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Arms Dealer's Record Overlooked

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The New York Times

Published: June 25, 2008

WASHINGTON - When the Army last year awarded a contract worth up to nearly $300 million to a tiny Miami Beach munitions dealer to supply ammunition to Afghanistan's security forces, it overlooked a very checkered past.

A congressional committee revealed Tuesday that by the time the Army awarded the bid, officials from the State and Defense departments had canceled or delayed at least six earlier contracts with the company, AEY Inc., for poor quality or late deliveries.

But that record, including a botched $5.6 million order for 10,000 Beretta pistols for Iraq's security forces, was either ignored or omitted from databases that U.S. military contracting officials have used to weed out companies suspected of involvement in suspect arms deals.
Congressional investigators also determined that the Afghanistan ammunition contract, which the company is also accused of mishandling, may have been unnecessary: Bosnia, Bulgaria, Hungary and Albania - the East European countries from which AEY bought its ammunition - had offered to donate the type of Soviet-style rifle and machine-gun cartridges that the Afghan army and police use.

With AEY's business dealings now shut down and its top executives charged last week with defrauding the government on the Afghan contract, lawmakers on Tuesday criticized four State and Defense department officials.

The hearing of the House Oversight and Government Reform Committee hinged on a question posed by its chairman, Rep. Henry A. Waxman, D-Calif.: "How did a company run by a 21-year-old president and a 25-year-old former masseur get a sensitive $300 million contract to supply ammunition to Afghan forces?"

It is a question many federal and congressional officials have been asking since March, when the Army suspended AEY from future federal contracting, citing shipments of Chinese ammunition and claiming that the company's young president, Efraim E. Diveroli, misled the Army by saying the munitions were Hungarian. U.S. law prohibits trading in Chinese arms.

One answer to Waxman's question is that Pentagon officials never consulted a "watch list" the State Department had compiled of 80,000 individuals and companies suspected of illegal arms transactions, including Diveroli.

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