Arms and the Dudes: How Three Stoners from Miami Beach Became the Most Unlikely Gunrunners in History (2015)

Chapter Eleven

OPERATIONAL NECESSITY

While Diveroli continued to work around the clock at AEY during the winter of 2007–8, David Packouz took a more laid-back approach to arms dealing. Scanning FedBizOpps for an hour or two each day, Packouz helped his girlfriend set up a spa, and they both did massages from the modest facility. When a solicitation for twenty-five thousand cleaning kits for M16s appeared on FedBizOpps, Packouz did a Google search and got quotes from companies in Italy, Missouri, and China (weapons were banned, but not accessories for arms). He bid $1.2 million, with a profit margin of 9 percent, but he lost. Another contract for ten thousand Pelican M6 2320 flashlights was posted, but Packouz wasn’t able to find an approved source in time. A request for five hundred MP9 submachine guns led Packouz to approach a Swiss company called Brugger & Thomet—Thomet had formerly been a partner in the firm. It offered a price of $540,000. Packouz bid $595,000, but again he didn’t win; Swiss arms were expensive because they were the best quality.

“I didn’t have the single-minded obsession that Efraim had,” Packouz recalled. “I didn’t want to work eighteen-hour days bidding on every contract. I had other interests in life, like my daughter. I started to record my album, which was great. I wasn’t in a state of constant panic and stress.”

During this time, a young Pakistani arms broker named Usman Masood contacted Packouz through his old AEY e-mail address and offered to supply a large amount of military equipment. Packouz and Masood began to exchange e-mails with quotes for various types of deals, like Russian-caliber machine guns, ballistic panels for armored vehicles, and twenty thousand AK-47 rifles for Sri Lanka—a country that was under a UN embargo because of the civil war then raging there.

“Dear Mr. David,” Masood wrote in one e-mail, “please provide a quote for 8,000 Astra Cub pistol required by our esteemed client.”

The Astra Cub was a small-caliber weapon, usually used by women for self-defense—a “purse gun,” in the business. Packouz approached a Czech father-and-son team that he’d dealt with at AEY. The Czechs found a supplier in Spain and quoted $43 for each of the pistols—an amazingly low price. Packouz was going to sell the guns for $63, making a profit of $160,000 on the deal. But his broker’s license required that he first contact the State Department to be approved to deal with parties in other countries. Before e-mailing State, Packouz asked Masood for the destination of the pistols. Somaliland, Masood said, a self-declared independent state on the Horn of Africa. Packouz did some research and discovered that Somaliland had broken away from Somalia after a series of massacres led to a civil war; a democratically elected government made it one of the most stable nations in the region, but it had yet to be internationally recognized. The State Department told Packouz that Somaliland was under a UN arms embargo, so he couldn’t participate in the deal. As ever in the complicated and often capricious world of arms dealing, he’d flirted with breaking the law—but caught himself in time.

“The Somaliland deal was like the Chinese ammo in Albania,” Packouz said. “The guns were for defenseless women to protect themselves. But there was an embargo. Doing the deal would break the letter of the law but not the spirit. I wasn’t going to stick my neck out.”

The letter of the law was very much on the mind of the DCIS as Special Agent Mentavlos returned from Albania, aiming to finally thwart AEY. Mentavlos sent an e-mail to the Army Sustainment Command in Rock Island, Illinois, stating that shipments had to cease forthwith.

On November 5, Melanie Johnson, the civilian administering AEY’s contract, wrote to her superiors to explain the situation. Johnson began by pointing out that the sole accusation Mentavlos had against AEY was the supposed violation of the law by shipping “Chinese”-made ammunition. No allegations were made about the quality of the ammunition. As far as the Army was concerned, AEY was delivering ammunition in accordance with the contract. There had been some small questions related to the thickness of the cardboard AEY was using for the repacking, and some boxes had been jostled during the flights from Tirana to Kabul. The shortcomings were well within the normal course of business, especially given the situation in Afghanistan.

“Mentavlos asked if the contract had been terminated yet—these guys just don’t get it,” Johnson wrote to her colleagues. “He was told no. We want a sworn statement from the agent outlining what was seen, seized, etc. We are not taking any action until we receive something in writing.”

