Arms and the Dudes: How Three Stoners From Miami Beach Became the Most Unlikely Gunrunners in History

by Guy Lawson

  “I’ve got to get one of those carts for my table,” Packouz said to the woman.

  “You should,” she replied. “Carrying your table over your shoulder like that will give you neck and shoulder problems.”

  “I’m very strong. I can handle it.”

  She laughed.

  Packouz wondered if she might be flirting and asked, “Where did you study massage?”

  “Educating Hands.”

  “Me, too,” Packouz said excitedly. “Here’s my card. If you want to trade massages sometime, let me know. I could really use one.”

  “Sounds good. Here’s my card.”

  Packouz had her number. Sara was her name. She was Spanish—and she was a knockout. He’d taken the risk and it had paid off; fortune favored the brave, as he’d decided when he signed on with Diveroli. He disciplined himself and waited two days before calling, time calculated to make him look interested but not desperate. She offered to host, and after a few sessions of exchanged massages they went out for sushi and started to date.

  The dudes both had girlfriends. FedBizOpps was humming with opportunities as the unfolding fiasco in Iraq fueled the tiny company. Packouz was receiving a rare education. He wasn’t learning how to make a living—he was learning how to make a killing.

  In Baghdad, the pickings were easy for Diveroli. Because procurement officers were rotated in and out of Iraq, Diveroli could rely on their inexperience. He won the soldiers over with fake wild-eyed patriotism and a keen sense of how to play to the military; he could “Yes, sir” and “No, sir,” with the best of them. To get the inside dirt on a solicitation, he’d call the soldier in charge in Baghdad and pretend to be a colonel or even a general seeking an update on the progress of the contract.

  “He’d be toasted and you wouldn’t know it,” Packouz recalled. “He was incredibly effective. And relentless. He seemed to know every trick in the book. Business just came naturally to him. He was always looking for an edge. He was always looking to squeeze himself into deals—that’s the word he used. I started calling him Squeeze-a-Roli. Or Sleaze-a-Roli. It was truly unbelievable to watch.”

  Scanning FedBizOpps, Diveroli didn’t limit himself to Iraq. Packouz watched as Diveroli won a State Department contract to supply high-grade FN Herstal machine guns to the Colombian army. The guns were to be used in the fight against FARC rebels in the mountains of Colombia, a hot war that had caused mass casualties. The deal was lucrative for Diveroli, but he wasn’t satisfied—as usual, he wanted more and more. Using his wiles, he convinced the procurement officer from the State Department to allow him to substitute Korean-made knockoff guns, instead of the top-quality, Belgian-made Herstal—a swap that doubled his earnings.

  As they toiled away, a story appeared in the newspapers about a rebellion in Nepal. The country was ruled by a repressive regime led by King Gyanendra. The reports said that the Nepali civilian population was fighting for its freedom. Loktantrik Andolan was the name given to the revolution, translated as “democracy movement.” According to the coverage, in this dirty civil war civilians regularly “disappeared.”

  Diveroli didn’t read the stories about Nepal for their news content. He didn’t care about politics or human rights. To the young gunrunner, Nepal looked like a business opportunity.

  Diveroli named his initiative to supply King Gyanendra with what he needed—ammo, RPGs, mortars—the Save the King Package. Packouz watched in silence as Diveroli hunted for quotes for enough weapons to start a small army—or suppress a democratic movement. Attack helicopters were the first priority—the aircraft that would enable the king to strafe his Maoist enemies. The mysterious Swiss arms dealer Henri Thomet was Diveroli’s collaborator, just as he was on the Iraq contracts. Diveroli and Thomet talked on the phone constantly and exchanged countless e-mails as they tried to source Balkan matériel for Nepal.

  “People are rebelling against their king and you’re going to help crush them?” Packouz finally asked, incredulous.

  “Don’t be an idiot,” Diveroli said. “If it isn’t me, it’ll be someone else.”

  “That’s probably true, but it doesn’t make what you’re doing right.”

  “It’s a good thing you’re not involved in this deal.”

