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

by Guy Lawson

  Podrizki raised the subject of the first 2 million rounds of AK-47 ammo: “When are you going to start delivery?”

  “It’s not so simple,” Pinari said. “I need approval of the minister of defense and the officials at the airport. Let’s go look at the ammunition now.”

  They got in Pinari’s Mercedes and drove into the mountains outside Tirana. Podrizki could see little white pillbox bunkers scattered throughout the countryside—small, mushroomlike structures with a slightly comical appearance. The bunkers had been built all over Albania by the former Communist government, Pinari explained. For decades, hard-line leader Enver Hoxha had believed the country faced imminent attack from all directions. Russians, Americans, Yugoslavs—all were going to assault Albania simultaneously. Total War was the name of Hoxha’s defense strategy. Every man, woman, and child would become a resistance fighter. He’d planned for the Albanian people to engage in a brutal, endless war of attrition using the stockpiles of weapons and ammo he’d stashed in bunkers in every street and field and valley and mountain. More than a billion rounds of AK ammo had been amassed, making Albania by far the most heavily armed nation in the world. This was why Albania was the perfect supplier for AEY, Pinari said, smiling.

  Up a remote switchback dirt road, past soldiers manning a checkpoint, Podrizki was led to a giant steel door, the entry to a vault built into the side of a mountain. Inside, a catacomb was filled with a vast supply of Albania’s ammo. Standing on the threshold, Podrizki couldn’t see the end of the tunnel; off to the left was another tunnel stretching into the distance. Somehow Podrizki had to figure out how to get Pinari to transport 100 million rounds of AK-47 ammo from bunkers like this to Tirana’s airport and then on to Afghanistan, and it clearly wasn’t going to be a simple task.

  Podrizki walked into the cave. Some of the ammo crates had Albanian markings, some Russian, some Yugoslavian; most had Chinese. Podrizki paused in front of crates of British ordnance dating back to the Second World War. The ammo was in all kinds of calibers, from large-scale howitzer rounds to the AK-47 cartridges AEY was going to buy. The small-caliber ammo came from all over the former Communist world. But it was effectively identical: after the AK-47 had been invented in the 1940s, factories had been built in many nations to clone both the gun and the exceedingly durable and effective cartridges it used.

  A crate of bullets was pulled down for Podrizki to inspect. Because ammunition was heavy, a single crate measuring only eighteen inches long, fourteen inches wide, and six inches deep weighed sixty pounds. The dimensions and heft were designed to enable an average soldier to handle one crate. Each box contained approximately fourteen hundred rounds. The lid was pried open. Podrizki found a placard stating that the ammo had been manufactured in 1964. The words were in English, the digits in Roman numerals. But next to the Western markings were Chinese characters indicating the date of production and the caliber of the rounds.

  Podrizki looked underneath the placard and found the aluminum cans. Rusty and old, they were also marked in English and Chinese. A can was opened. The ammo had been packed in nitrogen to displace oxygen and humidity and prevent the steel jackets from rusting. Despite being more than forty years old, the ammo was in amazingly good condition. All ammunition degraded over time, but it wasn’t unusual for AK-47 surplus to last for decades, provided it had been stored in a reasonable manner—as these rounds had.

  Podrizki took out a handful of individual rounds and inspected them closely. The ammo really was good, it seemed to Podrizki, given the amount of time it had spent in the dank cave.

  As Podrizki admired the ammo, a potential problem occurred to him. Packouz and Diveroli hadn’t told Podrizki about the Chinese embargo before he left. Why would they? Podrizki was going to Albania, not China. But Podrizki was a student of international affairs. He was aware of the military rivalry between the United States and China and rising tensions.

  Podrizki wondered if buying from the Albanians meant AEY was somehow buying from China. The ammo had been brought to Albania decades before the ban was imposed. Was the ammo Chinese or Albanian?

  Podrizki perceived the problem in the blink of an eye. Anyone could see the ammo was literally “Chinese” by the markings on the crates. Podrizki figured he should at least ask what the deal was—because he was pretty sure it wasn’t okay to trade in Chinese weapons.

