Arms and the Dudes: How Three Stoners from Miami Beach Became the Most Unlikely Gunrunners in History (2015)
The screaming fights were followed by makeup sex, quickly leading to another fight: I love you, I hate you, come here, go away. Efraim Diveroli’s tempestuous relationship with his girlfriend Suzie was doomed. The police had been called once, when Diveroli threw Suzie’s clothes into the hallway at the Flamingo and told her to get out. The police had found the girl crying in the hallway, but she denied she’d been assaulted and no charges were filed. Still, the police recorded the incident, adding it to Diveroli’s increasingly checkered history, including the restraining order a prior girlfriend had taken out. The relationship was obviously out of control—like Diveroli’s consumption of alcohol and cocaine, his lust for money, and his never-ending pursuit of contracts on FedBizOpps.
The affair had to end, and so it did. Newly single, Diveroli did what twentysomethings all over America did at the time when they wanted to meet someone new: he created a profile on Myspace.
“Well of course I’m a super nice guy!!!” Diveroli began. He described himself as easygoing, with a good sense of humor, though he allowed he’d had problems in high school so he’d worked from a young age. “I probably grew up way too fast. I finally got a decent apartment and I’m content for the moment, however I definitely have the desire to be very successful in my business and this does take up a lot of my time.” He concluded, “Who I’d like to meet: a sweet pretty girl with a good attitude and love for life, a woman that will stand by her man because she knows he’d do the same for her, no matter the circumstance.”
Romance aside, Diveroli was prospering, in his manner. The boiler-room model he’d created at AEY was cutthroat, as everyone was paid solely on commission. As usual, Diveroli micromanaged all aspects of the operation, screaming and yelling and flying into rages—only to step outside to smoke a joint and regain his composure. The main quality Diveroli looked for in his staff was greed. The desire for money was a motive he understood and believed he could control. But it meant that there was no loyalty.
As AEY’s “team” tried to beat each other to deals, Diveroli ventured deeper into a dictatorial mode, unwilling to listen to others, overly certain of his own good judgment, and contemptuous of those who weren’t willing to take the kinds of risks he encountered every day as a real-life gunrunner.
After months of dickering, Diveroli had finally reached an arrangement with Henri Thomet and MEICO, and the Afghanistan contract was running smoothly, even in Packouz’s absence. In Bountiful, Utah, the Mormon businessman Ralph Merrill was following Diveroli’s progress with admiration. AEY really was delivering on the $300 million contract. With the profits split fifty-fifty, Merrill stood to make millions. It all depended on Diveroli’s final profit margins, which would be determined by an audit at the end of the contract.
“I thought Diveroli was performing well, all things considered,” Merrill recalled. “He’d gained experience with the Iraq contracts, and he seemed to be in complete control. All of the problems I was aware of appeared to be external, and he was handling them as best as one could, given the circumstances. So I was pleased.”
But Diveroli had other plans for Merrill. From the start, Diveroli had always wanted his “financier” to know as little as possible about his business. When he spoke with Merrill, in an uncharacteristically quiet and reasoned tone, Diveroli would be alone, in his office. But as the Afghanistan contract proceeded, Diveroli’s attitude began to change. Deference was replaced with desperation—or at least that was how Diveroli represented himself to Merrill. The money AEY had been paid by the government was supposed to be reinvested to finance further arms purchases until the Afghan deal was completed. But now Diveroli pretended he was barely breaking even and that AEY was in danger of losing the entire contract because he didn’t have adequate funds to finance the various deals. In fact, the opposite was true: Diveroli’s profits and the factoring agreement with Wells Fargo meant that he was no longer dependent on Merrill’s money.
“Diveroli had been lying to Merrill about AEY’s profits for years,” David Packouz recalled. “Diveroli would often complain that Merrill was sitting on his ass in Utah while we were slaving away. He said he refused to be ‘Ralph’s workhorse,’ and that everyone should be rewarded in proportion to the work they put in—not the deal they’d struck with him. That’s how Diveroli justified his sleazy behavior to himself. So he decided he was going to squeeze Merrill’s share down—just like he’d done with mine.”
Diveroli concocted a phantom investor named Danny, a ploy he aimed to use to deceive Merrill and radically reduce his share of the profits. Danny was based on a real dude, Danny Doudnik, who was now Diveroli’s main confidant at AEY. Like many of the people Diveroli worked with, Doudnik had gone to the Hebrew Academy in Miami Beach. The pair hadn’t seen each other again for years, until they were both twenty years old and Diveroli was established as an arms dealer. At the time, Doudnik was working as a paralegal for a real estate company in Aventura, Florida, a dreary job with a modest salary and no real prospect of advancement or fulfillment. But Doudnik had a skill that was useful for Diveroli: born in the former Soviet Union, he was fluent in Russian. When the Kyrgyz intelligence agency had seized AEY’s ammo, Diveroli had asked his old buddy to translate some of the documents. Diveroli had paid him $150 for the job. After that, Doudnik had occasionally done small translation jobs. Diveroli tried to recruit him to work full-time for AEY, saying he was always looking for “good people.” Doudnik had steered clear of Diveroli for a simple reason—he thought he was a psychopath.
