Washington Blocks Exports of Munitions Firm Suspected of Fraud

http://www.nytimes.com/2008/04/04/washington/04ammo.html?_r=1&ref=world&oref=slogin

Washington Blocks Exports of Munitions Firm Suspected of Fraud

By C. J. CHIVERS
Published: April 4, 2008
The State Department on Thursday suspended the international export activities of AEY Inc., a Miami Beach arms-dealing company led by a 22-year-old man whose munitions procurements for the Pentagon are under criminal investigation, according to American officials familiar with the decision.



The Army last week accused the firm’s president, Efraim E. Diveroli, of fraud, claiming he shipped Chinese cartridges to Afghanistan after certifying they were made in Hungary. The Army also suspended Mr. Diveroli and the company from future federal contracts.

The latest decision blocks other elements of AEY’s business.

Under federal rules, arms transfers across an international border in which the United States government is not the customer require a State Department license. A State Department official said that barring extraordinary circumstances, Mr. Diveroli’s applications for licenses would be refused.

“AEY is under a policy of denial for future export authorization requests,” said the official, who was not authorized to speak publicly and requested anonymity. Two other officials confirmed the decision. “The department may make exceptions to this policy of denial but only if there are overriding national security or foreign policy reasons to do so.”

The question is, how did he incorrectly get a disadvantaged business listing?

http://oversight.house.gov/story.asp?ID=1828

Thursday, March 27, 2008
Waste, Fraud, and Abuse
Committee Announces Hearing on Arms Contract
Chairman Henry A. Waxman announced that the Oversight Committee will hold a hearing on Thursday, April 17, 2008, to examine federal contracts awarded to AEY Inc. to supply weapons, ammunitions, and munitions to military forces in Iraq and Afghanistan.

According to the New York Times, AEY was awarded a contract worth nearly $300 million, but provided defective, unreliable ammunition, including shipments of Chinese ammunition, to Afghanistan army and police forces. The hearing will examine the company’s financial history, past performance, and compliance with U.S. law and government contracting regulations as well as the federal government’s efforts to investigate allegations that AEY may have violated U.S. law and government contracting regulations.

The following individuals are invited to testify:




Efraim E. Diveroli, President, AEY Inc.
David M. Packouz, Vice President, AEY Inc.
Levi Meyer, General Manager, AEY Inc.
Senior Official, Department of Defense
Senior Official, Department of State

This case stinks of fraud from BEFORE the get-go.

62 posts 9 left

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=125&topic_id=199949&mesg_id=199949

Arms Dealing Company Was Listed As ‘Minority-Owned’
Questions grow about how a tiny Miami Beach firm became major supplier to Afghan army and police.

by Stewart Ain
Staff Writer

When a congressional committee examines how nearly $300 million in government contracts for an arms deal to Afghanistan’s army and police was given to a tiny Miami Beach-based company led by 22-year-old Efraim Diveroli, it is expected to question how the company, AEY Inc., qualifies as minority-owned, as was listed on the application.

Minority-owned companies, also classified as “disadvantaged,” receive preferential treatment in the awarding of contracts.

Those close to the case, which made front-page headlines last week in The New York Times, note that since 1984, chasidim have qualified under that category, along with Hispanics, African Americans, Indians and others. (Jews are not otherwise categorized as a minority.)

David Packouz, a 25-year-old licensed masseur, who is listed as vice president of the company, told The Jewish Week that neither he nor Diveroli are chasidic, that he was only a consultant to the company, and that he was unaware of the minority-owned designation on the application.

http://www.thejewishweek.com/viewArticle/c37_a7197/News/National.html

:wow: I never cease to be amazed at this stuff.

At first, Pentagon defended its contractor AEY proposal represented best value to the goverment

http://www.guardian.co.uk/world/2008/mar/28/afghanistan.usa

At first, the Pentagon defended its contractor. "AEY's proposal represented the best value to the government," the Army Sustainment Command wrote to the New York Times. Henry Waxman, the member of congress from California who heads the committee on government oversight, said yesterday he would conduct hearings into the contract next month.



........



In 2006, AEY was among 10 firms bidding on a contract to supply 52 kinds of ammunition for the Afghan security forces. But while his business was taking off, Diversoli was accused of violent behaviour involving two girlfriends and the parking attendant at his apartment building. In December 2006, Diversoli was charged with battery after beating up the parking attendant, according to the newspaper. Police recovered a forged driving licence from Diversoli's flat which led to a separate charge. He entered a programme for first time offenders to avoid trial.

AEY's contract was approved weeks later in January 2007, and Diversoli began scouring the globe for suppliers. Diversoli turned to Albania, which had large weapons dumps. However, the New York Times reported that the firm ended up paying for Kalashnikov rounds that were so obsolete that the US and Nato funded programmes to see them safely destroyed.