  “This is Chinese,” Podrizki said to Pinari, holding up a round.

  Pinari shrugged. “Is okay. We send the same ammunition to American Special Forces in Stuttgart in Germany last year. It was for them to train with. AEY did this deal. There was no problem.”

  Podrizki nodded. Perhaps Pinari was right. The ammo had been sitting in caves in Albania for decades, so it couldn’t fairly be described as “Chinese.” It was far more sensible to say the ammo was now “Albanian.” And the reality was that the place of manufacture didn’t change the quality of the rounds, or the urgency of getting the shipments to Afghanistan to fight the Taliban.

  “Let me run this by my people in Miami,” Podrizki said.

  “Of course.”

  Podrizki thought Pinari was looking at him with pity, like he was a dumb kid with no idea what he was talking about. That much of the ammo in the cave had been manufactured in China would be obvious to anyone who knew the slightest thing about Albanian history. The country’s alliance with China wasn’t a footnote but one of the foundational facts of its strange past. In the 1950s, Albanian leader Hoxha had split from the Soviet Union, declaring the leader Nikita Khrushchev “defeatist.” Albania had then formed a close friendship with China, at the time the sworn enemy of the Soviets. The unlikely alliance had resulted in Mao Tse-tung’s sending thousands of tons of his country’s surplus ammunition to Albania in the 1950s and 1960s—artillery pieces and surface-to-air missiles and tanks and armored vehicles. Pinari must have assumed that anyone in the arms industry would understand that if Albania was selling surplus ammunition, the likelihood was extremely high that some or all of it would be Chinese-manufactured.

  Podrizki said he wanted to test the ammo to see if it was “serviceable.” He said he needed to fire some rounds. An AK-47 was produced and he was taken to what passed for an Albanian shooting range: stones were placed on a nearby fence as targets. He loaded the magazine and let loose. The casings were steel, not brass, which made them of inferior quality and much cheaper. But as Podrizki unloaded the AK he could see that the ammo worked great.

  Late that night, Podrizki called Packouz in Miami. It was April 20—4/20, or 420, the stoner nickname for marijuana, and an annual day for pot smokers to celebrate weed. The two dudes shared a joke, each wishing the other a happy “four twenty.” Packouz was gently buzzed from a morning hit on the vaporizer.

  “Hey, man, I inspected the stuff and it seems good,” Podrizki said. “They’ve got a massive stockpile. All sorts of ordnance. Huge bunkers.”

  “How did the ammo look?” Packouz asked. “Any rust? The containers still sealed? You test some rounds?”

  “Yeah. It all worked perfectly. No rust anywhere on the rounds. The vacuum seals are still intact. The ammo looked good.”

  “Great. That’s a relief. Did you weigh the pallets?”

  “I have to buy a proper scale. But they’re around three and a half kilograms. So seven or eight pounds each. The tins weigh about two pounds.”

  “Excellent. That’s significant weight we’re going to get rid of.”

  “But, bro, you know the ammo is Chinese, right?”

  “What are you talking about?” Packouz asked.

  “The ammo is Chinese.”

  “How do you know it’s Chinese?”

  “There are Chinese markings all over the crates.”

  “You sure?”

  “Yeah. It’s definitely Chinese.”

  “Oh, fuck,” said Packouz. “That’s not good. What about on the metal tins? Any markings?”

  “There were some, but I can’t remember if they were Chinese. I’ll have to ge
t another look.”

  “This is what you’ve got to do. Tomorrow, you ask to see the ammo again. You take pictures from all angles—the crates, the tins, inside the tins. See if there is stencil paper inside the tins. We have to see what this looks like so we can decide what to do.”

  “Will do.”

  Packouz felt panic rising in his gut. He went back into the office and told Diveroli what he’d just learned.

  “You got to be shitting me,” Diveroli said, startled.

  “I’m serious. There are Chinese markings on the boxes.”

  The entire contract was at stake, the pair instantly decided. Weeks of delays had pushed AEY to the outer limit of the schedule, so there wasn’t time to find another supplier. Diveroli muttered that Henri Thomet hadn’t mentioned the Albanian ammo was Chinese, a calculated and cunning omission, as he had to know that the ammo was “Chinese.”