Finally, like David Packouz and Alex Podrizki before him, Doudnik had succumbed, however reluctantly, to Diveroli’s inducements—including a salary of $100,000 a year. The experience had proved extremely trying, far more so than Doudnik had anticipated. The temper tantrums and disorganization and substance abuse were hard enough to deal with. So were the hours Diveroli demanded of his staff, with the office doing business in a variety of time zones and the company woefully understaffed. But nothing topped Diveroli’s outrageous behavior on the trip he took with Doudnik to Ukraine. The aim was to negotiate lower prices with the air-cargo company shipping AEY’s munitions to Afghanistan. Doudnik went along to translate. But he’d been horrified when Diveroli approached pretty women on the streets of Kiev as if all of them were prostitutes. Diveroli would simply walk up to a beautiful woman and ask, “How much?”—an inquiry Doudnik had refused to translate.
Ralph Merrill recalled that Diveroli told him that Doudnik was a phantom investor willing to put money into AEY—but only on very onerous terms.
“Danny says he can put three million dollars in, but he wants seventy percent of the profit in return,” Diveroli said. “He drives a hard bargain. But he’s the only source I’ve been able to find.”
“That’s disproportionate to what I have in the contract,” Merrill said. “Tell him it’s too much.”
Diveroli promised to try. But he soon called Merrill back with melancholy news. His fictional investor wouldn’t budge.
“I think we’re going to have to take the deal,” Diveroli said. “We definitely need more money. That will leave thirty percent for us to split. We’ll just have to be content with that.”
“You can’t find any other institution that will lend against a government contract?”
“I don’t know of any. We have no collateral.”
Merrill sighed in resignation. It seemed plausible that AEY needed more money to cover the $300 million contract. Thus, in one fell swoop, Diveroli reduced Merrill’s take from 50 to 15 percent. Diveroli gambled that he would be able to doctor the audit when the time came; what mattered was that he’d managed to make millions more for himself, taking his own share from 50 to 85 percent.
/ / / / /
By the end of the summer of 2007, Alex Podrizki only went to the airport in Tirana to check on the repacking operation every few days, primarily just to show his face and protect AEY’s interests and ensure quality control protocols for the ammo were being followed. But the operation was continuing to attract other attention. American Army master sergeant Kristoff Winemiller was assigned to the Defense Attaché Office in Tirana. As part of his duties, he regularly visited the airport in Tirana, including the military side of the facility. In early August, Winemiller went to the military hangar with his Albanian assistant, Tef. Wandering the hangar with Tef, Winemiller watched the repacking operation and wondered what was going on. Dozens of workers were busily taking AK-47 ammo from wooden crates, emptying the boxes, taking the rounds out of their paper wrappers, and then putting them in plastic bags and new cardboard boxes. Piled in the hangar were ammunition tins with Chinese lettering and shrink-wrapped cardboard boxes on pallets. In this manner, more than 30 million rounds of ammo had gone from Tirana to Kabul to be issued to Afghan troops.
Tef told Winemiller that ammo was being repacked by an American company named AEY. The rounds were to be shipped to Afghanistan, and Tef pointed to two ancient Ilyushin 76 airfreight carriers parked on the tarmac, ready to be loaded. Winemiller asked Tef why AEY was buying Chinese ammo. Tef said that the Chinese rounds were older and thus less expensive. Winemiller nodded in understanding—he had no idea about the embargo against Chinese munitions.
Winemiller’s ignorance of the law against acquiring Chinese matériel was matched by that of others in the US Embassy in Albania. Many officials, military and diplomatic, were aware of AEY’s contract and that the company was repacking old, surplus Chinese ammo. To embassy officials, AEY’s contract looked like a great deal for all concerned. None of these officials apparently knew about the China ban—or cared. The same was true in Kabul. Diveroli had predicted that no one in Afghanistan would notice that the ammo was “Chinese.” All that mattered was that the ammo actually got there.
Diveroli’s assessment of the Pentagon’s procurement process was startlingly accurate. Haphazard barely began to capture the disorder and desperation of the procurement system AEY was dealing with. The administration of the contracts was technically the responsibility of civilians in Rock Island, Illinois, a long way from the battlefield. But the ammunition was coming from a country outside America—OCONUS, Outside of Continental United States, in military jargon—so the Army’s munitions team had nothing to do with actually running the contract. In reality, Rock Island was only responsible for processing payments.
