The Accidental Arms Dealer

Jun 19, 2015
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Transcript

GLYNN WASHINGTON, HOST:

Welcome back to SNAP JUDGMENT - the Caught Up episode. Today, we're exploring what happens when circumstances seem to run you over. Like, did you ever wonder how you ended up in your job or your city, your life? Have you ever looked around and thought, how did this happen? Well, you're going to want to listen to our next story.

DAVID PACKOUZ: It was Friday night, and Efraim asked me if I wanted to go to a rabbi's house for dinner. We were just going, you know, for the free food and free drinks and to meet good-looking girls.

ANNA SUSSMAN, BYLINE: David Packouz and Efraim Diveroli were old friends from synagogue. They had actually left the Jewish faith, but free food was free food. So they got into Efraim's old, black Mercedes and drove through the streets of Miami Beach.

PACKOUZ: And while on the way, he was talking about his business. He said that he could introduce me to a business that would be much, much more lucrative than what I was doing now and that he could prove that he was making a huge amount of money and he could teach me how to make it. And so I asked him, well, how much money are you making? And he said, well, this is top-secret information. And I said, well, you'd expect me to join you in business and you won't even tell me how much money you're making? I need to know what the potential is. And right then we had arrived at the rabbi's house, and he turned off the car, and he looked to me and he's like, I'm only telling you this to inspire you, not because I'm bragging. I have $1.8 million in the bank. And he was 18-years-old.

SUSSMAN: David was a part-time massage therapist putting himself through college. So, almost $2 million in the bank was both totally alien and completely captivating. Their group of friends passed their time sneaking into hotel pools. To David, Efraim was an unlikely owner of a multimillion dollar business.

PACKOUZ: He just seemed like a total clown and, you know, just, like, another stoner. He was constantly scheming about different ways of making money. So I knew he was making money, I mean, he said he was making money, but I had no idea how much. Well, when he told me he had $1.8 million dollars in the bank, I said, holy [expletive]. (Laughter) I couldn't believe it.

SUSSMAN: When Efraim told David about how much money he made, David had only one question.

PACKOUZ: So what is it exactly - what is it that you do? And he said, well, the government is always looking to buy things. For example, handguns or various common ammunition. They don't really care who they get it from, as long as they get the best price and from someone who's reliable who will actually deliver it. So they put it out for open bid.

SUSSMAN: Most of the contracts Efraim won were military contracts. Basically, he was an arms dealer.

PACKOUZ: You know, my mind was swimming. I couldn't believe that he actually had made that much money. He definitely didn't live like a millionaire. And we had some drinks and pretty much I was quiet the whole time just thinking about it. And, by the end, I told him, you know, I'll give it a shot. My plan was to make a few million dollars, and then get out and do what I like doing in order to live the life I always wanted.

SUSSMAN: Efraim took David to his office, which was actually just his apartment, opened up his laptop and said.

PACKOUZ: Let me show you how it works.

SUSSMAN: Efraim was getting contracts to sell arms and ammo from a website - fedbizopps.gov. On Fed Biz Opps, he would scan the listings for contracts he thought he could win. The listings read almost like a Craigslist ad, except instead of asking for help mowing the lawn, these ads ask for large quantities of military supplies. You can find ads for everything - from guided missiles to Black Hawk helicopter landing gear to, strangely, corn cob grounds.

PACKOUZ: My first contract that I actually won was for 50,000 gallons of propane.

SUSSMAN: Well, I would have no idea where to find that much propane. I mean, how did you know where to go?

PACKOUZ: Google. That's it. Really.

SUSSMAN: OK, but can I Google where to find, like, 50,000 grenades or AK47s?

PACKOUZ: Absolutely, of course you can. Who makes grenades, who makes AK47s? A range of companies do it, and those companies are looking to sell as long as they think you will buy and that you're legally allowed to do so.

Most companies dealing with government contracts are large companies. You have your Lockheed Martins, your Boeings, General Dynamics - these are Fortune 500 companies with tens of thousands of employees, and we were just two guys in a living room, smoking weed and bidding on contracts. It's kind of like the local lemonade stand going against Tropicana.

