Team Infidel
Forum Spin Doctor
New York Times
June 21, 2008
Pg. 8
By Eric Schmitt
WASHINGTON — The 22-year-old president of a Miami Beach arms-dealing company and three other people were charged Friday with selling prohibited Chinese ammunition to the Pentagon to supply Afghan security forces, federal officials said.
A federal grand jury in Miami indicted the munitions dealer, Efraim E. Diveroli, president of AEY Inc., as well as two former employees and a business associate, on charges of fraud and conspiring to misrepresent the types of ammunition they sold to the Defense Department as part of a $298 million Army contract.
According to the indictment, Mr. Diveroli, his colleagues and the company sought “to unjustly enrich themselves” by shipping aged Chinese rifle cartridges to Afghanistan after claiming they were made in Albania. The Army contract and American law prohibit trading in Chinese arms.
A lawyer for Mr. Diveroli in Miami, Howard Srebnick, disputed the accusations in an e-mail message, saying that the American ban applies only to Chinese arms bought after 1989, in response to the crackdown on pro-democracy protesters in Tiananmen Square, and that AEY bought ammunition from Albania that was manufactured in China in the 1960s and 1970s.
The charges cap a federal criminal investigation that began last year into the dealings of the fledgling company and its group of 20-something executives. The American military relied on them to be a principal supplier of ammunition to the Afghan security forces.
In March, the Army suspended Mr. Diveroli and the company from future federal contracts, contending that he sent a different shipment of Chinese cartridges to Afghanistan after certifying that they were made in Hungary. A month later, the State Department suspended the company’s international export activities, blocking its other business.
“This is a sobering development,” Representative Henry A. Waxman, a California Democrat who leads the House Oversight and Government Reform Committee, said in a statement on Friday. “The more we learn about AEY, the more questions we have.”
Before the charges were announced, the committee had said it would hold a hearing next Tuesday on AEY’s activities.
In addition to Mr. Diveroli, the indictment on Friday named David Packouz, a licensed massage therapist who is AEY’s former vice president; Alexander Podrizki, the company’s former representative in Albania; and Ralph Merrill, a business associate of Mr. Diveroli in Utah who gave the company financial and managerial assistance.
A lawyer for Mr. Packouz, Ken Kukec, declined to comment on the charges. Mr. Merrill did not return telephone calls, and Mr. Podrizki could not be reached for comment by late Friday.
In January 2007, the Army awarded AEY a contract, potentially worth $298 million, that made it the primary munitions supplier for Afghan security forces in the fight against Al Qaeda and the Taliban.
According to the indictment, the contract required AEY to certify that it was providing “serviceable and safe ammunition.” The Army contract also banned supplying ammunition acquired “directly or indirectly from a Communist Chinese military company.”
But the charges accuse the AEY employees and the associate of providing “instructions and guidance” on how to remove Chinese markings from the ammunition, to conceal its origins. With each shipment to Afghanistan, the charges say, Mr. Diveroli falsely certified that the Chinese rifle and machine-gun cartridges were manufactured in Albania.
Federal authorities said that based on these false submissions, the Army paid AEY about $10.3 million for 35 shipments of Chinese ammunition.
An examination by The New York Times earlier this year uncovered documents from Albania that showed that AEY bought more than 100 million Chinese cartridges that had been stored for decades in former cold war stockpiles. Mr. Diveroli then arranged to have them repacked in cardboard boxes, many of which split or decomposed after shipment to the war zones. Different lots or types of ammunition were mixed. In some cases the ammunition was dirty, corroded or covered with a film.
June 21, 2008
Pg. 8
By Eric Schmitt
WASHINGTON — The 22-year-old president of a Miami Beach arms-dealing company and three other people were charged Friday with selling prohibited Chinese ammunition to the Pentagon to supply Afghan security forces, federal officials said.
A federal grand jury in Miami indicted the munitions dealer, Efraim E. Diveroli, president of AEY Inc., as well as two former employees and a business associate, on charges of fraud and conspiring to misrepresent the types of ammunition they sold to the Defense Department as part of a $298 million Army contract.
According to the indictment, Mr. Diveroli, his colleagues and the company sought “to unjustly enrich themselves” by shipping aged Chinese rifle cartridges to Afghanistan after claiming they were made in Albania. The Army contract and American law prohibit trading in Chinese arms.
A lawyer for Mr. Diveroli in Miami, Howard Srebnick, disputed the accusations in an e-mail message, saying that the American ban applies only to Chinese arms bought after 1989, in response to the crackdown on pro-democracy protesters in Tiananmen Square, and that AEY bought ammunition from Albania that was manufactured in China in the 1960s and 1970s.
The charges cap a federal criminal investigation that began last year into the dealings of the fledgling company and its group of 20-something executives. The American military relied on them to be a principal supplier of ammunition to the Afghan security forces.
In March, the Army suspended Mr. Diveroli and the company from future federal contracts, contending that he sent a different shipment of Chinese cartridges to Afghanistan after certifying that they were made in Hungary. A month later, the State Department suspended the company’s international export activities, blocking its other business.
“This is a sobering development,” Representative Henry A. Waxman, a California Democrat who leads the House Oversight and Government Reform Committee, said in a statement on Friday. “The more we learn about AEY, the more questions we have.”
Before the charges were announced, the committee had said it would hold a hearing next Tuesday on AEY’s activities.
In addition to Mr. Diveroli, the indictment on Friday named David Packouz, a licensed massage therapist who is AEY’s former vice president; Alexander Podrizki, the company’s former representative in Albania; and Ralph Merrill, a business associate of Mr. Diveroli in Utah who gave the company financial and managerial assistance.
A lawyer for Mr. Packouz, Ken Kukec, declined to comment on the charges. Mr. Merrill did not return telephone calls, and Mr. Podrizki could not be reached for comment by late Friday.
In January 2007, the Army awarded AEY a contract, potentially worth $298 million, that made it the primary munitions supplier for Afghan security forces in the fight against Al Qaeda and the Taliban.
According to the indictment, the contract required AEY to certify that it was providing “serviceable and safe ammunition.” The Army contract also banned supplying ammunition acquired “directly or indirectly from a Communist Chinese military company.”
But the charges accuse the AEY employees and the associate of providing “instructions and guidance” on how to remove Chinese markings from the ammunition, to conceal its origins. With each shipment to Afghanistan, the charges say, Mr. Diveroli falsely certified that the Chinese rifle and machine-gun cartridges were manufactured in Albania.
Federal authorities said that based on these false submissions, the Army paid AEY about $10.3 million for 35 shipments of Chinese ammunition.
An examination by The New York Times earlier this year uncovered documents from Albania that showed that AEY bought more than 100 million Chinese cartridges that had been stored for decades in former cold war stockpiles. Mr. Diveroli then arranged to have them repacked in cardboard boxes, many of which split or decomposed after shipment to the war zones. Different lots or types of ammunition were mixed. In some cases the ammunition was dirty, corroded or covered with a film.