Actual oversight was supposed to occur in Kabul. But after awarding the contract the civilians in the Army Sustainment Command in Illinois realized that they had no one on the ground in Kabul to monitor the quality of the ammunition AEY supplied. The contract required acceptance at destination, but it had been proposed that the deal be amended to provide for acceptance at origin. The Army would thus inspect AEY’s shipments in the various countries of origin before it was loaded onto planes to be flown to Afghanistan. If that system had been adopted, American soldiers in Albania would have checked out the rounds at the airport in Tirana.
But no one was comfortable with signing off on AEY’s rounds without proof that the ammo had actually reached Afghanistan. So Rock Island had sent an e-mail to the Defense Contract Management Agency to see if anyone in Kabul could serve as their eyes on the ground for AEY’s deliveries. The DCMA said nothing in the contract required it to get involved—and that the contract called for only “minimal surveillance.” This was a way to avoid bureaucratic responsibility. But the DCMA then assigned Major Ronald Walck to monitor AEY’s deliveries, despite the fact that he had no training in dealing with arms shipments, let alone old, surplus, nonstandard ammunition.
Thus, when AEY’s ammo arrived in Kabul, Major Walck performed a “kind, count, and condition inspection,” but the process on the tarmac was perfunctory because of the dangers of incoming enemy fire; counting the number of pallets, not the rounds, was all Walck could manage. Walck received Certificates of Conformance from AEY stating exactly what was in every delivery. The COC form had lines for quantity, number of pallets, and place and year of manufacture. The line for the provenance of the ammunition was headed “Manufacturer (point of origin).” In this space Diveroli wrote on dozens of COCs, “Ministry of Defense of Albania, MEICO—Military Export and Import Company.” This was literally true, depending on how the word origin was interpreted, as Tirana was literally the place of “origin.” But it meant eliding the fact that the manufacturer of the ammo was Chinese.
In Kabul, AEY’s ammo was then trucked to a facility called 22 Bunkers. If soldiers there had inspected the head stamps of the ammo, they would have seen that the rounds were “Chinese.” The Pentagon had a nonclassified publication called the “Small Caliber Ammunition Guide,” which contained references to the meanings of the numbers on the head stamps of various rounds from around the world. The headstamps indicated the factories in the People’s Republic of China where the rounds had been manufactured—specifically, plants numbered 31, 61, 71, and 661. But the Army officers at 22 Bunkers didn’t look, as Diveroli had predicted. All they cared about was that the ammo worked—and it did.
The lax oversight wasn’t limited to AEY’s contract. In both Iraq and Afghanistan, billions upon billions of dollars were lost as a result of waste, fraud, and abuse. The ad hoc nature of the Army’s efforts led to the kinds of logistical fiascoes that resulted in lost wars. In Iraq, for example, in 2007 the Pentagon’s property books failed to account for 190,000 weapons shipped to Baghdad—110,000 AK-47s and 80,000 handguns. The Army had no consistent system to track weapons received, meaning it was likely even more weapons had been lost or stolen or sold to insurgents. The situation in Kabul was just as bad, if not worse. The American officers who were supposed to be developing systems to secure and track weapons had failed to issue instructions for their proper maintenance and control. No records existed for 87,000 of the 242,000 weapons shipped to Afghanistan—fully a third of the guns delivered. In this context there was zero chance that headstamps would be inspected: it was a war zone.
These statistics weren’t aberrations. According to later investigations, as much as 30 percent of the $50 billion spent on defense contracts in Afghanistan between 2005 and 2011 involved corruption.I Trucking contracts to carry supplies from Karachi, Pakistan, to Kabul, to cite one instance, involved criminal networks, widespread pilferage, and little or no oversight.II The Host Nation Trucking program, funded at $2.2 billion, included a contract for $360 million awarded to Hamed Wardak, the son of the Afghan minister of defense. Wardak was in his twenties and attracted to South Beach’s nightlife, much like Efraim Diveroli. He was reportedly paying massive bribes to Afghan warlords and the Taliban to ensure that his trucks wouldn’t be attacked. The practice was commonplace, as American officials knew—in part because the Afghan intelligence services had provided a “very detailed” report on the epidemic of corruption. As much as 20 percent of the money the United States was spending on transport was thus going directly to fund the Taliban—and nothing was being done about it.
