The Stoner Arms Dealers: How Two American Kids Became Big-Time Weapons Traders

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Alone in a strange city, Podrizki improvised. He picked up a phone book and found a cardboard-box manufacturer named Kosta Trebicka. The two men met at a bar near the Sky Tower in the center of town. Trebicka was in his late forties, a wiry and intense man with thick worker's hands. He told Podrizki that he could supply cardboard boxes strong enough to hold the ammunition, as well as the labor to transfer the rounds to new pallets. A week later, Podrizki called to ask if Trebicka could hire enough men to repack 100 million rounds of ammunition by taking them out of metal sardine cans and placing them in cardboard boxes. Trebicka thought the request exceedingly odd. Why go to all that trouble? Podrizki fibbed, saying it was to lighten the load and save money on air freight. After extended haggling with Diveroli back in Miami, Trebicka agreed to do the job for $280,000 and hired a team of men to begin repackaging the rounds.

As he worked at the warehouse, however, Trebicka grew even more suspicious. Concerned that something nefarious was happening, he called the U.S. Embassy and met with the economic attache. Over coffee at a cafe called Chocolate, Trebicka confided that the ammunition was covered in Chinese markings. Was that a problem? Not at all, the U.S. official replied. The embassy had been trying to find the money to pay for demolishing the ammunition, so sending the rounds to Afghanistan would actually do them a favor. AEY appeared to be in the clear.

But greed got the better of Diveroli. In a phone call from Miami, he asked Trebicka to use his contacts in the Albanian government to find out how much Thomet was paying the Albanians for the ammunition. AEY was giving the Swiss arms broker just over four cents per round and reselling them to the Pentagon for 10 cents. But Diveroli suspected that Thomet was ripping him off.

He turned out to be right. A few days later, Trebicka reported that Thomet was paying the Albanians only two cents per round — meaning that he was charging AEY double the asking price, just for serving as a broker. Diveroli was enraged. He asked Trebicka to meet with his Albanian connections and find a way to cut Thomet out of the deal entirely.

Trebicka was happy to help. The Albanians, he thought, would be glad to deal with AEY directly. After all, by doing an end run around Thomet, there would be more money for everyone else. But when Trebicka met with the Albanian defense minister, his intervention had the opposite effect: The Albanians cut him out of the deal, informing AEY that the repackaging job would be completed instead by a friend of the prime minister's son. What Trebicka had failed to grasp was that Thomet was paying a kickback to the Albanians from the large margin he was making on the deal. Getting rid of Thomet was impossible, because that was how the Albanians were being paid off the books.

Diveroli flew to Albania and tried to intervene to help Trebicka keep the job, but he didn't have enough clout to get the decision reversed. Trebicka was stuck with the tab for the workers he had hired to repackage the rounds, along with a warehouse full of useless cardboard boxes he had printed to hold the ammo. Furious at being frozen out, he called Diveroli and secretly recorded the conversation, threatening to tell the CIA what he knew about the deal. "If the Albanians want to still work with me, I will not open my mouth," he promised. "I will do whatever you tell me to do."

Diveroli suggested that Trebicka try bribing Ylli Pinari, the head of the Albanian arms-exporting agency that was supplying the ammunition. "Why don't you kiss Pinari's ass one more time," Diveroli said. "Call him up. Beg. Kiss him. Send one of your girls to fuck him. Let's get him happy. Maybe we can play on his fears. Or give him a little money, something in his pocket. And he's not going to get much — $20,000 from you."

When Trebicka complained about being muscled out of the deal, Diveroli said there was nothing he could do about it. There were too many thugs involved on the Albanian end of the deal, and it was just too dangerous. "It went up higher, to the prime minister and his son," Diveroli said. "This mafia is too strong for me. I can't fight this mafia. It got too big. The animals just got too out of control."