  Packouz could feel that things were changing—and getting more dangerous. Selling arms to the US government to fight insurgents in Iraq was one thing. He could believe in that cause, at least enough not to wonder if he was participating in a criminal conspiracy. As long as the weapons he was trying to trade weren’t being used for a specifically evil purpose, Packouz had no qualms. But Diveroli never had qualms, Packouz was beginning to realize. If he kept going with Diveroli, Packouz could easily wind up involved in something illegal, morally repugnant, or both.

  “Efraim was devoid of moral purpose,” Packouz recalled. “He understood that the Nepal deal was wrong, but he chose not to care. It bothered me. His skills as an arms dealer came at a price. I was getting nervous, on edge. I thought I could learn a lot from him. I was learning a lot, actually. Not all of it very nice. I was caught up in the money. But I could also see the danger.”

  Packouz’s life was changing in other ways. One evening his girlfriend told him she was pregnant. It was an accident. Packouz was stunned into silence. She said she was going to keep the baby, no matter what. If Packouz was willing to help her, she’d stay in Miami, but if he wasn’t going to step up and take responsibility she was going to move back to Spain to be close to her parents.

  “I was very torn,” Packouz recalled. “We didn’t have a strong foundation for our relationship. She was a very strong-willed person and I’m a lifelong rebel, so we’d had some conflict. But in the end I decided that I wasn’t going to let my child grow up without a father. Diveroli and I were about to travel to Paris, to a big arms show. I told my girlfriend that I was going to stand by her and the baby. Now I knew I had no choice about arms dealing. I had to sell a ton of guns.”

  Packouz pushed his ambivalence and fear aside. He was now in—all the way in.

  * * *

  I. Not her real name.

  Chapter Three

  CRASH AND BURN

  Eurosatory was one of the world’s largest trade shows dedicated to the arms industry. Packouz and Diveroli flew to France in June of 2006 to walk the miles of booths inside the gigantic Paris Nord Villepinte exhibition center. The vast rooms were filled with arms dealers hawking the latest instruments of death—tanks, robots, drones. American generals and military officers from tin-pot dictatorships mingled at cocktail receptions, bedecked in medals, chatting with kaffiyeh-wearing sheikhs and South American colonels. Mixed into this group were the well-dressed, smooth-talking, amoral businessmen Diveroli most admired—international arms dealers who worked the space between legal and illegal arms deals, the “gray market.”

  Billed as a trade show specializing in land and air defense, Eurosatory was in reality a biannual celebration of man’s endless desire to kill man. War was not only glorified in the halls of the conference center; it was institutionalized, commercialized, and monetized. Moët champagne and canapés and caviar were served in booths offering the latest inventions for death.

  Entering the giant trade show, Packouz looked around with a mixture of excitement and horror, like a kid entering the Disneyland of death. Diveroli was enthralled. They were by far the youngest people there. They had dressed the part of international arms dealers—or how they imagined they should look. Each wore a suit, a dark shirt, and a striped tie. Inside their briefcases, the pair had photocopies of AEY’s licenses to deal in arms, along with copies of the contracts the company had completed in Iraq, to prove that they were serious players, not just a couple of kids.

  “We were so young we had a very hard time convincing people that we were really doing deals,” Packouz recalled.

  The pair were wowed watching live demonstrations of tanks jumping over sand dunes as if they were fighting a real war. They went to an exhibit where they co
uld sit in a swivel seat and pretend to shoot heavy machine guns. But the AK-47 made the biggest impression on Packouz: the weapon was so perfectly designed, so simple, and yet so lethal.

  Diveroli was swept up into the entire atmosphere. “Wait until I’m really in the big time,” Diveroli boasted as he strode the aisles. “I will own this fucking show.”

  In Paris, Diveroli and Packouz found the booth of Henri Thomet, the Swiss arms dealer from whom Diveroli had been buying large amounts of weapons and ammunition for his Iraq contracts. Through Thomet, Diveroli had high-level contacts in Russia, Israel, Bulgaria, Ukraine, and throughout the Balkans. As a broker, Thomet had set up an array of shell companies and bank accounts in countries with financial-secrecy laws, like Cyprus and Switzerland. Packouz knew that Thomet had been behind much of Diveroli’s success as an arms dealer—but he didn’t know what really transpired between them.