“The American soldier in me is repulsed by it,” the commander of the Third Brigade of the Tenth Mountain Division later told investigators. “But I knew it was what it was. It was essentially paying the enemy, saying, ‘Hey, don’t hassle me.’ I didn’t like it, but it was what it was.”III
As events in AEY’s contract continued to play out in the fall of 2007, the Army issued the Gansler Report, an in-depth study of the government’s weapons-procurement procedures. It said the Army’s contracting staff was “understaffed, overworked, undertrained, undersupported, and, most important, undervalued.” The report said that the Defense Federal Acquisition Regulation Supplement—DFARS, which governed AEY’s contract and included the Chinese embargo—was impossible to adapt to fast-changing circumstances in a high-pressure environment. Rigid, legalistic interpretations and the lack of command and control over the process had led to contracting dysfunction on an epic scale.
There was a law-enforcement agency assigned to stop the rampant fraud and theft and incompetence destroying the Pentagon’s procurement systems. The Defense Criminal Investigative Service—or DCIS—had been created in the early 1980s expressly to “protect the integrity of Department of Defense programs and operations by conducting relevant, objective, and timely investigations.”
In this endeavor, the DCIS was failing spectacularly. In Afghanistan, private contractors from America had written to the Department of Defense, complaining about widespread extortion by warlords and how billions in American money was going to the Taliban. These complaints were met with “indifference,” a congressional inquiry would later find. The American military units overseeing the Host Nation Trucking program claimed to have “zero visibility” of how the subcontractors worked. Asked why no investigations were initiated, a lieutenant colonel said the decision was out of his control: “That was way, way, way, way above my level.”IV
But the DCIS would pursue one case with relentless determination. No expense would be spared. All available resources of the DCIS would be applied to ensure that this singular investigation was brought to a successful conclusion. The targets of this costly multiyear investigation were none other than a few stoners from Miami Beach.
In the fall of 2007, Efraim Diveroli was oblivious of this—as of so much else. To Diveroli, things had never been better. AEY appeared to be on its way to becoming the empire he’d fantasized about. The company would be awarded an astounding $201,707,453 in government contracts in 2007. The sheer scale of the business Diveroli was now operating might have daunted him, but it didn’t.
Nor did his unscrupulous business practices give him pause. As his successes increased, Diveroli was accumulating enemies, foreign and domestic—at times bitter, unscrupulous, vicious enemies. In Albania, Kosta Trebicka had sworn revenge and set in motion the investigation of C. J. Chivers of the New York Times. In Baghdad, rival contractors continued a whispering campaign against AEY and Diveroli. They told procurement officers that Diveroli was a Miami drug dealer, using money from running cocaine to buy and sell arms. The cumulative impact of the gunrunner’s youth, bravado, and cutthroat prices meant he was despised by many inside the small world of arms dealing.
Another unknown foe was the grandly titled Blane International Group. The company was in fact a one-man operation, run by Milton Blane, an older man who’d gone into the arms business late in life. After the invasion of Iraq, Blane had vied for contracts on FedBizOpps, frequently losing to AEY. Like the others in the various bidding wars Diveroli won, Blane was mystified by the young gunrunner’s way of winning deals. Diveroli was somehow able to source weapons and ammo for unbelievably low prices. Like others in the industry, Blane figured Diveroli had to be doing something illegitimate, unethical, or illegal—or all three.
In 2005, Blane had secretly approached the Department of State saying he believed that AEY was operating illegally. Blane alleged that Diveroli was labeling Chinese-made AK-47 guns as Eastern European to sell to the Iraq government. Blane claimed that the guns were being shipped from China to Bulgaria, where they were relabeled and repackaged to appear as if they’d been manufactured in Sofia. The weapons were then flown to Baghdad, where unsuspecting officers unloaded the guns and issued them to Iraqis. Many of the weapons were junk, Blane said, and had been rejected by the Army.
If true, Blane’s allegations would be explosive. If what he said was correct, it might explain how AEY had continually been able to underbid its competitors. If Diveroli really had been shipping cheap and shoddy Chinese guns to Baghdad, via Bulgaria, of course his prices would be lower. Chinese weapons were notoriously inexpensive, just as they were known to be inferior in quality to Russian-made guns.
In February 2006, DCIS investigators had traveled to the headquarters of Blane International—a private residence in a suburb of Atlanta—and dutifully recorded the older man’s tale of Diveroli’s plot to covertly sell Chinese guns.
“Blane stated that he was aware that AEY personnel traveled to China,” the confidential DCIS report said. “Blane further stated that another reason he thought that AEY was acquiring the rifles from China was the price that they won the bid with was below any of the common sources for the rifles.
“Blane told the agents of the AEY/China/Bulgaria/Iraq statement as a possible scenario of what AEY might be up to. However, Blane stated that he had no firsthand knowledge of where AEY was obtaining the AK-47 rifles. The scenario is pure speculation on his part.”
