Contract from hell

Sunday, March 30, 2008 | 2:06 a.m.

As a teenager, Efraim Diveroli took over his dad’s small munitions business a few years ago and began running it out of an unmarked office in Miami Beach. For his vice president, Diveroli, now 22, chose a licensed masseur, David Packouz, who is now 25.

Their company, AEY Inc., has somehow been winning big federal contracts since 2004, and early last year won a nearly $300 million U.S. Army contract. That made it the main supplier of ammunition to Afghanistan’s army and police forces, according to a New York Times story published Thursday.

Here are some details, uncovered by the Times, about how the two fulfilled the Afghanistan contract:

• Most of the ammunition came from old communist bloc stockpiles. A lot of it was more than 40 years old and had been determined by NATO and the State Department to be obsolete and unreliable. (Ammunition degrades over time.)

• AEY worked with middlemen and a shell company that are on a federal list of suspected illegal arms traffickers.

• Tens of millions of rifle and machine gun cartridges were made in China, making their procurement a possible violation of federal law.

“This is what they give us for the fighting,” a disgusted Afghan army officer told the Times. “It makes us worried, because too much of it is junk.”

Following repeated inquiries by the Times, the Army suspended AEY’s right to bid on future federal contracts. Also, AEY is now being investigated by the Defense Department’s inspector general as well as by Immigration and Customs Enforcement.

“A lot of us,” a State Department official told the Times, “are asking the question ‘How did this guy (Diveroli) get all this business?’ ”

It is a question that desperately needs answering.