It seems just about anyone can sign up to be a defense contractor and win lucrative contracts. Take for example the 22-year-old who secured munitions contracts with the Army — and delivered decades-old decomposing ammo.
The Army awarded a $298 million contract to AEY Inc., an otherwise faceless company based in Miami. Entrepreneur and alleged conman Efraim E. Diveroli, the barely-old-enough–to-drink company president reportedly worked with a number of middlemen and at least one shell company on the government’s list of those suspected of illegal arms trafficking to obtain his wares. We admire young entrepreneurs, and maybe he thought he was getting legit goods. Regardless, AEY has been suspended in the wake of the controversy, and it appears the company had been under government surveillance for some time. It has been reported that problems with AEY became apparent in the fall 2007 when one Afghan commander noted receiving ammo manufactured circa 1966 in China. The most recent decaying shipment was headed to the Afghan army and police forces, which rely on the U.S. to buy much of their gear.
Since the discovery, lawmakers have performed the requisite hostile question-and-answer sessions, grilling Army officials, who did not have many answers. The ammo embarrassment has itself become ammunition for lawmakers looking for their latest cause of the hour and self-serving sound bite.
Defense contracting opportunities exploded in 2003, and AEY was one of many small companies that got in on the action. Unfortunately, it was the Army that hooked up with this unscrupulous opportunist. Is this an isolated case or are there other illicit gun runners and conmen-turned-contractor that defense officials might have missed?
There has been at least one report that AEY fraudulently was listed as a Small Disadvantaged Business, making it eligible for a number of government set-asides. This is no surprise: If you look at Bandits around the Washington, D.C., Beltway, they (legitimately) wear similar labels. Most claim to be disabled vets to boot, qualifying them for additional opportunities. Though most of these disadvantaged, service-disabled veterans (driving those really nice sedans, though we’ve never seen any disability plates on these machines) are legit, this system that offers tremendous opportunities might continue to battle this demon of fraud.