  “Of course Thomet had quoted me ‘Albanian’ ammo,” Diveroli recalled. “When I called him, he swore to me a hundred times that the Army had bought the same ammo before. He said the Army was buying Chinese-made AK-47 rifles from Albania from one of my competitors named Taos. He was brokering that deal. But he knew what was going on. He’d been dealing with Albania for years. He wanted to stick me in a position where I was locked into using him, and he did a great job at that.”

  Diveroli instructed Packouz to read the Afghanistan contract carefully to see what kinds of modifications they might be able to get from the Army. Diveroli said he’d try to figure out what could be done legally.

  The next four hours were frantic. Packouz and Diveroli had never physically opened a crate of surplus AK-47 ammo, despite the deals AEY had done. So they had little understanding of how the rounds were packed. Their first idea was to simply paint over the Chinese markings on the crates. E-mails flew back and forth between Miami and Albania as they tried to find a solution.

  The dudes were in the midst of a classic wartime snafu: the Army desperately needed ammunition that worked perfectly, but it couldn’t buy the rounds, it appeared, because of a ban that self-evidently was never meant to apply to munitions shipped from China to Albania decades earlier. Faced with a situation in which the law seemed to defeat a necessary war purpose—for reasons that had nothing to do with the ban on Chinese munitions—the obvious solution for AEY would have been to tell the Army what was happening. They could explain to the Army that the ban shouldn’t apply to the ammo. The rounds had been manufactured decades before the ban was imposed. It was ridiculous to retroactively outlaw ammo—and thus leave the Afghan armed forces without rounds for their guns.

  The State Department’s foreign-military-sales laws had a clause that dealt with exactly this scenario. The provision stated that if munitions had left their country of origin, after five years their nationality was transferred to the new country of their location. Under this rule, the ammo that had been in Albania for decades would now legally be “Albanian,” not Chinese.

  In a world of shifting alliances, the State Department’s rule was a sensible policy. Once an implacable enemy of the West, Albania was now a close ally of the United States. The US Embassy in Tirana was deeply involved in helping the Albanians dispose of their surplus munitions through “demilitarization”—essentially taking the rounds apart. It was costly, dangerous, and cumbersome. Sending 100 million rounds of AK-47 ammo where they were so badly needed saved the expense and also helped an ally in Afghanistan.

  But the Defense Federal Acquisition Regulation Supplement that governed AEY’s contract had no such provision. Many of the Pentagon’s regulations had been enacted quickly, under the strain of war. The Pentagon’s haste in constructing its alternate procurement system meant that all of the consequences and implications of the new regime hadn’t been considered. The law had no mechanism to change the place of origin and nationality of munitions.

  Even so, if the Army had been informed, its lawyers could simply have found that MEICO wasn’t a “Communist Chinese military company” so the ban didn’t technically apply to the ammo in Albania. Moreover, there had been no such thing as a “Communist Chinese military company” when the ammunition had been manufactured. The ammunition had been made in the 1950s and 1960s by organizations called machine-building industries, the Chinese term for the entities running its military-industrial complex.I

  If Diveroli had the wit to hire a topflight law firm, AEY could brandish a legal opinion marshaling compelling arguments that the ban didn’t apply. If the matter had been thoroughly studied, AEY would have discovered that much of the “Chinese” ammo hadn’t actually come from China. Many of the rounds had been manufactured in Albania but packaged in containers with Chinese markings. This oddity resulted from yet another obscure page of history. The ammo had been part of a much larger Chinese “gift” to Albania. As part of the alliance in the 1950s and 1960s, China had aimed to help industrialize the agrarian nation. The Chinese had built all kinds of facilities for the Albanians, from clothing manufacturers to steel foundries and arms factories. The Chinese had exported everything from the steel and brass for the cartridges to the wooden crates, paintbrushes, stencil machines, and head-stamping equipment. Like a Hollywood movie-production team going to the jungles of Africa to shoot a film, bringing along everything from gaffer tape to Evian water, the Chinese had transported all the material they needed to Albania so they wouldn’t have to rely on local materials.

