by Guy Lawson
According to the government, Merrill was the mastermind of the fraudulent repacking program, not a financier who’d been kept in the dark about AEY’s plans. His first trial resulted in a hung jury. At the second trial, he was convicted. At both of Merrill’s trials, the prosecution showed the jurors scores of photographs of the “Chinese” ammunition to impress upon them that Merrill had defrauded the government.
“Generally, what would you say the condition is of these rounds of ammunition?” Merrill’s lawyer asked the State Department’s leading expert on small-caliber ammunition.
“They’re in good condition,” the expert said.
“Do you have any reason to believe these rounds wouldn’t operate properly?”
“No, I do not.”
“If you took one of these rounds and put it in an AK-47 and pulled the trigger, would you expect the bullet to be projected from the barrel?”
“I actually did that test,” the expert replied.
“What did the test result show?”
“I took the oldest ammunition—which was from 1958—and one of the most recent rounds, from 1974, and I test-fired them. They fired as they were designed to fire.”
But this evidence counted for nothing. Merrill spent more than a million dollars on his defense and lost his business and life savings. At the time of this writing, he was serving a four-year sentence in federal prison and working on a petition to overturn the convictions of all four AEY defendants.
As David Packouz awaited sentencing, he started advertising his massage services on Craigslist again. Fearful that he would be sent to prison, Packouz took a job as a volunteer at a local charity in Miami Beach, hoping to impress the judge with a sign of his remorse. He also spent his spare time refining the songs he was writing for his album, Microcosm.
Once a week or so, Packouz went out to sing karaoke. One evening at the bar called Studio, in South Beach, he ran into his old friend and business partner Efraim Diveroli. Packouz had heard that Diveroli was still living hard, consuming vast amounts of alcohol and cocaine. This evening, Diveroli was in high spirits, drinking at the bar with his new girlfriend. He greeted Packouz warmly and bought a round of shots.
“To everyone getting off easy,” Diveroli said, offering a toast. “And to putting this behind us.”
The pair clinked shot glasses.
“Can we ever be friends again?” Diveroli asked.
“Are you going to pay me?”
“What we agreed, okay?”
Diveroli got up to sing, employing his usual fake rock-star bravado on Everclear’s “I Will Buy You a New Life.”
/ / / / /
Alex Podrizki and David Packouz were spared prison sentences; both were placed under house arrest for a number of months. Standing before Judge Lenard, Packouz expressed regret for the “embarrassment, stress, and heartache that I have caused.” But Packouz’s real regret was political in nature: he believed that he and Diveroli and the others were scapegoats, prosecuted not for breaking the law but for making the government of the United States look bad on the front page of the New York Times.
“We were the Army’s favorite contractors when we got the deal—poster boys for President Bush’s small-business initiative,” Packouz said. “We saved the government millions. The ammunition we shipped was truly vital to the mission in Afghanistan. We were living the American dream, until it turned into a nightmare.”
/ / / / /
In January 2011, Efraim Diveroli appeared in federal court in Miami to be sentenced. He was dressed in a tan, prison-issued jumpsuit. The court was packed with his relatives, who sat in silence as a rabbi said Diveroli had offered to pay him $1 million if he could say something to convince the judge to keep him out of prison. “Efraim needs to go to jail,” the rabbi said. Diveroli’s mother concurred: “I know you hate me for saying this, but you need to go to jail.” Diveroli’s shoulders slumped as he stood and described his regrets to Judge Lenard. When prison guards saw his file, he said, they often asked in amazement how such a young person had managed to win such a huge contract. “I have no answer,” Diveroli told the court. “I 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—and there were some—cannot make up for the damage.”
The judge gazed at Diveroli for a long time. “If it wasn’t so amazing, you would laugh,” she said. Four years was the sentence imposed.
The Miami hearing was not the end of Diveroli’s criminal woes. As a convicted felon, he was barred from selling arms—or even so much as holding a gun. But he was sitting on millions of rounds of perfectly legitimate ammunition stored in warehouses in America. Diveroli couldn’t transact with the government, but that didn’t mean he couldn’t put his money to work.
Characteristically, Diveroli had a solution. In March of 2008, before he was indicted, he’d incorporated a company called Ammoworks. Since then, he’d used the company as a legal entity to sell ammunition to the general public. Diveroli called himself a “consultant” and had business associates conduct the actual transactions, a classic gunrunner evasion. In the spring of 2010, while awaiting sentencing, the irrepressible Diveroli contacted a gun dealer to see if he was interested in buying Korean-made ammunition magazines. The gun dealer was suspicious when Diveroli told him that he was banned from doing business with the federal government because he’d sold Chinese ammo to the Army. Diveroli was behaving legally, in all likelihood, as the magazines only fed the ammunition into the gun and thus didn’t qualify as a weapon. But the deal kept him neck-deep in the duplicitous world of arms dealers, where the perils were often invisible and consequences unpredictable.
