Efraim Diveroli

In March, 2007, defense industry sources reported that the Miami-based company, AEY Inc., was awarded a $298 million Pentagon contract, becoming the main supplier of ammunition to the Afghani troops battling against the Taliban and Afghani insurgents. On March 27, 2008, the New York Times reported that the head of the company, Efraim Diveroli, is 22 years old, and that the ammunition he provided was not only clearly defective, but had been manufactured before Diveroli was born, with much of it having been stockpiled for over 40 years.

Diveroli's extended family reportedly owns several arms businesses in California and Florida, including a controversial wholesale-weapons establishment run out of a former pawn shop in South Central Los Angeles. Efraim Diveroli took over one of his father's companies, AEY, between 2004 and 2005, at the age of 18 and 19, and headquartered it in an unmarked office in Miami Beach. He chose as vice president a massage therapist named David Packouz (now 25). The company began winning government contracts almost immediately.

The ammo apparently came from stockpiles in former Communist Bloc countries, including "tens of millions" of rounds from China. Much of the ammunition had been specifically determined by NATO and the State Department to be unreliable and obsolete. Federal law prohibits arms trading with China, and reports also indicate that Diveroli worked with middlemen and shell companies that are suspected of illegal arms trafficking.

Diveroli was recorded without his knowledge in a conversation that suggested he willfully purchased the defective ammunition. AEY Inc. was forbidden by the Army from having any future federal contracts, and as of early April, 2008, is being investigated by the Defense Department and Immigration and Customs Enforcement. Diveroli denies any wrongdoing, and claims to have severed his relationship with the company. The question as to how Diveroli won government contracts is currently unanswered.

1. "My business is currently of great importance to the country as I am licensed Defense Contractor to the United States Government in the fight against terrorism in Iraq and I am doing my very best to provide our troops with all their equipment needs on pending critical contracts." —Diveroli in 2005, requesting a delay in domestic violence case