-of-the-art weapons. The Bush administration\u2019s ambivalence about Afghanistan had manifested itself in the terms of the contract: The soldiers of Kabul and Kandahar would not be abandoned in the field, but nor would they be given the tools to succeed.<\/p>\n

Packouz sat on the couch in Diveroli\u2019s apartment, bong and lighter handy, and called U.S. Embassies in the \u201cstans\u201d \u2014 the former Soviet satellites \u2014 and asked to speak to the defense attache. Deepening his voice and adopting a clipped military inflection, Packouz chatted them up, made them laugh, asked about how things were in Kazakhstan, described how sunny it was in Miami. Whenever possible, he threw in military lingo designed to appeal to the officers: He was working on an essential contract in the War on Terror, he explained, and the United States military was counting on AEY to complete the mission. \u201cI said it was part of the vital process of nation building in the central front of the War on Terror,\u201d Packouz recalls. \u201cThen I would tell them the specifics of what I was after \u2014 mortar rounds, the size of ammo, the amount. They were all eager to help.\u201d<\/p>\n

Every day, Packouz spoke with military officials, sending volleys of e-mails to Kabul and Kyrgyzstan and the Army depot in Rock Island. The contracting officers he dealt with told him that there was a secret agenda involved in the deal. The Pentagon, they said, was worried that a Democrat would be elected president in 2008 and cut the funding for the war \u2014 or worse, pull U.S. troops out of Afghanistan entirely.<\/p>\n

\u201cThey said Bush and Rumsfeld were trying to arm Afghanistan with enough ammo to last them the next few decades,\u201d Packouz recalls. \u201cIt made sense to me, but I didn\u2019t really care. My main motivator was making money, just like it was for General Dynamics. Nobody goes into the arms business for altruistic purposes.\u201d<\/p>\n

It didn\u2019t take long for AEY to strike cut-rate deals that vastly improved its profit margin. The nine percent planned for in the original bid was soon pushing toward 25 percent \u2014 enough to provide Packouz and Diveroli with nearly $85 million in profits. But even such a jaw-dropping sum didn\u2019t satisfy Diveroli. He scoured FedBizOpps for even more contracts and landed a private deal to import Lithuanian ammo, determined to turn AEY into a multibillion-dollar company.<\/p>\n

To cope with the increased business, AEY leased space in a larger and more expensive office building in Miami Beach. The company hired an office manager and two young secretaries they found on Craigslist. Diveroli brought in two more friends from the synagogue, including a guy fluent in Russian, to help fulfill the contracts. \u201cThings were rolling along,\u201d Packouz recalls. \u201cWe were delivering on a consistent basis. We had suppliers in Hungary and Bulgaria and other countries. I had finally arranged all the overflight permits. We were cash positive.\u201d<\/p>\n

Packouz had yet to be paid a cent, but he was convinced he was about to be seriously rich. Anticipating the big payday, he ditched his beater Mazda for a brand-new Audi A4. He moved from his tiny efficiency apartment to a nice one-bedroom overlooking the pool at the Flamingo in fashionable South Beach. Diveroli soon followed, taking a two-bedroom in the central tower. It was convenient for both \u2014 their drug dealer, Raoul, lived in the complex.<\/p>\n

\u201cThe Flamingo was a constant party,\u201d Packouz says. \u201cThe marketing slogan for the building was \u2018South Beach revolves around us,\u2019 and it was true. There was drinking, dancing, people making out in the Jacuzzi \u2014 sometimes more than just making out. Outside my balcony there was always at least a few women sunbathing topless. People at parties would ask us what we did for a living. The girls were models or cosmetologists. The guys were stockbrokers and lawyers. We would say we were international arms dealers. \u2018You know the war in Afghanistan?\u2019 we would say. \u2018All the bullets are coming from us.\u2019 It was heaven. It was wild. We felt like we were on top of the world.\u201d<\/p>\n

In the evenings, Packouz and Diveroli would get high and go to the American Range and Gun Shop \u2014 the only range near Miami that would let them fire off the Uzis and MP5s that Diveroli was licensed to own. \u201cWhen we let go with our machine guns, all the other shooters would stop and look at us like, \u2018What the fuck was that?\u2019 Everyone else had pistols going pop pop<\/em>. We loved it. Shooting an automatic machine gun feels powerful.\u201d<\/p>\n