So Mentavlos e-mailed his evidence—photographs of the Chinese markings on the ammo AEY was shipping to Kabul.

The Procurement Fraud division was forced into action.

On November 6, 2007, acceptance of AEY’s shipments of AK-47 ammo from Albania to Afghanistan was suspended.

Inevitably, ammo shortages quickly followed in Kabul. Other companies were shipping limited amounts of ammo to Kabul, but AEY was supplying the vast majority. Ending AEY’s shipments of AK-47 ammo from Albania would obviously lead to disaster.

Lieutenant Colonel Moises Gutierrez was assigned to NATO’s logistics branch in Afghanistan. The specific goal of the logistics branch was to ensure that information was shared and that the military remained focused on operational necessity—the same metric the DCIS had encountered in its interactions with other American soldiers in Afghanistan. For LTC Gutierrez, operational necessity meant getting AEY’s AK-47 shipments started again—immediately. Winter was closing in, the only chance to lay in supplies for the coming fighting season, and he was anticipating a huge spike in demand. Weeks were passing and no small-caliber ammo was arriving in Afghanistan. From Kabul, it seemed as if investigators at the DCIS in Tampa Bay had lost their minds.

Then they ran out of ammo in 22 Bunkers. American officers embedded with Afghan forces contacted Gutierrez and furiously demanded that ammo be sent into the field—downrange, in the argot of the military. The soldiers were told that there was no ammo because the DCIS had stopped shipments.

Frustrated and astonished that Afghan soldiers were going into battle without ammunition because of an ill-begotten investigation in Florida, Gutierrez took his complaint up the chain of command. In January of 2008, he told his superiors about the lack of AK-47 ammo and how AEY’s rounds were needed; that they were “Chinese” made absolutely no difference in combat. Gutierrez was informed that the shipments had been stopped and that the decision was final. Gutierrez didn’t desist. He told his superiors that he was willing to take the risk of countermanding the DCIS. The only way to solve the problem, Gutierrez was instructed, was to put his request in writing. So Gutierrez sat down to explain to the Army how badly it was hurting its own cause:

The Afghanistan National Security Force is moving into the spring fighting season and the ammunition is critically needed. The Afghanistan National Police has zero 7.62 x 54mm on hand and is urgently awaiting deliveries of this ammo. As such, we are requesting that Defense Contract Management be engaged as soon as possible to ensure quality product/packaging, but that deliveries continue given the criticality of the need.

The 7.62x54 ammunition Gutierrez referred to was used in sniper rifles and the PKM machine gun—weapons that were fundamental to the way war was waged in the mountains of Afghanistan. The memorandum made it clear that the DCIS’s investigation was morphing into a strategic threat.

Inside the Army, the number of officers copied on Gutierrez’s e-mail exploded. Soldiers in the field were demanding the ammo, but it seemed as if nothing could legally be done to get AEY shipping again.

The procurement officials in Rock Island continued searching for a solution. The possibility of AEY’s applying for a Supply Deviation Request was discussed. A general named Dowd stepped in and supposedly made it clear that no more shipments from Albania for AEY should be approved, no matter what American soldiers in Afghanistan said.

“How does LTC Gutierrez trump General Dowd?” one of the civilian women in Rock Island asked.

Gutierrez was in the war zone, came the reply, not Illinois, so he would know the facts on the ground.

A “huddle” was called in Rock Island to determine a way forward. The deputy director of the Acquisitions Center circulated a memorandum before the meeting. “I don’t think General Dowd said to stop shipments,” Debra Collins wrote. Dowd, it was now contended, had merely “suggested” that the Army get someone on the ground in Albania to ensure the packing was properly done, solving the cardboard strength but ignoring the “Chinese” origin of the ammo. “I would feel a lot more comfortable if we had someone higher up in the food-chain that wants AEY to continue shipping.”

After weeks of uncertainty, the civilians in Rock Island finally hatched a plan. The first step was to get a “head nod” from someone “SENIOR” on continuing AEY’s shipments. An analysis of the reports on the deficiencies of AEY’s shipments should quickly be completed to determine if any issues related to quality, not just to packing. The Army could then issue a “cure notice,” requiring AEY to solve any identified problems. Finally: “Get AEY up here ASAP to review the issues and define their corrective action.”