  Thomet’s main business with AEY was brokering deals for Soviet Bloc nonstandard weapons for Iraq. But at the show he was exhibiting a new robotic reconnaissance device, a small-dog-size machine that could scale walls and enable unmanned surveillance behind enemy lines. In person, Thomet was tall, handsome, suave. In his late thirties, he had dark brown hair, light blue eyes, and an eerily calm demeanor. He was impeccably dressed. He spoke perfect English with a slight German accent. He had the odd tic of saying okay at the beginning and end of every sentence (“Okay, so the price of the AKs is firm, okay”).

  “Efraim told me that Henri could get body armor, machine guns, antiaircraft rockets—anything,” Packouz recalled. “He was one of the best middlemen in the business, a real-life Lord of War. Henri definitely looked like the kind of guy who’d sell arms to anyone.”

  Packouz’s intuition was more accurate than he knew. Indeed, Thomet’s name was reportedly on the State Department’s “watch list” of individuals and companies suspected of participating in black-market arms transactions. State’s Directorate of Defense Trade Controls—the DDTC—was primarily charged with controlling arms exports to ensure America’s “adversaries” didn’t gain access to sensitive defense technology. Overseeing the $100 billion American international-arms business, the DDTC developed protocols for identifying people who were ineligible to receive export licenses or to contract with the federal government. Some eighty thousand names were on the watch list, which was continually reviewed based on intelligence reports, law-enforcement information, and open-source material.

  If Thomet’s name was on the DDTC watch list it didn’t necessarily disqualify him from dealing with the government. The list was primarily informational, providing officials involved in arms deals with warnings about investigations and suspicious activity. If Thomet’s name was on the list, though, it would indicate the government should use increased scrutiny in any dealings with him. But Thomet was openly doing business with the Pentagon through AEY; there was no attempt to hide his name, or the documents with his company’s name on them. The munitions Thomet sourced from the Balkans routinely arrived in Baghdad with bills of lading saying they’d come from his company, which was also reportedly on the list. For the past year Thomet had sourced millions of dollars’ worth of matériel for Diveroli and other American companies. All of the arms had gratefully been accepted by the US Army.

  Thomet wasn’t the only questionable arms dealer doing business with the United States in Iraq. The most notorious gun smuggler alive was a Russian named Viktor Bout, who was at that time using his fleet of cargo planes to deliver weapons to Baghdad. The planes were the same ones used to fly guns to men like Charles Taylor of Liberia, a war criminal responsible for the murder of thousands of innocent civilians. But in Baghdad no attempt was made to ensure that the American military wasn’t transacting with men like Bout. The Army didn’t care who its contractors hired as subcontractors—even if they were known to be responsible for supplying arms that resulted in mass murder.

  The apparent lack of controls wasn’t an oversight. The DDTC system was designed to make coordination between government departments easy and reliable. But the Army didn’t want to coordinate its efforts; the Army was fighting a war and needed to act with dispatch. Procurement officers in Iraq weren’t consulting State’s watch list, because they weren’t required to.

  The legal exemption was accomplished by the use of a term deceptive for its seeming simplicity. When Congress authorized the Pentagon to set up new systems for training and equipping foreign forces in Iraq and Afghanistan, the law began with a preamble stating, “Notwithstanding any other provision of law.” Page upon page of detailed regulations followed, all appearing like any other complex and legally binding act of Congress. But the words “notwithstanding any other provision of law” worked the magic of exempting the Department of Defense from responsibility to follow any other laws—including human rights laws, international treaties, and the State Department’s foreign-military sales regime. The provision made the regulations a self-contained reality, subject to no outside legal authority or scrutiny. The sweep of the exclusion was as broad as imaginable—and it went completely unremarked upon in the press, and in Congress.