The biggest piece of the Afghan contract, in terms of sheer quantity, was ammunition for AK-47s. Packouz had received excellent quotes from suppliers in Hungary and the Czech Republic. But Diveroli insisted on using the Swiss arms dealer Heinrich Thomet\u2019s high-level contacts in Albania. The move made sense. The Albanians didn\u2019t require a large deposit as a down payment, which made it easier for AEY to place big orders. And Albania\u2019s government could certainly handle the volume: Its paranoid communist leaders had been so convinced they were going to be attacked by foreign powers that they had effectively transformed the nation into a vast military stockpile, with bunkers scattered throughout the countryside. In fact, AK-47 ammunition was so plentiful that Albania\u2019s president had recently flown to Baghdad and offered to donate millions of rounds to Gen. David Petraeus.<\/p>\n

The structure for AEY\u2019s purchase of the Albanian ammo was standard in the world of illegal arms deals, where the whole point is to disguise origins and end-users. It was perfectly legal, but it had the stench of double-dealing. A shell company called Evdin, which Thomet had incorporated in Cyprus, would buy the ammo from Albania\u2019s arms-exporting company. Evdin would then resell the rounds to AEY. That way Thomet got a cut as broker, and AEY and the U.S. government were insulated from any legal or moral quandaries that came with doing business in a country as notoriously corrupt and unpredictable as Albania.<\/p>\n

There was only one snag: When Diveroli bid on the contract, he had miscalculated the cost of shipping, failing to anticipate the rising cost of fuel. The Army had given him permission to repackage the rounds into cardboard boxes, but getting anything done in a country as dysfunctional as Albania wasn\u2019t easy. So Diveroli dispatched another friend from their synagogue, Alex Podrizki, to the capital city of Tirana to oversee the details of fulfilling the deal.<\/p>\n

Despite the hands-on approach, signs of trouble emerged immediately. When Podrizki went to look at a cache of ammunition in one bunker, it was apparent that the Albanians had a haphazard attitude about safety; they used an ax to open crates containing live rounds and lit cigarettes in a room filled with gunpowder. The ammunition itself, though decades old, seemed to be in working order, but the rounds were stored in rusty cans and stacked on rotting wooden pallets \u2014 not the protocol normally used for such dangerous materiel. Worst of all, Podrizki noticed that the steel containers holding the ammunition \u2014 known as \u201csardine cans\u201d \u2014 were covered in Chinese markings. Podrizki called Packouz in Miami.<\/p>\n

\u201cI inspected the stuff and it seems good,\u201d Podrizki told him. \u201cBut dude, you know this is Chinese ammo, right?\u201d<\/p>\n

\u201cWhat are you talking about?\u201d Packouz said.<\/p>\n

\u201cThe ammo is Chinese.\u201d<\/p>\n

\u201cHow do you know it\u2019s Chinese?\u201d<\/p>\n

\u201cThere are Chinese markings all over the crates.\u201d<\/p>\n

Packouz\u2019s heart sank. There was not only an embargo against selling weapons manufactured in China: The Afghan contract specifically stipulated that Chinese ammo was not permitted. Then again, maybe AEY could argue that the ammunition didn\u2019t violate the ban, since it had been imported to Albania decades before the embargo was imposed, back when Albania\u2019s communist government had forged an alliance with Mao. There was precedent for such an argument: Only the year before, the Army had been delighted with Chinese ammo that AEY had shipped from Albania. But this time, when Diveroli wrote the State Department\u2019s legal advisory desk to ask if he could use Chinese rounds made prior to the embargo, he received a curt and unequivocal reply: not without a presidential decree.<\/p>\n

Given the deadline on the contract, there was no time to find another supplier. The Hungarians could fill half the deal, but the ammunition would not be ready for shipment until the fall; the Czechs could fill the entire order, but they wanted $1 million. Any delay would risk losing the entire contract. \u201cThe Army was pushing us for the ammo,\u201d says Packouz. \u201cThey needed it ASAP.\u201d<\/p>\n

