by Guy Lawson
Diveroli now had more in common with Thomet than he knew. On June 26, Diveroli flew back to Miami. When he arrived at the airport, he was stopped by customs. His luggage and documents were searched by law enforcement. The agents had no particular reason to seize Diveroli’s personal effects; they were looking for anything suspicious—documents, contracts, business cards. Diveroli had no idea at the time, but the reason he’d been detained at the airport was that his name was on the State Department’s watch list, like Thomet’s. Because the list was classified, he had no way of knowing he was the subject of a federal criminal investigation. In more ways than he realized, Diveroli really was an international arms dealer, just as he’d dreamed—even if he was a particularly naive one.
Diveroli was oblivious of—or indifferent to—the increasing peril. He was making millions of dollars, but the riches only fueled his ambition to make more. Back in Miami, Diveroli was finding it impossible to keep up with himself. He’d win Iraq contracts for helmets and AK-47s, but instead of focusing on fulfilling the orders he’d won, he’d race like a maniac back to FedBizOpps to find other deals to bid on. Deals mounted on deals as Diveroli became responsible for a significant amount of matériel arriving at the airport in Baghdad—and thus an ever larger part of the war effort.
The Pentagon didn’t know that a young and unlikely arms dealer was playing such a prominent role. Simply coping with the reality on the ground in Iraq during the summer of 2006 was more than the US military could handle. In Baghdad, beheadings and massacres were occurring daily. The bombing of the Al-Askari Mosque fomented yet more violence and resulted in more than a thousand deaths. The launch of Operation Together Forward failed to lessen the level of violence in Sadr City, the Shiite quarter of the city. Then a fourteen-year-old girl was gang-raped by American soldiers, her parents and six-year-old sister murdered before the girl’s body was set on fire—a crime that only increased the desire of the vast majority of Iraqis for the invaders to leave. In those desperate days, the Army had no ability to monitor contractors—or, often, even to know if contracts had been fulfilled at all.
Logistical problems were inevitable for any company doing what Diveroli was doing in Iraq, let alone a tiny start-up like AEY. Packouz was busy looking for his own deals, and he wasn’t being paid to work on the ones Diveroli won; their agreement stipulated that Packouz was only paid on contracts he found and won. So in effect Diveroli was single-handedly managing the delivery of Glocks from Italy, AK-47s from Bosnia, and helmets from Korea—not to mention the many other deals he pursued with lunatic enthusiasm.
Overburdened and understaffed, Diveroli had defaulted on seven contracts in Iraq out of the dozens he’d won. The record wasn’t stellar, but it also wasn’t terrible, at least compared with that of the other contractors, who were also routinely facing logistical nightmares finding surplus nonstandard weapons and chartering flights into Baghdad. Locating airlines and pilots willing to dare to land in Iraq was a challenge, a reality Viktor Bout exploited while the US government looked the other way.
Despite an increase in expenditures in Iraq of more than 600 percent in 2006, the Pentagon continued to decrease the number of personnel assigned to supervise private contracting. Billions were being squandered on outsourcing, it was widely understood, but next to nothing was being done about it as the war consumed all the attention and energy of the US military.
But AEY wouldn’t benefit from such lenient treatment. For some reason the company seemed to receive the special ire of the American officers in Baghdad. Why Diveroli had been singled out remained a mystery until Thomet explained it one day on the phone. Thomet didn’t only sell to AEY; he often did business with Diveroli’s competitors as well. Thomet was familiar with how rival companies were setting out to destroy the competition. He revealed that AEY’s competitors had sent executives to Baghdad to lavish money on the American officers responsible for awarding the contracts, buying drinks and dinner in the Green Zone as they whispered rumors about Diveroli’s being a coke dealer and an illegal gunrunner. Thomet said that AEY was systematically being slandered by its competitors in Baghdad, as a way to destroy the business.