Within days, Diveroli traveled to Rock Island to meet with the contracting officer. Diveroli told her AEY would implement more stringent packing protocols and no longer use loose-pack ammunition.

Once all the details had been corrected, the Army planned to bring the snafu to the attention of Admiral William Fallon, the four-star officer who was in charge of Central Command. Fallon would surely see that the matter needed to be remedied—and that AEY’s shipments should start again immediately. There was no other way to get the necessary ammunition to Kabul: AEY was the only supplier that was in a position to quickly solve the dire shortages. Fallon would surely overrule the DCIS.

But the plan would never be acted upon. For reasons that remain unknown, the documents needed to enable AEY to commence shipping again would never reach the desk of Admiral Fallon. AEY would never ship another round of ammunition from Albania to Afghanistan. Despite “operational necessity,” the Afghans would be left with “zero” ammo, creating “critical shortages.”

The DCIS still wasn’t satisfied. Now Mentavlos wanted to seize whatever Chinese ammo from AEY remained in Afghanistan. At his direction, the DCIS’s representatives in the war zone—Special Agent Albert Wiesner and his partner—were told to make the dangerous trip from the Bagram Airfield to 22 Bunkers. Because of the elevated threat level, particularly on the Muslim Sabbath, when insurgent attacks ran rampant, the investigators traveled through a blizzard in a convoy of up-armored, unmarked Land Rovers, both wearing body armor and carrying M4 carbines; Wiesner later admitted to being terrified. When they arrived at the outdoor ammunition-storage complex, they found the place was a mess, as might be expected in a rapidly deteriorating crisis: boxes of ammo were strewn on the ground, and the “structures” used for storage were nothing more than old, rusting shipping containers. In the driving snow, Wiesner was taken to the containers holding the remainder of AEY’s ammo and seized nearly five hundred rounds. Careful to establish a good chain of custody, Wiesner took photographs for use as evidence against AEY. All of the rounds were in pristine condition. They represented the last remnants of the Army’s effort to effectively arm the Afghans. But that didn’t matter: the rounds were “Chinese.”

Michael Mentavlos had won his war.

“DCIS has a large Global War on Terrorism case,” a senior DCIS agent triumphantly wrote to a senior counterterrorism official, referring to AEY. “This case is extremely high profile with the DCIS, the Department of Defense, and the State Department.”

For all the glee inside the DCIS, the AEY contract was emblematic of larger failures in Afghanistan and Iraq. America was losing both wars, for myriad reasons, not least of which was a lack of focus on winning—or any workable definition of what might amount to “winning.” The Army was desperate for AK-47 ammo in Afghanistan—even as it had stopped millions of serviceable “Chinese” rounds of AK-47 ammo from reaching Kabul.

For months AEY had been trapped between two distinct and contradictory US government forces. In Florida, the DCIS and federal prosecutors were pursuing a highly legalistic case with all the might they could muster. At the same time, the Army was telling Diveroli to ship ammo—no matter what. There was no way to reconcile these divergent demands, certainly not under the pressures of a war spiraling out of control.

Even though the “Chinese” AK-47 rounds from Albania were disqualified, AEY was still expected to fulfill the rest of the contract, including the delivery of millions of rounds of AK-47 ammo—which would have to be sourced from other countries. The demands placed on Efraim Diveroli increased exponentially when Task Order 005 arrived, worth $22,560,384, and including grenade launchers, OG 40 mm fragmentation warheads, as well as nearly 5 million rounds of AK-47 ammo. The loss of the Albanian connection forced Diveroli into a frantic hunt for other suppliers of surplus AK-47 ammo in Hungary, Bulgaria, and the Czech Republic—wherever rounds could be bought cheaply and quickly. But the ammo he sourced from these countries was problematic: ironically, much of it was much worse in quality than the ancient “Chinese” rounds in Albania. Time limits meant that AEY couldn’t inspect the rounds or search for better-quality ammo. Because of the DCIS investigation, AEY was now shipping AK-47 rounds that weren’t serviceable—while serviceable ammo sat on the tarmac in Tirana.

Worried about AEY’s ability to fulfill the contract, the Army sent a letter demanding a written plan. Diveroli replied that he was hunting for new sources. With “severely depleted” stores of ammunition for the PKM machine gun—a situation that would “impact the mission”—the contracting officer instructed AEY to make this kind of ammunition the “first priority.” AEY was now delinquent on the entire contract, in large measure due to the DCIS investigation.