So the two friends chose a third option. As arms dealers, subverting the law wasn\u2019t some sort of extreme scenario \u2014 it was a routine part of the business. There was even a term of art for it: circumvention.<\/em> Packouz e-mailed Podrizki in Albania and instructed him to have the rounds repackaged to get rid of any Chinese markings. It was time to circumvent.<\/p>\n

Alone in a strange city, Podrizki improvised. He picked up a phone book and found a cardboard-box manufacturer named Kosta Trebicka. The two men met at a bar near the Sky Tower in the center of town. Trebicka was in his late forties, a wiry and intense man with thick worker\u2019s hands. He told Podrizki that he could supply cardboard boxes strong enough to hold the ammunition, as well as the labor to transfer the rounds to new pallets. A week later, Podrizki called to ask if Trebicka could hire enough men to repack 100 million rounds of ammunition by taking them out of metal sardine cans and placing them in cardboard boxes. Trebicka thought the request exceedingly odd. Why go to all that trouble? Podrizki fibbed, saying it was to lighten the load and save money on air freight. After extended haggling with Diveroli back in Miami, Trebicka agreed to do the job for $280,000 and hired a team of men to begin repackaging the rounds.<\/p>\n

As he worked at the warehouse, however, Trebicka grew even more suspicious. Concerned that something nefarious was happening, he called the U.S. Embassy and met with the economic attache. Over coffee at a cafe called Chocolate, Trebicka confided that the ammunition was covered in Chinese markings. Was that a problem? Not at all, the U.S. official replied. The embassy had been trying to find the money to pay for demolishing the ammunition, so sending the rounds to Afghanistan would actually do them a favor. AEY appeared to be in the clear.<\/p>\n

But greed got the better of Diveroli. In a phone call from Miami, he asked Trebicka to use his contacts in the Albanian government to find out how much Thomet was paying the Albanians for the ammunition. AEY was giving the Swiss arms broker just over four cents per round and reselling them to the Pentagon for 10 cents. But Diveroli suspected that Thomet was ripping him off.<\/p>\n

He turned out to be right. A few days later, Trebicka reported that Thomet was paying the Albanians only two cents per round \u2014 meaning that he was charging AEY double the asking price, just for serving as a broker. Diveroli was enraged. He asked Trebicka to meet with his Albanian connections and find a way to cut Thomet out of the deal entirely.<\/p>\n

Trebicka was happy to help. The Albanians, he thought, would be glad to deal with AEY directly. After all, by doing an end run around Thomet, there would be more money for everyone else. But when Trebicka met with the Albanian defense minister, his intervention had the opposite effect: The Albanians cut him out of the deal, informing AEY that the repackaging job would be completed instead by a friend of the prime minister\u2019s son. What Trebicka had failed to grasp was that Thomet was paying a kickback to the Albanians from the large margin he was making on the deal. Getting rid of Thomet was impossible, because that was how the Albanians were being paid off the books.<\/p>\n

Diveroli flew to Albania and tried to intervene to help Trebicka keep the job, but he didn\u2019t have enough clout to get the decision reversed. Trebicka was stuck with the tab for the workers he had hired to repackage the rounds, along with a warehouse full of useless cardboard boxes he had printed to hold the ammo. Furious at being frozen out, he called Diveroli and secretly recorded the conversation, threatening to tell the CIA what he knew about the deal. \u201cIf the Albanians want to still work with me, I will not open my mouth,\u201d he promised. \u201cI will do whatever you tell me to do.\u201d<\/p>\n

Diveroli suggested that Trebicka try bribing Ylli Pinari, the head of the Albanian arms-exporting agency that was supplying the ammunition. \u201cWhy don\u2019t you kiss Pinari\u2019s ass one more time,\u201d Diveroli said. \u201cCall him up. Beg. Kiss him. Send one of your girls to fuck him. Let\u2019s get him happy. Maybe we can play on his fears. Or give him a little money, something in his pocket. And he\u2019s not going to get much \u2014 $20,000 from you.\u201d<\/p>\n

When Trebicka complained about being muscled out of the deal, Diveroli said there was nothing he could do about it. There were too many thugs involved on the Albanian end of the deal, and it was just too dangerous. \u201cIt went up higher, to the prime minister and his son,\u201d Diveroli said. \u201cThis mafia is too strong for me. I can\u2019t fight this mafia. It got too big. The animals just got too out of control.\u201d<\/p>\n