Concerned that Diveroli was breaking the law, the gun dealer reported Diveroli to the Bureau of Alcohol, Tobacco, Firearms, and Explosives. When the ATF ran Diveroli’s name and realized that it had chanced upon the notorious arms dealer behind one of the largest federal fraud causes in recent years, the agency scarcely believed its good fortune. Diveroli unwittingly became the target of a reverse sting operation—instead of capturing him breaking the law, investigators would try to lure him into acting illegally.
For weeks, an ATF undercover agent posing as an arms dealer tried to wheedle Diveroli into selling him guns. Diveroli refused, telling the undercover agent about his legal woes and describing himself as a “convicted felon” who couldn’t trade in arms anymore.
The ATF persisted: Diveroli’s avowed desire not to break the law wouldn’t stop law enforcement from seducing him toward their ends. As federal agents secretly recorded his conversations, Diveroli couldn’t resist bragging about his exploits; he talked about hunting alligators and hogs in the Everglades with a .50-caliber, muzzle-loaded rifle. He boasted about the millions of dollars he’d made as an arms dealer, and how he owned pallets of ammunition, and that he could broker deals—but he wouldn’t actually take delivery of any arms for fear of breaking the law.
Finally, the ATF agent enticed Diveroli to a meeting in a parking lot, asking him to provide guns to test the magazines. Diveroli didn’t bring any weapons, as it would be against the law—once again refusing to cross the line. But the undercover ATF agent had a solution. He popped open the trunk of his car, where he had a small arsenal of arms, and handed Diveroli a Glock 9 mm semiautomatic pistol. The temptation was too much. Adopting his best tough-guy swagger, Diveroli cleared the chamber, to make sure it was unloaded, and inspected the weapon.
As always, the twenty-four-year-old arms dealer was the star of his own Hollywood movie. He’d tried not to break the law. But every time he tried to stop acting like a big-time arms dealer, he was pulled back—this time earning an extra two years in prison—a sentence he completed in the fall of 2014.
“Once a gunrunner,” Diveroli told the ATF agent, “always a gunrunner.”
Comrades in arms: David Packouz and Efraim Diveroli at the American Gun Range, Miami, 2006.
&
nbsp; Packouz at the Eurosatory arms show, Paris, playing war, 2006.
Diveroli at Eurosatory, Paris, 2006.
When Alex Podrizki arrived in Albania in April of 2007, he discovered much of the ammunition had been manufactured in China decades earlier.
Despite its age, the ammunition was in surprisingly good condition.
To disguise the Chinese origin of the ammo, the rounds were taken from their original packaging.
The ammo was put into lightweight cardboard boxes and palletized to be shipped from Albania to Afghanistan.
The Albanian arms company MEICO was run by an official named Ylli Pinari. Credit: Gent Shkullaku
The Albanian minister of defense Fatmir Mediu. Credit: Gent Shkullaku
A businessman named Mihail Delijorgji apparently outranked the defense minister on the pricing of the ammo. Credit: Gent Shkullaku
Also involved, the dudes discovered, was the prime minister’s son, Shkelzen Berisha. Credit: Gent Shkullaku
The repacking was being done by an Albanian businessman named Kosta Trebicka.
Until Trebicka was kicked off the deal and went to the New York Times and federal prosecutors in America with claims of corruption involving powerful Albanians—and was soon found dead. Credit: Gent Shkullaku
Because of a lack of safety precautions in a deal run by the same politicians selling ammo to AEY, an ammunition dump in the Albanian village of Gërdec exploded, killing twenty-six civilians. Credit: Gent Shkullaku
On March 27, 2008, a front-page story in the New York Times appeared with a photograph of ammo AEY shipped to Afghanistan—though the rounds pictured weren’t Chinese and they weren’t from Albania.
The mug shots of Packouz and Diveroli that appeared in the New York Times. Credit: Miami-Dade Police Department
/ / / / / / ACKNOWLEDGMENTS / / / / / /
I would like to thank David Packouz and Alex Podrizki for telling me their stories. Likewise, I’m grateful to Efraim Diveroli for sharing as much of his tale as his lawyers would allow. The fourth defendant, the financier Ralph Merrill, was swept up by events nearly entirely beyond his control; I hope he feels that he has received a measure of justice by finally having the whole tale told.
Miami criminal attorney Ken Kukec provided the initial entrée to this case and I am grateful for his belief in me. I was also helped to navigate treacherous legal waters by defense lawyers Nathan Crane, Peter Stirba, Hy Shapiro, and Cynthia Hawkins. To assist me in understanding the inner workings of the global arms trade, Colby Goodman of the Center for International Policy provided invaluable insights, as did Hugh Griffith of the Stockholm International Peace Research Institute. Nick Wood was generous describing the background to his reporting in Albania for the New York Times, and Sharon Weinberger of the Woodrow Wilson International Center for Scholars was kind enough to share sources and leads. On the intricacies of life and death in Albania, I was guided by Gary Kokolari, Erion Veliaj, Gjergj Thanasi, Theo Alexandridis, and Dorian Matlija. Genta Trebicka also provided assistance; she and I both hope the truth about her father’s death will one day be revealed.