The consequences of this encounter were far-reaching: Blane’s tip—his speculation—appeared to provide the basis for a wide-ranging, two-year federal investigation of Diveroli and AEY. As a result of Blane’s assertions, Diveroli was secretly placed on the State Department’s watch list as an arms dealer suspected of illegal activity. When Diveroli traveled internationally, his luggage was seized and searched at airports—like on his trips to Albania and Ukraine. His laptop computer was also seized. In this way, Diveroli’s rights as a citizen had apparently been breached based on rumors spread by a rival.
Any investigator assigned to the AEY case should have paused as they listened to Blane’s accusations. Why was Blane telling the DCIS about Diveroli, after all? Was Blane trying to use law enforcement to harm a competitor?
To begin with, Blane’s story didn’t add up. The price of transporting weapons constituted a huge part of the cost of arms dealing, as AEY had learned the hard way in Albania. It would be prohibitively expensive for AEY to fly the guns from China to Bulgaria, repack the arms, and then fly them back to Baghdad. Wouldn’t an experienced investigator understand the practical realities of arms dealing, and see that it cast doubt on Blane’s version of events?
But AEY’s competitors got lucky—very, very lucky. The epic failure of the DCIS to stop fraud in Iraq and Afghanistan had made the agency highly susceptible to the kind of case AEY appeared to be. Diveroli was only twenty-one years old, an absurd fact on its face: How on earth was such a young man able to win a $300 million arms contract? For the DCIS, Diveroli must have looked like easy prey. Going after the serious fraud in Baghdad and Kabul was politically risky and physically dangerous. Pursuing cases there required travel to war zones. It required defying well-connected companies like General Dynamics and Boeing. It risked upsetting lobbyists, retired military officers who’d gone to work for Fortune 500 companies, and the congressmen who depended on the political donations of defense companies. Meddlesome investigations also could anger the Army itself, as an unnecessary distraction that might slow or stop desperately needed procurement contracts. In a time of war, all sorts of compromises needed to be made. Edicts had come down from the highest levels of government—perhaps even the White House—that law enforcement was not to interfere with the war effort.
By contrast, Efraim Diveroli had no political connections. He had no allies in the business. He had no lawyers or lobbyists. AEY was just down the road from the DCIS office in Tampa Bay—a safe and convenient car ride. The Global War on Terrorism was raging, and the DCIS needed to do its part—and a twenty-one-year-old with a bad reputation in the arms business looked like a perfect target: heedless, brazen, and defenseless.
Diveroli’s rivals got even luckier when the case was assigned to a special agent named Michael Mentavlos. A former Air Force major who’d become a law-enforcement agent as a second career, Mentavlos was in his midthirties, with a pasty complexion, dark hair, a humorless, by-the-book affect, and the glint in his eye of a true believer. Mentavlos had spent the six previous years at Immigration and Customs Enforcement. Along the way, he boasted how he’d mastered the reverse undercover sting. The term referred to a law-enforcement tactic of inventing a criminal conspiracy and then using undercover operatives to entice suggestible people into participating in the plot and thus breaking the law. The strategy was commonly used in terrorism cases, where confidential informants were planted inside mosques with conspiracies concocted by law-enforcement agencies. This was the technique Mentavlos hoped to use in procurement-fraud cases—to lure unsuspecting marks into breaking the law.
Mentavlos had recently started working at the DCIS, and he was looking to make a big case. To begin his investigation of Diveroli, Mentavlos contacted the Army’s Sustainment Command Center in Rock Island, Illinois, and requested copies of all AEY’s contracts, task orders, and end-user certificates—a request that was ignored for months. But by February 2007, as Diveroli and Packouz were swapping snorts of cocaine to celebrate their great good fortune in winning the Afghanistan contract, the investigation begun by Blane’s speculations was slithering through the DCIS with serpentine efficiency. Sitting in an office in Fort Lauderdale, Mentavlos had drafted an affidavit to justify federal agents’ raiding AEY’s headquarters. The DCIS was planning to seize all of AEY’s files and computers. The agency seemed to be looking for a crime—any crime. A fishing expedition was the legal term for such a venture.
On August 23, 2007, the DCIS was ready to make its move. First thing that morning, Mentavlos and other agents stormed AEY’s offices brandishing a search warrant and instructing the company’s employees to freeze and touch nothing, lest they tamper with evidence. A SWAT team was on standby—though law enforcement found only a small gathering of kids working the Internet.
August 23 was also the day David Packouz was to receive the first installment of his settlement payment from Diveroli. At ten in the morning, he got a call from Diveroli’s personal assistant, who said frantically, “The government just raided the office.”
“What? The government? Which agency? Why?”
“I’m not sure. They just walked in and told everyone to step away from their computers and to leave the office. They boxed up all the paperwork and took it away.”
“Holy shit. We are so fucked. Thanks for telling me. I really appreciate it.”