The situation devolved during the winter as AEY was reduced to shipping a cache of Bulgarian small-caliber ammo, which hadn’t been physically inspected or tested. Diveroli had purchased the ammo sight unseen, in the belief that supplying something was better than supplying nothing. In desperation, the Army was allowing AEY to improvise. Getting the proper end-user certificates for the Bulgarian ammo could take weeks, or longer, so Diveroli was told he could use the approvals he’d received for the Albanian “Chinese” ammo—technically a breach of the law but an operational necessity.

“The government realizes AEY has experienced some difficulties in the performance of this contract,” the contracting officer wrote to Diveroli. “However, this does not alleviate the dire need for all ammunition under the contract and the required schedules for ALL ammunition is not to be compromised.”

The message to Diveroli was clear: do whatever is necessary to get the rounds to Kabul.

The swirl of contradictory messages from the US government had left the Albanians confused as well. The Army needed exactly the kind of ammunition the Albanians had in abundance. If the Albanians couldn’t sell the ammo to their American friends, perhaps they could give it away. To this end, the Albanian prime minister, Sali Berisha, and Defense Minister Fatmir Mediu flew to Baghdad. Despite a worldwide shortage of AK-47 ammo, they had more than 5 million rounds sitting in a warehouse at Tirana International Airport neatly shrink-wrapped, packaged, palletized, and ready to be shipped. Millions of rounds were also stored in caves and caches scattered all over the country.

The Albanian politicians met with General David Petraeus, the commander of American forces in Iraq, as well as the American ambassador, Ryan Crocker. These were the two most powerful American officials in Iraq. The Albanians formally proposed the donation. But Petraeus and Crocker rejected the offer. The Albanian ammo was “Chinese,” it was known, and thus couldn’t be received under US law. The Albanians flew home dejected.

Into this chaos stepped C. J. Chivers of the New York Times. As the New Year dawned, Chivers was employing the many resources of the Times to try to get to the bottom of the AEY story. To obtain a firsthand look at the ammunition AEY was supplying, Chivers traveled to Afghanistan, to an outpost called Nawa along the Pakistan border. There he interviewed a colonel in the Afghan army as they inspected a cardboard box of ammunition split open on a dirt floor. The rounds had been supplied by AEY.

“This is what they give us for fighting,” the Afghan colonel told Chivers. “It makes us worried, because too much of it is junk.”

Chivers contacted the US military’s public affairs officer in Kabul to ask about problems with the ammunition AEY was supplying. To reply to Chivers, the public affairs officer sought the input of the soldier in charge of CJ-4 Shop, the location at 22 Bunkers where AEY’s ammo was stored and issued. The soldier contacted was none other than Lieutenant Colonel Gutierrez—the officer who was fighting tooth and nail to get AEY’s shipments started again. LTC Gutierrez was asked about any reports of shipping deficiencies related to AEY. Gutierrez could have replied that the rounds were serviceable—but he’d run out of ammo. Instead, he didn’t bother replying to the press query. Later, when asked why he failed to answer, Gutierrez claimed that the request “fell through the cracks.”

After months of reporting, Chivers’s take on the AEY story was coming into focus. Chivers was appalled that the kids who ran AEY were apparently selling the Army junk surplus ammunition, putting Afghan soldiers at risk. Chivers believed Packouz and Diveroli were young, irresponsible, and obviously unqualified to carry out the Afghanistan contract. AEY was also possibly defrauding the US government by selling ammunition that was subject to a ban—if, indeed, the ammo was deemed to be “Chinese.”

“I’m told that after AEY won the award, many people in the industry were flabbergasted, and complained to the Army,” Chivers wrote to the Army’s Sustainment Command in Rock Island. “Can you verify these complaints and their substance?”

“The contracting officer debriefed all unsuccessful offerors” came the reply. “There were no protests received. Industry did not complain to the contracting officer.”

Chivers then asked about the quality of the ammunition AEY was supplying. The Army replied that there were “no serviceability issues.”

Why had AEY been selected? Chivers asked.

The reply was as succinct as it was seemingly ridiculous: “AEY’s proposal represented the best value to the government.”