This adventure began in midtown Manhattan, at lunch with my editors at Rolling Stone, Eric Bates and Will Dana. I thank them for their support, intelligence, and wit. I am also grateful to Alison Weinflash and Sacha Lecca at the magazine, along with the irrepressible owner Jann Wenner for providing a venue for this kind of journalism.
Many people had a hand in crafting this book. Three editors at Simon & Schuster worked with me: Karen Thompson started the project, Karyn Marcus helped shape the narrative, and Emily Graff saw it through to completion. I am grateful to all three for their care and diligence and creativity. Jonathan Karp acquired the book and provided an insightful and patient voice during the difficult days every author encounters; his sense of humor and proportion were vital and very much appreciated. I couldn’t ask for a better publicist than Larry Hughes, and the marketing efforts of Cary Goldstein and social media campaign of Elina Vaysbeyn were exemplary. The manuscript required a careful legal edit, and Elisa Rivlin more than rose to the occasion. Publishing truly is a team sport and I am grateful for the efforts of all involved.
Finally, I would like to thank my siblings—Ben, Liza, Hugh—the Kaimal clan, the Arons, the O’Learys, Merrily Weisbord, Scott Anderson, Barry Berman, Charles Foran, the awesome gang at MKFIF, and all the many great friends who provide encouragement and laughter. To the smart, strong, and beautiful women in my life—to Lucy, to Anna, and to Maya—my love and gratitude are forever yours.
© FRANCO VOGT PHOTOGRAPHY
GUY LAWSON is a New York Times bestselling author and award-winning investigative journalist whose articles on war, crime, culture, and law have appeared in The New York Times Magazine, GQ, Harper’s, and many other publications. His Rolling Stone article on this story was a finalist for a National Magazine Award. He lives in New York with his wife and two daughters.
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/ / / / / / INDEX / / / / / /
A note about the index: The pages referenced in this index refer to the page numbers in the print edition. Clicking on a page number will take you to the ebook location that corresponds to the beginning of that page in the print edition. For a comprehensive list of locations of any word or phrase, use your reading system’s search function.
Abu Dhabi, 88–93, 157, 211
Abu Ghraib prison, 38
Acosta, Alexander, 233
aerial rockets, xiii
AEY:
accounting procedures as lacking in, 82, 84
AK-47 ammo contracts of, see AK-47 ammunition, Army Task Order 002 for; AK-47, Army Task Order 005 for
Blane’s accusations of fraud by, 176, 179, 194
board of directors meeting of, 73–74
Bosnian AK-47s shipped by, 21–22
Chivers’s investigation of, 163–65, 175, 194–99
Colombian army contract of, 42–43
competitors’ slandering of, 54, 100, 175
contract defaults by, 53–54
DCIS investigation of, 175, 176–79, 182–87, 189–94
DCIS raid on offices of, 179–80
on DDTC watch list, 81–82
Diveroli’s aunt hired by, 54–55
Diveroli’s dysfunctional micromanagement of, 108, 167, 169, 211
and Diveroli’s mastery of defense bidding process, 6, 7–9, 20, 35–36
failed Xbox deal of, 33–35
financing problems of, 18–19, 34–35
fraud charges against, xv, xvi
grenade contract of, see grenades, Army Task Order 001 for
growing business of, 26
headquarters of, 33
helmet contract of, 17–19, 38–39, 53
Iraq War contracts of, 17, 19–21, 23–25, 35–39, 42, 47–48, 50–54, 58, 62, 80, 82–83, 97, 107, 152–53, 194
as lacking experience in fulfilling large contracts, 6
Merrill’s first deal with, 18–19
Nepal deal of, 43–44, 182
night-vision goggle contract of, 36–37
Packouz recruited into, 30–33
payments to suppliers withheld by, 109
performance record of, 38, 82–83, 118–19
Podrizki hired as logistics coordinator for, 108–9
political connections lacked
by, 123, 125, 145, 178, 225
as proxy in Army’s deals with gunrunners, 50–51, 71, 164–65, 224, 225
small FedBizOpps contracts won by, 10
staffing increases in, 88, 95–96, 167
suspended from further government contracts, 219–20
Thomet’s deals with, 19, 21–22, 24, 44, 47–49, 50, 51, 61, 69, 70–72, 86
Wells Fargo factoring agreement with, 85, 168
see also Diveroli, Efraim; Packouz, David; Podrizki, Alex
Afghanistan:
attempted assassination of Karzai in, 151
Korangal Valley in, 120
Kunar Province in, 151
land-based supply routes to, 101–2
US arming of anti-Soviet mujahideen in, 58–59, 90–91
Afghanistan War, xiii–xiv, 83, 120, 126, 206
Bishkek airport as strategic staging point for, 4, 147
Bush administration and, 56–57, 58, 59, 80
fraud and waste in, 173–74, 188