Packouz hadn’t been in the office for weeks, but he knew there were multiple reasons why AEY’s headquarters might be raided. He also knew what the likely explanation was—even if the DCIS knew nothing about the Chinese ammunition being repacked in Albania before the raid.
“I figured it had to be the Chinese ammo,” Packouz recalled. “I knew the e-mails about the Chinese repacking job were incredibly incriminating. I knew that once federal agents saw those, we’d be in trouble. We were so stupid. If we didn’t e-mail, we probably could’ve denied the whole thing. But there were names and dates. It was undeniable. I realized I was going to get caught no matter what I did, so I better turn myself in first.”
Packouz called his friend Alex Podrizki in Albania and told him about the raid. Packouz told Podrizki how the agents were going to find the e-mails about the Chinese ammo and how it might be a federal crime.
Sitting in his room in Tirana, Podrizki reeled. First he needed to know what had really happened in Miami. Podrizki phoned Danny Doudnik, who’d become his main contact at AEY. Podrizki didn’t mention that he knew about the raid; he was trying to see if Doudnik and Diveroli would tell him the truth. As they talked, Doudnik didn’t mention the raid, so he plainly was not going to level with him. Podrizki told Doudnik he needed a bunch of documents quickly. Doudnik said he was out of the office and didn’t have the papers with him and that it was going to take a while to get them.
“Why not go to the office?” Podrizki asked. “It’s urgent.”
The stress in Doudnik’s voice was palpable.
“What’s the matter?” Podrizki asked.
Podrizki could hear murmuring in the background. “Tell him there was a bomb threat,” he heard Diveroli whisper.
Doudnik repeated the lie.
“Are you guys okay?” Podrizki asked, feigning concern.
“It’s okay,” Doudnik said.
Podrizki hung up. He had to make a plan. Now. The Albanian police could be outside his door, for all he knew. First, he needed to get out of Albania and away from what suddenly appeared to be a crime scene at the repacking operation at the airport. Catching a plane was too risky, Podrizki decided. He was too well known at the airport. Leaving his meager belongings behind, he caught a cab to the edge of Tirana and got out. After the cab had driven away, he hailed another and directed the driver to take him to the port city of Durrës. Podrizki was now off the grid: no one would know where he was.
At Durrës, Podrizki bought a ticket for the ferry to Italy. He paid cash. As the ship put out to sea, he sat in the bar downing raki after raki and considered running to a country that had no extradition treaty with the United States. He replayed events from the past few months. He recalled how strange it was that Diveroli hadn’t gone to the airport to see the repacking when he was in Albania. He remembered how Diveroli had borrowed his laptop for half an hour one day. Now he realized that Diveroli could’ve planted incriminating evidence on the hard drive. Diveroli could have been scheming to lay the whole repacking plot on Podrizki. There was no way of knowing how ruthless Diveroli could be. It was every man for himself, Podrizki realized.
Podrizki stepped out of the bar onto the deck of the ferry. He looked around to be sure no one was watching. He quietly slipped his laptop overboard, the computer disappearing into the black Adriatic Sea.
In Miami, David Packouz hired a lawyer and tried to figure out if he had a defense. Was the repacking really illegal? Was the ammo really “Chinese”? Did the federal government know it was receiving Chinese ammo? He had many possible arguments he could try to make, Packouz’s lawyer said. But it was extremely expensive to mount a legal defense against the limitless resources of the federal government.
“You got two options,” the lawyer said. “You can fight, which is going to cost a minimum of two hundred thousand dollars. Or you can plead guilty. Your parents got a house they can put a second mortgage on?”
“I’m not doing that to my parents,” Packouz said. “What about a public defender?”
“You mean ‘public pretender.’ You’ll be one of two hundred cases he’s working. You’ll be lucky if he remembers your name.”
“You’re saying I can only effectively defend myself if I have lots of money?”
“That’s the system—how much justice can you afford.”
“What happens if I plead guilty?”
“You become the government’s bitch. Pretty much, you’re pulling down your pants and begging them not to fuck you too hard.”
“But I’m already bent over.”
“The way of the world.”
The lawyer arranged for a sit-down with Michael Mentavlos of the DCIS. An agent from the Immigration and Customs Enforcement agency named Oscar Garcia was working the case with Mentavlos. Garcia was older, near retirement, a veteran. Garcia led the meeting. He explained to Packouz that he had to confess to every crime he’d committed. A guilty plea applied to all possible forms of guilt.
“Keep in my mind we have all of AEY’s files, computers, and e-mail accounts,” Garcia said. “We’re going to find everything eventually. If you omit anything or lie about anything, we’ll come down on you like a ton of bricks.”
“What if I forget something?” Packouz asked.
“Then it’ll be a judgment call for us. Don’t put us in that position.”