We actually won a fair amount, and we started winning more and more as we kind of learned how to work the system. We were working at his desk - he had a big desk in his living room that we had two laptops on - old laptops - and piles of paper everywhere. This was 2005, 2006 - there's these two huge wars, Iraq and Afghanistan, raging and the government was looking to buy massive quantities of things. They were looking to buy huge amounts of bed sheets and body armor and bullets and air conditioners and trucks, and pretty much anything you could think of, they were looking to buy. But because he had a lot of experience in military equipment, he focused on that. Eighty to 90 percent of the business was weapons and ammunition.

On a typical day, we would work around 18 hours, and that's pretty much from when we would wake up until when we would fall asleep. And we would order delivery so we wouldn't have to leave to get food so we could eat while we worked. I'd never worked so hard in my life.

SUSSMAN: So, they'd be eating Chinese noodles from a carton and sleeping on the floor and delivering weapons to Colombia and Germany. They'd been on contracts for Nepal, Niger and Chad.

PACKOUZ: But most of the business was in Iraq and later in Afghanistan.

SUSSMAN: As they bid on these contracts, David saw the promise of really big money flash on the screen before him. If everything went well, he could be making millions.

PACKOUZ: There were many moments I considered backing out, but then I would see the money. you know, coming in and I just told myself I could put up with it for a little bit longer. I just need to make some money, and then I'll quit. So I was planning on retiring after that and traveling the world and buying a yacht and living the good life. That was the plan.

Who was it? I forgot who it was - it was some - one of the robber barons - the guy who cornered the silver market in the 1800s. A reporter asked him how much money would be enough? And he said, more (laughter).

SUSSMAN: Then, David got a call that promised all the money he wanted and then some. It was the call to step up into the high-stakes arena of the big-time arms dealers.

PACKOUZ: I was driving to see my girlfriend and have dinner with her. And Efraim called me and he said, I just saw one of the biggest solicitations, requests for a quotation I have ever seen on Fed Biz Opps, which is bigger than anything I've ever seen, and you have to come to the office right now. We got to discuss it. And I told him, I'm on the way to dinner with my girlfriend. And he said - he's like, well, bleep that (laughter), you want to, like, hang out with your girl or do you want to get rich?

SUSSMAN: David and Efraim pored over the contract. It was a deal to supply all the munitions for the new Afghan Army and police force. So, they got to work.

PACKOUZ: We looked at the request for a quote. And it was huge, I mean, it was like 100 million rounds of AK47 ammo, 100,000 grenades, antiaircraft rockets - it was enormous.

SUSSMAN: David spent two months working around the clock. He called every contact in the world he thought might be able to supply the stuff for the contract, scouring the planet for lots and lots of bullets.

PACKOUZ: I was calling Russia, I was calling Ukraine, I was calling Bulgaria, I was calling Kyrgyzstan and Uzbekistan, Korea. Calling most of these countries, they usually don't speak English very well, so I would just say..

English, English, English. I want to buy, I want to buy.

We would say, oh, yeah, I'll get my sales team working on that or I'll have my accountant contact you or...

We'll get our procurement division on that right away, Sir.

We would act like we had, like, a whole staff. But, of course, it was just us two. We lied all the time.

SUSSMAN: David and Efraim put in a bid for the Afghan ammo at $300 million, and they won. They were the lowest bidder, by far. Partly because two guys in an apartment have a lot less overhead than a company with tens of thousands of employees.

PACKOUZ: It was - how do I put it? It was surreal. It was very odd. I was [expletive] myself on a constant basis (laughter). It was a constant state of panic. Without us, the Afghan Army had no ammunition. They wouldn't be able to fight the Taliban.

WASHINGTON: It doesn't stop there. Don't go anywhere. The stunning conclusion of "Accidental Arms Dealer" in just a moment when SNAP JUDGMENT - the Caught Up episode - continues. Stay tuned.