With things up in the air in Albania, Packouz was starting to feel the pressure. He was stressed out, working around the clock, negotiating multimillion-dollar purchases and arranging for transportation. It felt like AEY was under siege from all directions. So when the cargo plane had finally taken off from Hungary on its way to Kabul loaded with 5 million rounds of ammunition, Packouz had breathed a sigh of relief. Then the plane had been abruptly seized in Kyrgyzstan — and Packouz had been forced to swing into action once more, working the phones for weeks to get the ammo released. Fortunately, AEY had friends in high places. When Packouz contacted the U.S. Embassy in Kyrgyzstan, the military attache immediately wrote to the Kyrgyz government, explaining that the cargo was "urgently needed for the war on terrorism being fought by your neighboring Afghan forces." Two weeks later, Defense Secretary Robert Gates traveled to Kyrgyzstan on a mission to keep supplies flowing through the airport there. Under pressure from top U.S. officials, the ammo was eventually released.

"I never did find out what really happened, or why the plane was seized," says Packouz. "It was how things were done in international arms dealing. The defense industry and politics were extremely intertwined — you couldn't do business in one without dealing with the other. Your fate depended on political machinations behind the scenes. You don't even know whose side you were on — who you were helping and who you were hurting."

With the plane released and the Albanian supply line secured, Packouz and Diveroli thought they finally had everything under control. Cargo planes filled with ammunition were taking off from airports across Eastern Europe. The military officials receiving the ammo in Kabul had to know it was Chinese: Every round is stamped with the place of manufacture, as any soldier knows. But the shipments were routinely approved, and there were no complaints from the Afghans about the quality of the rounds. The ammo worked, and that was all that mattered. Millions of dollars were being transferred via wire from the Pentagon into AEY's accounts, and the $300 million contract was moving along smoothly. Diveroli was rich. Packouz was going to be rich. They had it made.

But it didn't take long for success to drive a wedge between the two friends. The exhausted Packouz no longer had to work 18 hours a day to track down suppliers. He started coming in late and knocking off early. Diveroli, who owed him commission but had yet to cut a check to his partner, started to argue with him about his hours.

"Efraim started looking at me differently," Packouz says. "I could tell he was working things over in his head. There was real money in the bank — millions and millions. He was about to be forced to pay me a huge chunk of change. He said he didn't want to 'give' me all that money. That was how he put it. Not like I had earned the money."

One day, Diveroli finally made his move. He wanted to renegotiate the deal. Packouz knew he was in a bad bargaining position. The money coming in from the Army went directly to AEY. Packouz had no written contract with Diveroli, only an oral agreement. The handshake deal they had made was worth just that — a handshake.

In an effort to protect his interests, Packouz demanded a meeting with lawyers present. Before the session, the two friends had a quick exchange.

"Listen, dude, if you fuck me, I'm going to fuck you," Packouz warned.

"Whatever," said Diveroli.

"It's going to be war," Packouz said. Then he played his trump card. "You don't want the IRS starting to come and look around."

Diveroli's face went white.

"Calm down," Diveroli said. "Don't throw around three-letter words like IRS. We can find a settlement."

"I know all of your contacts, and I can send them the actual documents showing what the government is paying," Packouz said. "You'll lose your entire profit margin."

"Take it easy," said Diveroli.

"We both know you're delivering Chinese," Packouz said.

A deal was struck, with Packouz agreeing to a fraction of the commission he had been promised. He figured he had something more precious than money: He knew how to work FedBizOpps. To compete with his former partner, he opened up his own one-man shop, Dynacore Industries, claiming on his website that his "staff" had done business with the State Department, the Pentagon, and the Iraqi and Afghan armies. "Sometimes you have to fake it until you make it," Packouz says. "People won't do business with you unless you have experience, but how can you get experience if they won't do business with you? Everyone has got to lie sometimes." Fearing that Diveroli might decide it was cheaper to have him killed than to pay him, Packouz also bought a .357 revolver as insurance.

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