Diveroli could do nothing, short of traveling to Baghdad—and he had no intention of doing that. To help cope with the logistics of all the deals he’d already won, Diveroli decided he needed administrative assistance. When his aunt heard that her nephew was looking to hire someone, she offered to help. Diveroli’s father’s sister was older than the dudes and friendly at first, but she soon came to disapprove of Packouz and the way the two buddies smoked dope all day. Like her nephew, Diveroli’s aunt was strong-willed and outspoken. She and Diveroli were soon regularly having screaming arguments. While Diveroli told her to shut up, she shouted that he was out of control—his ambitions, his appetites, his business. She talked openly about Diveroli on the phone with his mother as if he weren’t present.
“Mark my words,” she told Diveroli’s mother repeatedly, “your son is going to crash and burn.”
“Shut up,” Diveroli shouted back, the cold-blooded arms dealer turning into a pissed-off teenager. “You don’t know what you’re talking about. I made millions last year.”
“Crash and burn. Mark my words—crash and burn.”
* * *
I. Colby Goodman, “Dealing with Arms Intermediaries: The Pentagon’s Missing Controls on Contractors Engaged in Arms Transfers” (Amnesty International, 2009).
Chapter Four
HELLO! IS THIS UKRSPETEKSPORT?
In 2006, Operation Mountain Thrust began in the south of Afghanistan. The intention was to confront the resurgent Taliban in Helmand Province and elsewhere. Thousands of American, Canadian, and British troops fought alongside the Afghan National Army, encountering a well-coordinated, disciplined, and deadly enemy in the Taliban. Despite the disparity in firepower, and the heavy aerial bombing, the Taliban inflicted large casualties on the foreigners. Worse, the death of more than one thousand Taliban fighters seemingly did nothing to harm their morale or diminish the apparently limitless number of jihadis willing to fight the infidels. According to the Army’s statistics, by the middle of 2006 the number of improvised explosive devices being deployed by the Taliban had more than doubled, direct attacks on American and Afghan soldiers had tripled, and suicide attacks had quintupled. Using sanctuaries in Pakistan, the Taliban and the Haqqani Network had increased their territorial holdings fourfold, according to classified intelligence estimates. As in Iraq, another war that had been prematurely imagined as a great and glorious victory was turning into a strategic disaster.
Something had to be done to turn the war around, the Bush administration decided. The United States had ceded “control” of the south of Afghanistan to the Canadians, but the level of violence only increased as the Taliban won battles for key territories. New thinking was required, it was decided, as the United States entered into a new compact to take control of military operations in Afghanistan. For years, the multinational alliance in Afghanistan had tried to equip and train hapless Afghans, but the effort had been a near-total failure. Corruption, narcotics, poor training, substandard equipment, terrible morale, and tribal animosity, not to mention language, cultural, and religious barriers, had made the Afghan problems as intractable as those in Iraq. With the United States focused on the surge in Iraq, transferring security arrangements to the Afghans had become the top priority—if it was even possible.
One of the most pressing issues for the Afghan security forces was a lack of ammunition. Like the Iraqis, the Afghans were used to nonstandard, Soviet Bloc weapons. Many formerly Communist countries were fighting alongside the Americans in Afghanistan—Bulgaria, Hungary, Lithuania, Poland, Romania, and Albania, to name a few. These countries all had large stockpiles of nonstandard ammo they could supply. Many were eager to assist the United States in any way they could. Like the Albanian government. The tiny Muslim nation, wedged between Italy and Greece on the Adriatic Sea, was one of the most pro-American c
ountries on the planet. The formerly Communist country was preparing to join NATO at the time and had to get rid of decades’ worth of surplus ammunition, most of it donated in the 1960s by its then close ally China. The Albanians had offered to give the Americans millions of rounds of ammunition for free in Iraq. Surely the same offer would stand for Afghanistan.
But there was a problem. Under the policies and procedures that ruled the US military, agreements could not be entered into directly with foreign allies to supply munitions—no matter the strategic necessity. America couldn’t simply ask the Albanians for their ammunition, even if it was the ideal solution. The Army had to follow its own procurement procedure—however dysfunctional it might be. The letter of the law had to be followed, even if it made no sense in a time of war.