(SOUNDBITE OF MUSIC)

WASHINGTON: Welcome back to SNAP JUDGMENT from PRX and NPR, the Caught Up episode. My name is Glynn Washington, and when last we left, David Packouz and his partner Efraim were in quite a fix. And David, he's got a habit of going from the frying pan into the fire.

PACKOUZ: Without us, the Afghan Army had no ammunition, and they wouldn't be able to fight the Taliban.

SUSSMAN: The hard part now was that David and Efraim actually had to find the ammo and the weapons to fulfill the contract.

PACKOUZ: In Abu Dhabi every year, there's a - one of the biggest arms exhibitions in the world. I went there by myself to try to source ammunition for the Afghan contract. It was like the Cantina scene in "Star Wars." Pretty much every degenerate in the world was there or at least in my mind. You'd see generals in full military gear, you know, sleazy looking businessmen, government officials, pretty much every single country was represented - Chinese generals, Africans, Europeans. Everyone was just having cocktails together. And it was just incredible to me because I knew some of these people are mortal enemies and they're fighting each other. And here they are and they're just, you know, schmoozing over cocktails. Rumors were flying around of, you know, who was going to go to war next, where the best countries were to get the best prostitutes. During the day, you're in the exhibition halls. They had very expensive bottles of wine and champagne and, you know, caviar and hors d'oeuvres and, you know, really good-looking women to serve it all. They spared no expense. Outside, they had live-fire weapons drills where they would have, like, tanks jumping sand dunes and like blowing things up and helicopter gunships. And it was like live military drills that you could watch. There were bleachers where everyone would stand and, you know, drinks and hors d'oeuvres being passed around. And it was like being at a big football game where, you know, the sport was military maneuvers. I was by far the youngest person there of course because everyone in this business is military or ex-military so they're all, like, men in their middle ages. And they just looked at me as if I was, you know, some kid and they were wondering what I was doing there, which is why I always had copies of our contract in my briefcase to prove that, you know, I was the real deal and actually had real business deals to do.

SUSSMAN: Was the arms business, in your experience, kind of more morally dubious than other industries? Was it shadier?

PACKOUZ: The arms business by its nature is definitely shadier and more dubious because arms could be used for great evil. And the people that you're dealing with sometimes sell to people who use them for great evil. But at the time, did it stop me? No, it didn't.

SUSSMAN: David kept working to get the guns and the bullets, but as they worked, these wayward kids from Miami Beach that snuck into the halls of power started to get some unwanted attention.

PACKOUZ: Because we were winning so many contracts, we were upsetting a lot of our competitors. You know, they worked real hard on these contracts, and they kept on losing them to us. They started slandering us to various people in Iraq. They started telling people that we were coke dealers and that's how we got the money to fund the contract.

SUSSMAN: David was sending planeloads of ammo all over the globe for the Afghan arms contract. At one point, he had over 5,000 tons of bullets waiting to be loaded into cargo planes in Albania. And it was there that the two-man operation began to crumble against the powerful tectonic plates of the international arms trade.

PACKOUZ: Albania is famous for - how do you put it? Let's put it this way - the State Department guy told us, you know, most Third World countries are Third World, but Albania is kind of like the fifth world. They need to be supervised.

SUSSMAN: He sent a friend over to Albania to check on the deal, make sure the ammo wasn't faulty and to repackage it so it would cost less in air freight. But when their friend walked into the underground Albanian bunker and saw the piles of bullets, he immediately called David.

PACKOUZ: When he went over there, he told us hey, you know, there's Chinese letters all over the boxes and we had no idea. We were like, oh, well, uh-oh. This could be a problem.

SUSSMAN: Here's the thing about Chinese ammo; it was illegal. Their contract said it explicitly. And while technically this ammo hadn't been bought directly from the Chinese, they knew this mountain of Chinese ammo was a really big problem.