AEY also purchased 9 million cartridges from a Czech citizen who had been linked to illegal arms trafficking to Congo.



......



AEY also supplied weapons to US agencies, and rifles to Iraqi forces






AEY & Efraim Diveroli: Subject to the Foreign Corrupt Practices Act?


http://pogoblog.typepad.com/pogo/2008/03/aey-efraim-dive.html

AEY & Efraim Diveroli: Subject to the Foreign Corrupt Practices Act?
Based on my quick Google search of the web for AEY, Efraim Diveroli and "Foreign Corrupt Practices Act," I haven't seen anyone ask the question (though someone may have): Is Efraim Diveroli's alleged bribery of Albanian government officials, if true, a violation of the Foreign Corrupt Practices Act? It seems that it would be the case. According to the New York Times:

As Mr. Diveroli began to fill the Army’s huge orders, he was entering a shadowy world, and in his brief interview he suggested that he was aware that corruption could intrude on his dealings in Albania. “What goes on in the Albanian Ministry of Defense?” he said. “Who’s clean? Who’s dirty? Don’t want to know about it.”

The way AEY’s business was structured, Mr. Diveroli, at least officially, did not deal directly with Albanian officials. Instead, a middleman company registered in Cyprus, Evdin Ltd., bought the ammunition and sold it to his company.

The local packager involved in the deal, Mr. Trebicka, said that he suspected that Evdin’s purpose was to divert money to Albanian officials.

The purchases, Mr. Trebicka said, were a flip: Albania sold ammunition to Evdin for $22 per 1,000 rounds, he said, and Evdin sold it to AEY for much more. The difference, he said he suspected, was shared with Albanian officials, including Mr. Pinari, then the head of the arms export agency, and the defense minister at the time, Fatmir Mediu.

...

The conversation, he said, showed that the American company was aware of corruption in its dealings in Albania and that Heinrich Thomet, a Swiss arms dealer, was behind Evdin.




http://www.miamiherald.com/news/columnists/fred_grimm/story/475617.html
But Sonnett was taken aback by Diveroli. ``Well, I think it is passing strange that a 22-year-old can sign a $300 million worth of weapons contract with the Pentagon. I suppose the American dream is always possible.''

Even by the mythical standards of South Florida, a 20-something Miami Beach party boy seems an unlikely entry in our gallery of rogue arms peddlers with the likes of Soghanalian. Or Nazi turned arms smuggler Klaus Altmann-Barbie. Or Fort Lauderdale's flamboyant Ken Burnstine, the drug smuggler and arms dealer who may -- or not -- have perished in a 1976 plane crash. Or Gerard Latchinian, whose arms dealings were interrupted when he was caught plotting a coup in Honduras. Or David Duncan, tripped up in a deal sending guns to Peru. Or the bevy of Miami arms dealers exposed in the Iran-Contra scandal.

http://www.exportlawblog.com/archives/313

Of course, you didn’t expect that this blog would let a story about an arms company run by a 22-year-old kid and a 25-year-old “professional masseur” escape without comment, did you? The story, which the New York Times broke on Thursday, revealed how AEY, Inc., the company run by 22-year-old Efraim Diveroli and his massage therapist friend, was paid hundreds of millions of dollars by the United States Government to supply sub-standard ammunition to Afghan forces. Some of the ammo supplied by AEY is alleged to have been up to 40-years-old, i.e., manufactured before the AEY executives were even born.

There is at least one export law angle to the story. It arises from the discovery that some of the ammunition delivered by AEY had been procured from China. The Times story noted:

Tens of millions of the rifle and machine-gun cartridges were manufactured in China, making their procurement a possible violation of American law.

I’d say that’s more than a “possible” violation. When AEY arranged the export of ammunition from China to Afghanistan it would have been acting as a broker under Part 129 of the International Traffic in Arms Regulations (the “ITAR”). Section 129.5 of the ITAR notes that “no brokering proposals involving any country referred to in § 126.1,” e.g. China, “may be carried out by any person without first obtaining the written approval of” the Department of State’s Directorate of Defense Trade Controls. And we know that AEY would not have had such written approval because section 126.1 says that it is the policy of DDTC to deny licenses involving China.


http://edition.cnn.com/2008/US/03/28/arms.dealer/?iref=mpstoryview

Diveroli is president of AEY Inc., a South Florida company which, according to U.S. government documents, has done more than $10 million of business with the U.S. government since 2004

He's a genius about anything to do with weapons," the 72-year-old says. "Ever since he was a little boy, I would take him to gun shows and he could identify every model of guns. People would ask: How can he do that so young? He has a gift, I would tell them.''

Michael Diveroli, Efraim's father, told CNN affiliate WFOR-TV that he wished his son had turned his intellect elsewhere.

