Young arms dealer gets into more trouble

A Miami arms dealer who has admitted to selling faulty, decades-old Chinese munitions to Afghan security forces is back in trouble with the law.

Efraim Diveroli, who was 22 years old when his company, AEY Inc., secured a nearly $300 million Defense Department contract to provide ammunition to Afghanistan's army and police force, was arrested on Aug. 20 in Brevard County, Fla.

He was charged with possession of firearms as a convicted felon and possession of firearms while under indictment for a felony offense. Diveroli, who will likely face additional criminal charges, was held without bond. The New York Times first reported Diveroli's arrest on Monday.

Diveroli pleaded guilty last year to conspiracy to make fraudulent statements to the U.S. government in relation to the Afghan contract. He faces five years in prison when he is sentenced on Nov. 8. Under the terms of his plea deal, he is forbidden from selling or handling firearms.

But, according to a new criminal complaint, Diveroli showed little interest in forgoing his once fledging arms business. While out on bond last month, Diveroli reportedly called a licensed weapons dealer attempting to unload machine guns and ammunition that could be resold in Miami and Orlando. The unnamed arms dealer, suspicious of Diveroli, notified authorities.

In a phone call monitored by the Bureau of Alcohol, Tobacco, Firearms and Explosives, Diveroli told the dealer he imports 100 round drum magazines and was looking for someone who could modify the items to accommodate other caliber ammunition. "Diveroli stated that he had a lot of ammunition in stock in the United States available for sale," the criminal complaint said. "Diveroli suggested that he and [cooperating source 1] sit down soon and discuss business venture options."

Diveroli later told an undercover ATF agent that he had an exclusive contract with a factory in South Korea for the purchase and importation of 10,000 magazine drums per month, according to the complaint. Diveroli's plan was to find a firearms dealer who would put his or her company's name and logo on the drums "to make them more marketable," the charging document stated.

During an Aug. 12 meeting, Diveroli and two of his associates provided the undercover agent with a box of ammunition and the group later discussed commission fees. "Obviously it's my business to sell ammo, OK?," Diveroli reportedly told the agent. "I'm not going to make any secret about that. I am a salesman, OK?"

According to Florida business records, Diveroli formed a number of new munitions companies during the past several years, including Ammo Works Inc., LOW LLC and Advanced Munitions. Diveroli does not have a license to sell or trade weapons. AEY Inc. was suspended from doing business with the government after his arrest.

"Once a gunrunner, always a gunrunner," Diveroli told the agent, according to the affidavit. He later described himself as a consultant to the ammunition companies, arguing it was not beneficial for his name to be associated with the firms.

Diveroli also boasted in taped conversations that he and his friends recently had hunted alligators, whitetail deer and hogs in the Everglades with a .50-caliber black-powder rifle. The trip, however, did not go as planned as their car got stuck in the mud and they needed to call a tow truck for assistance.

On Aug. 20, Diveroli met again with undercover ATF agents. He repeatedly examined guns the agents brought to the meeting and then traveled to Wal-Mart to purchase several hundred rounds of ammunition, the complaint said. Diveroli was arrested shortly thereafter. His attorney did not respond to a request for comment.

Diveroli is no stranger to problems with the law, with previous arrests for battery, driving under the influence and possession of fictitious drivers' licenses. But, he made headlines -- and created major headaches for the Pentagon -- when he was caught repacking munitions manufactured in China in the 1960s. The obsolete and defective cartridges were shipped in poorly packed cardboard boxes that split open upon arrival, officials said.

A Government Executive investigation in April 2008 showed that AEY's business exploded after the company was improperly designated as a small disadvantaged business less than one year before receiving the massive Afghan munitions contract.

Before the designation first appeared in the Federal Procurement Data System in mid-2006, AEY had earned a modest $8.1 million in business with the federal government. Since the SDB label was applied, the contractor earned more than $204 million in federal contracts.

Small disadvantaged businesses can receive price evaluation adjustments or proposal evaluation credits on Defense contracts. But Diveroli was anything but disadvantaged, coming from an extremely wealthy family. His father owns a pair of highly successful military and police supply companies, both of which receive government contracts. And his grandfather is one of the largest property owners in Los Angeles.