Update On Our Favorite Neighborhood Arms Dealer

By Robert Brodsky

Last year, we reported on the case of Efraim Diveroli, a then 22-year-old arms dealer from a fabulously wealthy Los Angeles family who allegedly sold the government banned Chinese ammunition through a $300 million Defense Department contract. Diveroli, the president and owner of AEY Inc., was indicted last July and charged with 71 counts, including conspiracy, procurement fraud and making false statements to the Army.

AEY officials falsely told the government that the decades-old munitions, which was later delivered to Afghan security forces, was from Albania, the indictment said.

The Associated Press reports that David Packouz and Alexander Podrizki, two AEY business associates, pleaded guilty Tuesday to federal fraud charges. Both men face a maximum of five years in prison.

Meanwhile, Diveroli and another business associate, Ralph Merrill, have pleaded not guilty and are awaiting trial.

AEY has run into other questions about its honesty with federal contracting officials.

An investigation by Government Executive in April 2008 showed that the company had been improperly designated as a small disadvantaged business less than a year before receiving the massive arms contract. Since that label was applied, AEY earned more than $204 million in federal contracts.