With things up in the air in Albania, Packouz was starting to feel the pressure. He was stressed out, working around the clock, negotiating multimillion-dollar purchases and arranging for transportation. It felt like AEY was under siege from all directions. So when the cargo plane had finally taken off from Hungary on its way to Kabul loaded with 5 million rounds of ammunition, Packouz had breathed a sigh of relief. Then the plane had been abruptly seized in Kyrgyzstan \u2014 and Packouz had been forced to swing into action once more, working the phones for weeks to get the ammo released. Fortunately, AEY had friends in high places. When Packouz contacted the U.S. Embassy in Kyrgyzstan, the military attache immediately wrote to the Kyrgyz government, explaining that the cargo was \u201curgently needed for the war on terrorism being fought by your neighboring Afghan forces.\u201d Two weeks later, Defense Secretary Robert Gates traveled to Kyrgyzstan on a mission to keep supplies flowing through the airport there. Under pressure from top U.S. officials, the ammo was eventually released.<\/p>\n

\u201cI never did find out what really happened, or why the plane was seized,\u201d says Packouz. \u201cIt was how things were done in international arms dealing. The defense industry and politics were extremely intertwined \u2014 you couldn\u2019t do business in one without dealing with the other. Your fate depended on political machinations behind the scenes. You don\u2019t even know whose side you were on \u2014 who you were helping and who you were hurting.\u201d<\/p>\n

With the plane released and the Albanian supply line secured, Packouz and Diveroli thought they finally had everything under control. Cargo planes filled with ammunition were taking off from airports across Eastern Europe. The military officials receiving the ammo in Kabul had to know it was Chinese: Every round is stamped with the place of manufacture, as any soldier knows. But the shipments were routinely approved, and there were no complaints from the Afghans about the quality of the rounds. The ammo worked, and that was all that mattered. Millions of dollars were being transferred via wire from the Pentagon into AEY\u2019s accounts, and the $300 million contract was moving along smoothly. Diveroli was rich. Packouz was going to be rich. They had it made.<\/p>\n

But it didn\u2019t take long for success to drive a wedge between the two friends. The exhausted Packouz no longer had to work 18 hours a day to track down suppliers. He started coming in late and knocking off early. Diveroli, who owed him commission but had yet to cut a check to his partner, started to argue with him about his hours.<\/p>\n

\u201cEfraim started looking at me differently,\u201d Packouz says. \u201cI could tell he was working things over in his head. There was real money in the bank \u2014 millions and millions. He was about to be forced to pay me a huge chunk of change. He said he didn\u2019t want to \u2018give\u2019 me all that money. That was how he put it. Not like I had earned the money.\u201d<\/p>\n

One day, Diveroli finally made his move. He wanted to renegotiate the deal. Packouz knew he was in a bad bargaining position. The money coming in from the Army went directly to AEY. Packouz had no written contract with Diveroli, only an oral agreement. The handshake deal they had made was worth just that \u2014 a handshake.<\/p>\n

In an effort to protect his interests, Packouz demanded a meeting with lawyers present. Before the session, the two friends had a quick exchange.<\/p>\n

\u201cListen, dude, if you fuck me, I\u2019m going to fuck you,\u201d Packouz warned.<\/p>\n

\u201cWhatever,\u201d said Diveroli.<\/p>\n

\u201cIt\u2019s going to be war,\u201d Packouz said. Then he played his trump card. \u201cYou don\u2019t want the IRS starting to come and look around.\u201d<\/p>\n

Diveroli\u2019s face went white.<\/p>\n

\u201cCalm down,\u201d Diveroli said. \u201cDon\u2019t throw around three-letter words like IRS. We can find a settlement.\u201d<\/p>\n

\u201cI know all of your contacts, and I can send them the actual documents showing what the government is paying,\u201d Packouz said. \u201cYou\u2019ll lose your entire profit margin.\u201d<\/p>\n

