Team Infidel
Forum Spin Doctor
Washington Post
June 25, 2008
Pg. 6
Company Accused of Fraud Had Been Flagged by State Dept
By Walter Pincus, Washington Post Staff Writer
AEY Inc., the company run by a 22-year-old Miami Beach arms dealer who was indicted last week for conspiring to defraud the government on a $298 million Pentagon contract in 2007, was on a State Department watch list for suspicious international dealings the year before that contract was awarded, according to testimony before Congress yesterday.
Both AEY and its president, Efraim E. Diveroli, were listed because they had been under investigation since July 2005 because of suspicion of "numerous violations of the Arms Export Control Act and contract fraud," according to a report released by the House Committee on Oversight and Government Reform at yesterday's hearing.
But Defense Department contracting officials were not aware of the listing because the two agencies did not regularly share such data, according to defense and State Department officials who appeared at the hearing.
Diveroli and four associates were indicted for conspiring to conceal that ammunition they were supplying to Afghanistan under a Pentagon contract had originated in China and not Albania as they were certifying. U.S. law prohibited providing Chinese-made arms and ammunition under the contract.
Yesterday's committee report said that at least seven defense and State Department contracts with Diveroli's company had been terminated for non-performance before the company was awarded the contract to deliver $298 million worth of ammunition to Afghanistan military units. Pentagon officials said that earlier notices describing AEY's failures were not circulated to contracting officers because the amounts involved were below $5 million.
During the hearing, the State Department and Pentagon officials said they would look into sharing data. They also said that the Pentagon is changing several practices, including a change that would circulate termination notices regardless of the contract price.
"The AEY contract shows that the procurement process at the Department of Defense is dysfunctional," said Rep. Henry A. Waxman (D-Calif.), the committee chairman. He pointed out that the ammunition being sought for Afghanistan was surplus in former Warsaw Pact countries that are allied with the U.S. coalition in Iraq and Afghanistan. "It appears that the Army agreed to pay $300 million for ammunition it could have gotten for free."
Rep. Darrell Issa (R-Calif.) picked up the same theme. "Wasn't this an unnecessary contract?" he asked the officials. Brig. Gen. William N. Phillips said that because the United States had entered into an agreement with Afghanistan to supply weapons, "we are required by statute and by federal regulations . . . [to] use specific policies and procedures."
"That essentially locked out the ability for our NATO allies, who had large stockpiles, from being the suppliers," Issa responded.
The committee's report also disclosed that the official who awarded the $298 million contract had upgraded AEY's performance rating in one category to "good" from "unsatisfactory." According to the panel's report, the contracting officer told committee investigators she had disagreed with the prior rating and without her change AEY "would not [have] gotten the award."
In a related matter, State Department spokesman Tom Casey told reporters yesterday that the department's inspector general has been asked to examine allegations that the U.S. ambassador in Albania was aware that Chinese ammunition was being shipped by AEY to Afghanistan and that the department had withheld that information from the committee.
Casey said that Ambassador John L. Withers II, a 24-year veteran Foreign Service officer, had released a statement in the Albanian capital Tirana saying that when all inquiries are completed, he and his staff will be shown to have "acted appropriately."
June 25, 2008
Pg. 6
Company Accused of Fraud Had Been Flagged by State Dept
By Walter Pincus, Washington Post Staff Writer
AEY Inc., the company run by a 22-year-old Miami Beach arms dealer who was indicted last week for conspiring to defraud the government on a $298 million Pentagon contract in 2007, was on a State Department watch list for suspicious international dealings the year before that contract was awarded, according to testimony before Congress yesterday.
Both AEY and its president, Efraim E. Diveroli, were listed because they had been under investigation since July 2005 because of suspicion of "numerous violations of the Arms Export Control Act and contract fraud," according to a report released by the House Committee on Oversight and Government Reform at yesterday's hearing.
But Defense Department contracting officials were not aware of the listing because the two agencies did not regularly share such data, according to defense and State Department officials who appeared at the hearing.
Diveroli and four associates were indicted for conspiring to conceal that ammunition they were supplying to Afghanistan under a Pentagon contract had originated in China and not Albania as they were certifying. U.S. law prohibited providing Chinese-made arms and ammunition under the contract.
Yesterday's committee report said that at least seven defense and State Department contracts with Diveroli's company had been terminated for non-performance before the company was awarded the contract to deliver $298 million worth of ammunition to Afghanistan military units. Pentagon officials said that earlier notices describing AEY's failures were not circulated to contracting officers because the amounts involved were below $5 million.
During the hearing, the State Department and Pentagon officials said they would look into sharing data. They also said that the Pentagon is changing several practices, including a change that would circulate termination notices regardless of the contract price.
"The AEY contract shows that the procurement process at the Department of Defense is dysfunctional," said Rep. Henry A. Waxman (D-Calif.), the committee chairman. He pointed out that the ammunition being sought for Afghanistan was surplus in former Warsaw Pact countries that are allied with the U.S. coalition in Iraq and Afghanistan. "It appears that the Army agreed to pay $300 million for ammunition it could have gotten for free."
Rep. Darrell Issa (R-Calif.) picked up the same theme. "Wasn't this an unnecessary contract?" he asked the officials. Brig. Gen. William N. Phillips said that because the United States had entered into an agreement with Afghanistan to supply weapons, "we are required by statute and by federal regulations . . . [to] use specific policies and procedures."
"That essentially locked out the ability for our NATO allies, who had large stockpiles, from being the suppliers," Issa responded.
The committee's report also disclosed that the official who awarded the $298 million contract had upgraded AEY's performance rating in one category to "good" from "unsatisfactory." According to the panel's report, the contracting officer told committee investigators she had disagreed with the prior rating and without her change AEY "would not [have] gotten the award."
In a related matter, State Department spokesman Tom Casey told reporters yesterday that the department's inspector general has been asked to examine allegations that the U.S. ambassador in Albania was aware that Chinese ammunition was being shipped by AEY to Afghanistan and that the department had withheld that information from the committee.
Casey said that Ambassador John L. Withers II, a 24-year veteran Foreign Service officer, had released a statement in the Albanian capital Tirana saying that when all inquiries are completed, he and his staff will be shown to have "acted appropriately."