There was one huge difference in Afghanistan, however. The Bush administration appeared to have learned the hard logistical lessons of Iraq. Posting thousands of small contracts online had led to widespread chaos and fraud in Iraq. This time, the Pentagon wasn’t going to be foolhardy enough to use FedBizOpps to buy third-rate surplus from the Balkans via dodgy outfits like AEY; the practice of awarding contracts to the lowest bidder in an online lottery, thus virtually ensuring the lowest-possible-quality goods, was obviously flawed, as the unfolding disaster in Baghdad proved. This time the Americans would buy directly from one source, not use a daisy chain of brokers like Efraim Diveroli and his competitors. The military wouldn’t buy cheap surplus from Balkan bunkers—this time brand-new ammunition would be acquired.
So on May 22, 2006, an article appeared in the London Telegraph headlined “US Sets Up £215M Deal for Afghan Arms.” The defense correspondent for the Telegraph reported that American officials were going to purchase a “prodigious quantity” of ammunition from the Russian government’s military-export company, Rosoboron. The US Army would acquire the rounds on behalf of the Afghan security forces:
“Pentagon chiefs have asked the Russian arms supplier for a quote on a vast amount of ordnance, including more than 78 million rounds of AK-47 ammunition, 100,000 rocket-propelled grenades and 12,000 tank shells,” the Telegraph reported.
If true, the story had heady implications. After decades of hostility between America and the Soviet Union, the international equation was changing in new and unexpected ways. It appeared that the Cold War enemies were on a path toward becoming allies against the shared threat of Islamic extremism. The historical ironies of two longtime superpower enemies coming together in Afghanistan made it seem as if the reported transaction had to be a prank; the Soviet Union had been defeated in Afghanistan in the 1980s, in large measure because of a covert American operation to arm the mujahideen fighting the Communist invaders. Now the Americans were asking for Russian help as they faced defeat in the same mountains.
“Defense specialists said Russian arms chiefs at first ‘fell about laughing’ because they thought the order was a joke when it arrived this month,” the Telegraph reported.
But it wasn’t a stunt. Under the new paradigm, the Russians would supply brand-new matériel that would give the Afghans an advantage against the Taliban and their ancient Soviet surplus ordnance.
“This is completely refitting the Afghan army for the long term and it should stop a resurgence of the Taliban in its tracks,” a British arms expert was quoted as saying. “This deal makes sense if we are going to hand over military control to them.”
One small caveat was mentioned: no actual contract existed with the Russians. The US Army was only asking for a quote. But that appeared to be just a formality. No other company in the world was more capable of providing so much high-quality Eastern Bloc munitions, and Rosoboron’s prices were well known in the marketplace. Burying old grievances to forge a new future with the Russians looked to be a historic masterstroke.
However, yet another geopolitical goal trumped the need to arm the Afghans. Years earlier, the United States had imposed an arms embargo on Iran, supposedly to stop the Iranians from obtaining nuclear weapons. But the Iranian ban had reached far beyond its original intentions—all the way into the territory of unintended consequences.
Soon after the story about the Afghan contract appeared, Rosoboron agreed to repair and upgrade Iran’s long-range strike-force aircraft. The deal had nothing to do with Iran’s suspected program to manufacture weapons of mass destruction. But that didn’t matter to the Bush administration. The Iranian deal meant that the Russians had forfeited the opportunity to bid on the Afghan ammo contract. Indeed, the Russians were now banned from any arms deals with the US government.
As a result of the Iran embargo, the US government would have to do the same thing in Afghanistan that it had done in Iraq. The Pentagon wouldn’t pursue the obvious logistical solution to its problems for reasons that could be described as political but were better understood as ideological and confrontational. Rosoboron was out. FedBizOpps was in. Once again, Diveroli and Packouz and the other denizens of the federal arms-contracting world would search Eastern Europe for the cheapest surplus ammo they could find, a supply that was severely diminished after years of the fight against the insurgency in Iraq.