\u201cTake it easy,\u201d said Diveroli.<\/p>\n

\u201cWe both know you\u2019re delivering Chinese,\u201d Packouz said.<\/p>\n

A deal was struck, with Packouz agreeing to a fraction of the commission he had been promised. He figured he had something more precious than money: He knew how to work FedBizOpps. To compete with his former partner, he opened up his own one-man shop, Dynacore Industries, claiming on his website that his \u201cstaff\u201d had done business with the State Department, the Pentagon, and the Iraqi and Afghan armies. \u201cSometimes you have to fake it until you make it,\u201d Packouz says. \u201cPeople won\u2019t do business with you unless you have experience, but how can you get experience if they won\u2019t do business with you? Everyone has got to lie sometimes.\u201d Fearing that Diveroli might decide it was cheaper to have him killed than to pay him, Packouz also bought a .357 revolver as insurance.<\/p>\n

It turned out that Packouz had bigger things to worry about. Winning the Afghan contract had earned AEY powerful enemies in the industry. One American arms dealer had complained to the State Department, claiming that AEY was buying Chinese-made AK-47s and shipping them to the Iraqi army. The allegation was false, but it had apparently triggered a criminal investigation by the Pentagon. On August 23rd, 2007 \u2014 the very day Packouz was supposed to sign the settlement papers with Diveroli \u2014 federal agents raided AEY\u2019s offices in Miami Beach. Ordering everyone to step away from their computers, the agents seized all of the company\u2019s hard drives and files.<\/p>\n

The raid led agents directly to the e-mails about the Chinese markings on the ammunition from Albania, and the conspiracy to repackage it. \u201cThe e-mails were incredibly incriminating \u2014 they spelled out everything,\u201d Packouz says. \u201cI knew once they saw them we were in trouble. We were so stupid. If we didn\u2019t e-mail, we could probably have denied the whole thing. But there were the names and dates. It was undeniable. I realized I was going to get caught no matter what I did, so I turned myself in. When the agents came to my lawyer\u2019s office to interview me, they were joking about how they had seen all the e-mails and notes. They were laughing.\u201d<\/p>\n

To avoid indictment, Packouz agreed to cooperate, as did Alex Podrizki. But Diveroli went right on shipping Chinese ammo to Afghanistan \u2014 and the Army went right on accepting it. By now, though, the repackaging being done in Albania was getting even sloppier. Some of the crates were infested with termites, and the ammunition had been damaged by water. Tipped off by an attorney for Kosta Trebicka, who had begun a crusade against corruption in Albania, The New York Times<\/em> ran a front-page story in March 2008 entitled \u201cSupplier Under Scrutiny on Arms for Afghans.\u201d<\/p>\n

Before the Times<\/em> story ran, Packouz had been led to believe that he wasn\u2019t going to be charged for shipping pre-embargo Chinese ammunition. But after the article appeared, he and Podrizki and Diveroli were indicted on 71 counts of fraud. Faced with overwhelming evidence, all pleaded guilty. The Mormon gun manufacturer from Utah, Ralph Merrill, pleaded not guilty and was convicted in December. Heinrich Thomet simply vanished; according to rumors, he was last seen somewhere in Bosnia.<\/p>\n

After the story broke, Kosta Trebicka traveled to the United States to talk to congressional investigators and federal prosecutors in Miami. He soon became terrified that the U.S. government was going to indict him as well. But back in Albania, he also became the lead witness in a case that targeted Albanian thugs and gangsters with ties to the prime minister. Then one afternoon in September 2008, Trebicka was killed in a mysterious \u201caccident\u201d when his truck somehow managed to flip over on a flat stretch of land outside Tirana. He was found alive by villagers, but medical crews and the police were slow to arrive. One of the first officials on the scene, in fact, was the Albanian prime minister\u2019s former bodyguard. \u201cIf it was an accident,\u201d says Erion Veliaj, an Albanian activist who worked with Trebicka, \u201cit was a very strange kind.\u201d<\/p>\n

Through all the chaos, Diveroli and Packouz had done a huge amount of business with the U.S. military. All told, AEY made 85 deliveries of munitions to Afghanistan worth more than $66 million, and had already received orders for another $100 million in ammunition. But the fiasco involved more than a couple of stoner kids who made a fortune in the arms trade. \u201cThe AEY contract can be viewed as a case study in what is wrong with the procurement process,\u201d an investigation by the House Committee on Oversight and Government Reform later concluded. There was a \u201cquestionable need for the contract,\u201d a \u201cgrossly inadequate assessment of AEY\u2019s qualifications\u201d and \u201cpoor execution and oversight\u201d of the contract. The Bush administration\u2019s push to outsource its wars in Iraq and Afghanistan, in short, had sent companies like AEY into the world of illegal arms dealers \u2014 but when things turned nasty, the federal government reacted with righteous indignation.<\/p>\n