Packouz had prepared with his lawyer. He might be charged with fraud, he understood, but his lawyer believed that with a full confession he might be able to avoid indictment. Packouz spoke slowly as he tried to recall everything he’d seen and done that might possibly be illegal. He told them how Diveroli had ordered him to falsify documents to send to arms companies in Bulgaria and Albania. He described the bait-and-switch tactics Diveroli used with Army procurement officers, bidding with brand-name Belgian guns and then persuading them to accept cheap Korean knockoffs. He told them about Diveroli’s Save the King Package and the attempt to sell arms to Nepal. The investigators took careful notes. Mentavlos had a habit of frowning at Packouz, as if trying to intimidate him.
“Now I’ll tell you the thing that makes me most nervous,” Packouz said.
“Saving the best for last, huh?” Garcia said.
Packouz laid out how AEY had repacked the ammunition in Albania—the Chinese markings, the weight of the pallets and crates, the way they’d changed the packaging of the AK-47 ammo, first to save money, then to save the contract.
Mentavlos and Garcia exchanged a glance and burst out laughing.
“If it makes you feel any better, we already know about the Chinese ammo,” Garcia said. “We found a to-do list in Diveroli’s papers, and one of the items was ‘Repackage Chinese ammo.’ ”
“That sounds incriminating,” Packouz said.
“No kidding.” Garcia laughed. “Now this is very important. I want you to think hard. Did any government official know about what you were doing? Were they involved, getting paid or anything else?”
“Not that I know of.”
Afterward, Packouz prayed he wouldn’t get indicted. He prayed he wouldn’t go to prison, though he’d been told he could face years behind bars. The prospect of doing time in a federal penitentiary because of repacked “Chinese” ammo seemed crazy to Packouz—and Garcia seemed to agree, though he was careful not to make any promises. Packouz’s lawyer said he felt that he could deal with Garcia—he was mature and levelheaded. But Mentavlos was another matter—he seemed unpredictable.
Packouz was now at the mercy of the government. So was Alex Podrizki, who’d returned to Miami, hired a lawyer, and confessed all to the federal agents. Special Agent Mentavlos promised to “go to bat” for them both. Diveroli was his real target, Mentavlos said. But Packouz and Podrizki thought there was something sinister in Mentavlos’s gung ho attitude.
Packouz wanted to know what he could do to make a living—could he still work on arms deals? Mentavlos said that he could, provided he didn’t break the law. Relieved, Packouz said he was working on a lead to sell a large number of AK-47s to a Nigerian colonel. A Serbian company was going to supply the weapons.
“Very interesting,” Mentavlos said, sniffing the chance of making another case. He suggested Packouz help him set up a sting operation against the Nigerian. Packouz figured Mentavlos had simply assumed that the Nigerian had to be a fraudster—with no evidence whatsoever.
“Can you tell the Nigerian you’ve got a better source in the States?” Mentavlos asked. “Invite him here. We can set up a warehouse filled with AKs and bust him. That would really help your case.”
“What?” Packouz asked. “The guy’s totally legit. He’s planning on going to Serbia any day to inspect the guns with Nigeria’s top brass.”
Mentavlos laughed. “Trust me. The guy’s not legit. Can you set up a deal like that?”
“Everyone knows the cheapest prices for Eastern Bloc ammo come from Warsaw Pact countries. They’d never believe I got a better price in America.”
“Okay. But you can’t do the deal. You’re an important witness in our case and we can’t have you getting in trouble.”
Packouz was crushed. The deal was perfectly legal. He’d obtained the necessary licenses and was counting on the $200,000 in profit he would make from the transaction, not least to pay his legal fees. The Nigerian deal also promised to lead to other African deals. But Mentavlos had killed that opportunity for no apparent reason, other than an unfounded assumption of criminal activity.
“Mentavlos wanted me to do a fake sting deal,” Packouz recalled. “I didn’t think the Nigerian was a criminal or a fraud. It seemed to me that Mentavlos would do anything to make a case. He wasn’t trying to solve crimes—he was making them up. I thought it was pretty disgusting coming from someone with so much power.”
As part of Packouz’s cooperation deal, the DCIS put Packouz to work going through more than one hundred thousand e-mails, looking for evidence that further incriminated Diveroli. Day after day, Packouz read AEY’s e-mail archives with amazement. Packouz read how Diveroli had attempted to squeeze Ralph Merrill out of the deal and then hide his profit margins from the older man. Merrill obviously had no idea of Diveroli’s true margins or business practices.
The DCIS was delighted with Packouz’s diligence. “You’ve saved us a lot of time and legwork,” Mentavlos said. “All the agents here are fully supportive of keeping you and Podrizki out of the indictment.”
“So Alex and I won’t be indicted?” Packouz asked.