Thus, in one fell swoop the attempt to supply ammunition to the Afghan army became infinitely more difficult. Worse, according to a report in the Washington Post, the Russians considered the American ban tantamount to a declaration of war. The Russian quasi-governmental company Rosoboron was run by a former KGB agent who was a close personal associate of Vladimir Putin’s; the company was a central part of the country’s corporate oligarchy. The Russians retained many ways to express their displeasure and hinder American efforts in Afghanistan. To reach Kabul, suppliers such as AEY would need to obtain permission to fly over many countries that were formerly part of the Soviet Union—like Kyrgyzstan, Turkmenistan, and Kazakhstan. These nations all remained in the Russian sphere of influence. In due course, Putin would have his revenge.
So it came to pass that on the evening of July 28, 2006, David Packouz was driving his ancient Mazda Protégé along Interstate 195 in Miami on his way to dinner with his girlfriend. Normally he would’ve sparked a bowl at the end of another day on the job, but he tried to stay straight for his pregnant girlfriend.
Packouz had now been working with Diveroli for more than six months. He’d won a couple of small contracts and he’d learned a lot—how to calculate profit margins, how to source obscure Communist weapons, how to maneuver on FedBizOpps. But he’d yet to make any real money, and his patience was beginning to wear thin. Dealing with Diveroli was stressful and exhausting. Packouz was starting to wonder if he should go back to school and finish his degree.
As Packouz turned off the freeway, his cell phone rang. It was Diveroli. He was excited—really excited, Packouz recalled.
“Dude, I’ve found the perfect contract for us,” Diveroli said. “It’s enormous—far, far bigger than anything we’ve done before. Hundreds of millions of dollars. But it’s right up our alley.”
“What is it, dude?”
“An Afghanistan contract. It’s all ammo—no weapons. It’s all Russian caliber, so we’ve got the past performance to bid on this thing. But here’s the best part. There’s no age limit. Seriously. We can get Thomet to go through every old ammo dump in Eastern Europe and get rock-bottom prices.”
“Wow!” said Packouz. “Sounds perfect.”
“The solicitation only says that the ammo has to be serviceable without qualification. In my book, that means it goes bang and goes out the barrel.”
“You sure there’s no official definition of serviceable without qualification?”
“I looked. If there were specific quality requirements, it would have been posted in the solicitation. They say serviceable without qualification when they’re telling us not to deliver shit. That means no rust, no defective rounds. The ammo has to be in generally good condition.”
“Why wouldn’t the Army be more specific?”
“The United States government wants to arm the
Afghan army,” Diveroli said. “But they want to do it as cheaply as possible. I guess the US Army isn’t too worried about Afghan soldiers on the front lines.”
“Well, surplus is our specialty.”
“I need you at the office immediately.”
“I’m on my way to have dinner with my girlfriend.”
“Who gives a shit? You want to yakety-yak with your bitch, or you want to get rich?”
“Chill, dude.”
The next morning they met at Diveroli’s girlfriend’s apartment to parse the forty-four-page document posted on FedBizOpps titled “A Solicitation for Nonstandard Ammunition.” The contract looked like any other contract for screwdrivers or forklifts. It had blank spaces for names and telephone numbers and squares to be filled out for more detailed information. But the scope of the solicitation was astounding. Contracts on FedBizOpps were frequently worth millions of dollars for significant amounts of matériel. But this request for proposal—or RFP—was worth hundreds of millions of dollars and had vast geopolitical implications. The RFP called for 100 million rounds of ammunition for AK-47s—and that was just the start. Then there was the list of other munitions—millions of rounds for SVD Dragunov sniper rifles, thousands of GP-30 grenades, huge amounts of 82 mm mortars, aviation rockets, on and on it went.
One firm fixed-price award, on an all-or-none basis, will be made as a result of this solicitation, the tender offer said.
This meant that the contract was winner take all. One company would be entrusted with the epic responsibility of acquiring and shipping tons of ammunition to the mountains of Afghanistan. But who should bear such a heavy burden? Who could be relied upon to carry out a key component of America’s foreign policy? Who would win the contract?