In January, Packouz was sentenced to seven months of house arrest after he stood before a federal judge in Miami and expressed his remorse for the \u201cembarrassment, stress and heartache that I have caused.\u201d But his real regret is political: He believes that he and Diveroli were scapegoats, prosecuted not for breaking the law but for embarrassing the Bush administration. No one from the government has been charged in the case, even though officials in both the Pentagon and the State Department clearly knew that AEY was shipping Chinese-made ammunition to Afghanistan.<\/p>\n

\u201cWe were the Army\u2019s favorite contractors when we got the deal \u2014 poster boys for President Bush\u2019s small-business initiative,\u201d Packouz says. \u201cWe would have saved the government at least $50 million. We were living the American dream, until it turned into a nightmare.\u201d<\/p>\n

In January, dressed in a tan prison-issued jumper, Diveroli came before Judge Joan Lenard for sentencing at Miami\u2019s gleaming new federal courthouse. The court was packed with his friends and relatives, but they didn\u2019t exactly give him the support he was hoping for. \u201cEfraim needs to go to jail,\u201d a local rabbi told the judge. Even Diveroli\u2019s mother concurred. \u201cI know you hate me for saying this,\u201d she said, addressing her son directly, \u201cbut you need to go to jail.\u201d Diveroli\u2019s shoulders slumped.<\/p>\n

Diveroli described his contrition to Judge Lenard. When prison guards saw his file, he said, they asked in amazement how such a young person had managed to win such a huge military contract. \u201cI have no answer,\u201d Diveroli told the court. \u201cI have had many experiences in my short life. I have done more than most people can dream of. But I would have done it differently. All the notoriety in my industry and all the good times \u2014 and there were some \u2014 cannot make up for the damage.\u201d<\/p>\n

Judge Lenard gazed at Diveroli for a long time. \u201cIf it wasn\u2019t so amazing, you would laugh,\u201d she said. Then she sentenced him to four years.<\/p>\n

The hearing was not the end of Diveroli\u2019s woes. As a convicted felon, he was barred from so much as holding a gun, let alone selling arms. But while he was awaiting sentencing on the fraud charges, Diveroli couldn\u2019t stay out of the business he loved. He contrived to act as a consultant to a licensed importer who wanted to buy Korean-made ammunition magazines. The deal was technically legal \u2014 the magazines only fed ammo into the guns, so Diveroli wasn\u2019t actually selling weapons \u2014 but it put him in the cross hairs of another federal sting operation.<\/p>\n

An ATF agent posing as an arms dealer spent weeks trying to wheedle Diveroli into selling arms. Diveroli refused, but he couldn\u2019t resist bragging about his exploits; as agents recorded his every word, he talked about hunting alligators and hogs in the Everglades with a .50-caliber rifle. Finally, the ATF agent lured Diveroli to a meeting, asking him to bring along a gun so they could go shooting together. Diveroli didn\u2019t bring a weapon \u2014 he knew that would constitute a felony. But the ATF agent, who had thoughtfully brought along a gun of his own, handed Diveroli a Glock to try out.<\/p>\n

The temptation was too much. Adopting his best tough-guy swagger, Diveroli cleared the chamber and inspected the weapon. As always, the 24-year-old arms dealer was the star of his own Hollywood movie. No matter what happened, he told the agent moments before his arrest, he would never leave the arms business.<\/p>\n

\u201cOnce a gun runner,\u201d he boasted,\u201d always a gun runner.\u201d<\/p>\n

(Source<\/a>)<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"

The e-mail confirmed it: everything was finally back on schedule after weeks of maddening, inexplicable<\/p>\n","protected":false},"author":1,"featured_media":14721,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[21],"tags":[],"ppma_author":[396],"class_list":["post-14674","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-thephoenixandthemonarch"],"yoast_head":"\nWar Dogs ~ Mind's Eye Mag<\/title>\n<meta name=\"description\" content=\"A piece of beauty for the world\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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