  There was a further legal loophole created for the Pentagon, and this was equally audacious—and achieved by omission. Under the State Department’s regulations, companies doing business with the US government had to name all subcontractors. So if AEY’s contracts were ruled by State’s laws, the company would be required to disclose that it was doing business with Henri Thomet and his name would be checked against the DDTC watch list. But the Pentagon’s system had no such requirement. The trick was accomplished by a simple omission of the word “subcontractor,” an elision invisible to the untrained eye that enabled the Pentagon to deal indirectly with even the most corrupt warlords and gunrunners.I

  Although it would never be fully reported in the press, the Pentagon, in effect, had enabled itself to legally deal with anyone it pleased, including arms dealers like Thomet, by using proxies like Diveroli and Packouz. In truth, AEY was in effect a front for the real transaction between Thomet and the Pentagon. Officially, AEY’s contracts were governed by the Defense Federal Acquisition Regulation Supplement, or DFARS, as it was known in the trade. To the layman, the DFARS, looked like a complex mesh of laws intended to closely regulate the Pentagon’s weapons purchasing. But beneath the surface of the extremely legalistic regulations lurked a darker reality. The Pentagon had set up a parallel system for buying arms that bypassed State’s protocols and watch lists designed to avoid the US government’s doing business with—and enriching—illegal arms dealers.

  The two young partners didn’t know it—couldn’t imagine it—but they were in the middle of a huge chess game and they were the pawns. The Army knew it couldn’t send jarheads into the Balkans to buy AK-47s from Serbian and Croatian and Albanian gunrunners. The chances of corruption and scandal were far too high. A bureaucracy like the Pentagon wasn’t capable of dealing with the many and varied demands of acquiring millions of dollars’ worth of surplus munitions—like paying off politicians or petty officials or killers. Arms dealing was an inherently dirty business, infused with Swiss bank accounts, prostitutes, double-dealing, and the willingness to do anything to get the job done—legal or illegal. American soldiers wouldn’t have a clue how to navigate such treacherous waters.

  The US government needed companies like AEY to get to men like Thomet. Like the others bidding on contracts on FedBizOpps, Diveroli and Packouz were being used by the Army. Likewise, Thomet was using Diveroli and Packouz as a conduit for dealing with the Pentagon. For all Diveroli’s bravado, in truth the two young men were the monkeys in the middle. Or the fall guys, should things go wrong.

  David Packouz understood none of this as Thomet’s beautiful young assistant handed him a glass of Veuve Clicquot in Paris. Packouz kept silent as Thomet suggested to Diveroli that AEY should diversify and start selling Balkan AK-47 ammo in the huge American domestic market. Gun nuts all over the United States loved firing AK-47s and were w
illing to pay well for the thrill.

  On the surface, Thomet’s idea sounded perfectly reasonable. But it, too, contained an element of deception. The Army was running the procurement process in Baghdad, but the State Department was still in charge of the importation of arms into the United States. Thomet had to know there was a real probability that he was on the State watch list. Shipping ammo to the United States under his company’s name could put his goods at risk. But if Diveroli bought the rounds and they came into America under AEY’s name, there would be no reason to stop the shipment. None of this was spoken. Thomet’s manipulative powers could be glimpsed in the way Diveroli was convinced he was the mastermind of the deal—not the other way around.

  “Even when he was dealing with someone as obviously sophisticated and experienced as Henri Thomet, Diveroli always thought he was smarter and tougher than the other guy,” Packouz said. “He told me he wanted to cut Thomet out of the deals he was doing. He wanted to buy directly from the contacts Thomet had so he could get more profit for himself.”

  Walking the show later that day, Diveroli noticed the booth for a company called Yugoimport. He recognized the name from some of the deals he’d done with Thomet. The company was the state military exporter for the Serbian government. Diveroli approached the men in the booth—burly, Balkan tough guys in their forties and fifties, with gray hair. Diveroli was twenty years old. But he showed them his Iraq contracts and they recognized the name AEY. Suddenly he was “Mr. Diveroli.” They sent a woman to fetch coffee and invited Diveroli and Packouz into a private room in the back of their booth.

  “Diveroli asked if they had an exclusive relationship with Thomet,” Packouz recalled. “They said no—no, no, no. Arms dealing really was cutthroat. Literally. Diveroli didn’t care about any personal relationships or loyalty. If he could fuck Thomet, he would. Diveroli really was ruthless—like I imagined Thomet to be.”