  Albanian laborers had put cartridges with Chinese headstamps in ammo cans with Chinese markings, layered in stencil paper with Chinese markings, then sealed the ammo in wooden crates stating that it had been manufactured in China. This ammunition looked exactly as if it had been made in China. Or nearly exactly. The dudes would have to have been world-class experts on Kalashnikov ammunition, which they most certainly weren’t, to tell the difference.

  Trapping a small contractor like AEY in a maze of federal regulations like this was a well-founded fear of Congress when new laws and regulations were enacted. The Regulatory Flexibility Act required the Pentagon to study the impact any new regulations would have on small companies fulfilling federal contracts. This was to ensure that small companies weren’t overburdened and put at a disadvantage by larger companies with legal departments and funds for fancy law firms. But the Pentagon claimed that no such study was required, because the ban applied only to Chinese military companies—not American companies.

  The Pentagon was wrong about its own regulation. The ban had been drafted broadly, forbidding any acquisition “directly or indirectly,” which could be taken to include AEY’s purchase of Chinese-made ammunition from an Albanian company fifty years after the rounds were manufactured—an interpretation that would strain credulity and common sense.

  But the dudes were the dudes. Podrizki and Diveroli and Packouz didn’t grasp the legal niceties of the situation, or the political realities. The trio comprehended only what was directly in front of them: the ban, the Chinese markings, the need to deliver.

  Unsure what to do next, Diveroli called Ralph Merrill in Utah. The older businessman had imported Chinese AK-47 ammunition to the United States for years. Instead of leveling with Merrill about the China problem, Diveroli dissembled and said the idea of changing the packaging came from the Albanians.

  Over the next few hours, the deceptions within deceptions multiplied. AEY would either have to supply the Albanian ammo, or renege on the contract. The consequences of not delivering on such a large and vital contract would be harsh. In the language of FedBizOpps, it would result in a termination for default, not only costing AEY the Afghan deal but also severely undermining its ability to win contracts in the future. There was really no choice to make: AEY was dead if they didn’t deliver.

  First, the dudes decided they needed to be doubly sure the ammo really was “Chinese.” The next morning, in Albania, Alex Podrizki went to check the rounds again and take pictures. He was escorted to another vault filled with ammo. He randomly opened ammo cans filled with a variet
y of Soviet Bloc ammo for different guns—AK-47s, Dragunov sniper rifles, SKS semiautomatics.

  The Albanian soldiers accompanying Podrizki opened the locks on boxes with axes and smoked cigarettes while surrounded by tons of explosives—a remarkable lack of precaution. They grinned when Podrizki recoiled in fear: Look at the stupid American kid, he thought they were thinking.

  But there was no doubt now: the ammunition was definitely “Chinese.” Podrizki carefully took photographs, as instructed by Packouz—the crates, the tins, the stencil paper inside the tins. Then Podrizki went and fired the rounds. To him, all the fuss about the origin of the ammunition was a distraction. He was working for AEY and would do his best to follow instructions, but he believed he had a larger duty to fulfill—to the war effort in Afghanistan and the soldiers going into battle who lacked ammo for their guns. The rounds worked perfectly well, despite the place of origin.

  “All I was interested in was serviceability,” Podrizki recalled. “That was all I ever really gave a fuck about. What were the Afghan soldiers in the field going to take into battle? I was concerned about how things worked. I had trained as a soldier. I wanted to make sure that the ammo could be used to fight the Taliban.”

  Podrizki called AEY in Miami. This time he spoke to Diveroli.

  “Diveroli told me that in the worst possible scenario it would be a civil matter, not criminal,” Podrizki recalled. “Diveroli said he had lawyers looking into the matter. He said the ammo had been purchased by the Albanians before the embargo was imposed, so the law couldn’t be applied retroactively. He said the weapons weren’t coming from a Chinese company and the contract wasn’t benefiting China in any way. He said the embargo only applied to certain kinds of weapons. It was about technology going to China, not ancient ammo in Albania. He had a bunch of explanations that made sense. “I knew Efraim and David were going to make a lot of money out of the contract, so they had a motive to perform.”