He said Efraim was "a boy genius" who is "hard to control." Read the WFOR story

"I would prefer he became a nice Jewish doctor or lawyer rather than an arms dealer," WFOR quoted Michael Diveroli as saying. Watch how father says son runs his own show »

For now, relatives say Efraim Diveroli is out of the country. CNN attempts to contact him have not been successful.



http://www.lindsayfincher.com/2008/03/aey_inc_wtf.html


And that's not their only federal contract!

As Efraim Diveroli arrived in Miami Beach, AEY was transforming itself by aggressively seeking security-related contracts.
It won a $126,000 award for ammunition for the Special Forces; AEY also provided ammunition or equipment in 2004 to the Department of Energy, the Environmental Protection Agency, the Transportation Security Administration and the State Department.

By 2005, when Mr. Diveroli became AEY’s president at age 19, the company was bidding across a spectrum of government agencies and providing paramilitary equipment — weapons, helmets, ballistic vests, bomb suits, batteries and chargers for X-ray machines — for American aid to Pakistan, Bolivia and elsewhere.

It was also providing supplies to the American military in Iraq, where its business included a $5.7 million contract for rifles for Iraqi forces.

Two federal officials involved in contracting in Baghdad said AEY quickly developed a bad reputation. “They weren’t reliable, or if they did come through, they did after many excuses,” said one of them, who asked that his name be withheld because he was not authorized to speak with reporters.



Arms Dealing Company Was Listed As ‘Minority-Owned’


http://www.thejewishweek.com/viewArticle/c37_a7197/News/National.html


As the government investigation was started, the House Oversight and Government Reform Committee launched its own inquiry into the arms shipments. A spokeswoman for Rep. Henry Waxman (D-Calif.), the committee chair, said invitations to appear before the committee April 17 had been sent to Diveroli, Packouz, the company’s vice president, and Levi Meyer, its general manager.


Dudes, is everyone who works on these government contracts completely high? Is it too much to ask that you actually investigate who you will be handing out $300 million contracts to?!




March 27.2008
Mr. Efraim E. Diveroli
President
AEY Incorporated
975 Arthtx Godfrey Road, Suite 2l I
Miami Beach, FL 33140-3341
Dear Mr. Diveroli:
Today's New York Times raises questions about your company's contracts with the U.S.
government to provide weapons, ammunition, and munitions to military forces in Iraq and
Afghanistan.' I am writing to request your testimony at a hearing on these matters before the
Oversight Committee at 10:00 a.m. on April17,2008, in Room 2157 of the Rayburn House
Office Building.
At the hearing, please be prepared to discuss your company's financial history, past
performance, and compliance with U.S. law and government contracting regulations. The
Committee will be sending you under separate cover a request for documents relating to this
issue. In addition, I request that you make yourself available for a transcribed interview with
Committee staff on or before April 11, 2008.
The Committee on Oversight and Govemment Reform is the principal oversight
committee in the House of Representatives and has broad oversight jurisdiction as set forth in
House Rule X. Information for witnesses appearing before the Committee is contained in the
enclosed'Witness Information Sheet. Also enclosed with this letter are the Committee's
procedures for transcribed interviews.
' Supplier Under Scrutiny on Aging Arms for Afghans, New York Times (Mar. 27,2008)
(online at www.nytimes.com/2008103l27lworldlasia/27ammo.html?_r:1&hp&ore Èslogin).
Mr. Efraim E. Diveroli
March 27,2008
Page2
Ifyou have any questions regarding this request, please contact Theodore Chuang or
Suzanne Renaud with the Committee staff at (202) 225-5420.
Sincerelv.

Henry A. Waxman
Chairman
Enclosures
cc: Tom Davis
Ranking Minority Member



Is he competition for Erik Prince, Brent Wilkes?


http://tpmmuckraker.talkingpointsmemo.com/2008/03/todays_must_read_304.php


Botach Tactical and AEY Inc., family arms dealerships


http://majikthise.typepad.com/majikthise_/2008/03/botach-tactic-1.html


http://www.botachtactical.com /


Botach Tactical doesn't advertise guns or explosives on its Yahoo-hosted website, but they will sell you plastic training guns and real magazines. Body bags, too. (Before you whip out your credit cards, be advised that Botach seems to have a lot of bitterly dissatisfied customers.)


In 2005 Rep. Maxine Waters (D-Ca) and some of her constituents confronted Botach at his at unmarked establishment at 3423 W. 43rd Place in Los Angeles. Local residents and city officials became concerned when they found out that Botach had quietly converted a former pawn shop into a gun dealership 12 years earlier. Botach has many other business interests in California, including Botach Management, also at 3423 W. 43rd Place, and a cold storage warehouse around the corner from his tactical store/gun dealership/property management company.

as his ego told him he was.