“We’ll sure do everything we can for you guys. It’s not up to us, of course. But they usually listen to what we have to say, so I’d say it’s looking good for you guys.”
“Wow. That’s a huge relief.”
“But that’s contingent on us continuing to receive the same level of support and honesty from you.”
“I’m one hundred percent on board. There’s no going halfway on this.”
Packouz reenrolled in college and now aimed to complete a degree in science. But he was stone-cold broke and running up large legal bills; dealing with the DCIS required his lawyer to read through evidence and prosecution documents, even if he was never indicted, which was proving to be extremely expensive. To make a few bucks, Packouz was working as a masseur again, but he still had to figure out a way to support himself and his daughter.
Meanwhile, Diveroli was still rolling in money, Packouz knew, because of the millions he’d made with AEY, much of it legitimate earnings. Packouz reasoned that he’d missed out on his payment from Diveroli by a matter of hours—why not try to get at least some cash? He’d done perfectly legal deals with Diveroli—gun parts, scrap metal, propane for the Army. Leaving aside the Afghanistan deal, Packouz figured he was owed $17,000—money he needed badly.
Packouz called one of Diveroli’s cousins and a meeting was arranged. The two estranged friends hadn’t talked in months. After the raid, Diveroli had wondered if Packouz had betrayed him and snitched to the DCIS. Diveroli had finally decided Packouz wouldn’t act against his best economic interests and jeopardize the money he had coming.
As they greeted each other, Diveroli behaved as if they were still best friends, giving Packouz a bear hug. A bong was produced and Packouz was offered a hit. He played along. Diveroli seemed just as cocky as ever, eager to pump him for information.
“Crazy shit going down, eh?” Diveroli said.
“Crazy,” Packouz said, looking up from the bong.
“The government try to contact you?”
“I told them to talk to my lawyer,” Packouz lied.
“Excellent! That’s the way to handle these bastards. You can’t let them run you over. If they smell blood in the water, they go into a feeding frenzy.”
“You think you can freeze them out?” Packouz asked.
“I’ve got the best damn lawyers money can buy working on it. I’m going to crush those motherfuckers.”
“You still delivering on the contract from Albania?”
“You think a federal investigation is going to slow us down? You know how we roll.”
“Just be careful, dude. Sounds like serious trouble.”
“Listen, buddy, you keep your head down and this shitstorm is going to pass. They’ll forget about us. Then you and I can settle our business and you’ll get the money you rightly deserve.”
“I hope so.”
Leaving the apartment, Packouz decided he should tell Mentavlos that he’d met with Diveroli. The investigator was furious. He ordered Packouz to tell him of any future meetings with Diveroli.
“Mentavlos wanted me to wear a wire on Diveroli,” Packouz recalled. “In my mind, telling the government everything that had happened was one thing. But entrapping someone, even Diveroli—that was a whole new low. I wasn’t willing to play along with Mentavlos’s schemes, even though I could see that it would be in my interests. Mentavlos seemed like he’d do anything to get Diveroli.”
The prospect of going to prison gave Packouz a new direction in life. All the fights with his girlfriend now seemed trivial. They’d reunited and were focused on their daughter, with Packouz taking the lead in child care.
“There’s nothing like hardship to bring people together,” Packouz said. “I savored spending as much time with my daughter as possible.”
But darker voices still beckoned Packouz. He had his company, Dynacore, and the knowledge he’d obtained working with Diveroli. He’d lost the Nigerian deal, but mankind’s thirst for weapons was never slaked, and Packouz figured he should try to cash in. The business was perfectly legal, after all, and it offered the chance to make a lot of money quickly. Packouz found a financier who was willing to back him on FedBizOpps deals, anything up to $5 million, which put Packouz back in the game. He was aiming to become an arms dealer in his own right. Like Henri Thomet. Like Diveroli.
“I told myself I’d make a few million—five was my goal—then I’d kick back and do what I loved to do,” Packouz recalled. “I’d make music, play with my daughter, travel. But now I doubted that I’d stop if I reached the five-million-dollar mark. Diveroli already had that much money and it hadn’t stopped him. He still worked like a dog. Once you’re making millions, a large part of you is only concerned with making money. You want more and more. You make money for the sake of making money. I was afraid that was what I would become.”
I. Moshe Schwartz, “Wartime Contracting in Afghanistan: Analysis and Issues for Congress” (CRS, 2011).
II. John T. Tierney, “Warlord, Inc.: Extortion and Corruption Along the U.S. Supply Chain in Afghanistan” (Congressional Subcommittee on National Security and Foreign Affairs, 2010).
III. Aram Roston, “How the US Funds the Taliban,” Nation, November 11, 2009.
IV. Aram Roston, “Congressional Investigation Confirms: US Military Funds Afghan Warlords,” Nation, June 21, 2010.