PACKOUZ: We discovered that it was Chinese ammunition, and then we figured, well, it's better not to tell the Army about this. What they don't know won't hurt them. The ammunition is excellent quality and that's all that really matters. It's not enriching the Chinese government in any way, and that's all that the anti-Chinese ban was meant to be about; it'll be fine. So we took the ammunition out of the wooden crates that they were packed in and out of the metal sardine cans, and we packaged it in plastic bags and in cardboard boxes. We were very careful not to include any papers that had Chinese letters in the boxes. So there was no more Chinese words on the packaging once we had repackaged it. And so we delivered - started delivering, and we delivered I think by the end, close to 70 aircraft loads of ammunition, each holding around 45 tons.

SUSSMAN: He says anybody would've done that. He says shenanigans like this happen every day in the arms trade. The big boys don't get caught. But David and Efraim were not the big boys. A rival competitor, an Albanian businessman who had been cut out of a deal, started his whisper campaign against David and Efraim. He told a Pentagon official to check them out. And soon, David and Efraim's office was raided by the Feds.

PACKOUZ: And the government eventually decided that that constituted fraud. As they say, it was a conspiracy to defraud the United States of America. Well, I felt like my life was over because they said OK, you have 71 aircraft loads that you delivered to Afghanistan, each one with a certificate saying that the point of origin is Albania. And you signed off on that, and really the origin was China. And therefore, each aircraft load delivery, each document you signed, is one count of fraud. And each count of fraud has a maximum of five years in prison, so 71 counts of fraud for 71 aircraft loads is around 350 years in prison.

SUSSMAN: And did you ever - I don't know - I mean, I feel like all of us in our dark moments of shame feel like, I don't know, there's some kind of like celestial checks and balances. Like, did you ever feel like you were caught because of greed - because you had been being greedy?

PACKOUZ: I did think that. When I got caught and I realized that I was facing possibly a lifetime in prison, a lot of things go through your head. And you evaluate your entire life and how you got up to this point and how you could be so stupid and all the mistakes that you've made. And one of the big ones I was constantly thinking about was getting involved in the business in the first place. And I wondered why I did it. Of course I knew, but I thought that it was a certain, yeah - it was almost like a punishment for kind of turning a blind eye towards certain things. And I wish I had never gotten involved in it in the first place, that's for sure.

SUSSMAN: In fact, David never saw any of the money he dreamed of. So now he was broke and a federal criminal.

PACKOUZ: Like any sane person caught up in the system, I pled guilty, and they reduced my charges down to - you know, from 71 counts of fraud to one count of fraud. Eventually, the judge had mercy on me and gave me just seven months of house arrest and seven months' probation.

SUSSMAN: He had to reset. There would be no more drinking cocktails and watching rocket launches with African warlords. Instead, after serving his house arrest, David walked out of his apartment armed with a backpack full of scented candles and soothing music.

PACKOUZ: Well, I went back to doing massage, you know, to make ends meet. I would have my massage table on a cart and, you know, a little bag with all my equipment, such as essential oils and massage oil and, you know, music. But it was strange; it was definitely strange. After I went back into massage, I, you know, informed all of my former clients that I was doing massage again. And the vast majority of them were very thrilled to hear that. And they asked me so what have you been doing the last year or two? (Laughter) And I would say yeah, it's a long story; it's been interesting.

WASHINGTON: Big thanks to David Packouz for sharing your story. If you want to find out the dirty, dirty, gritty, gritty behind this piece, check out the book written by Guy Lawson out in stores right now; it's called "Arms And The Dudes." Find a link on our website, snapjudgment.org. The piece was produced by Anna Sussman and Julia DeWitt in collaboration with Guy Lawson. The original score and sound design by our own Renzo Gorrio.

All right, it's about that time. But, Glynn, I missed some of the episode. Glynn, I need more stories; give me some more stories, man. Hey player, it's going to be all right. I've got exactly what you need. Subscribe to the SNAP JUDGMENT storytelling podcast and get your fix today - snapjudgment.org. Available on iTunes, Stitcher, SoundCloud, we deliver your way. Don't miss out on the snap-nation conversation - Twitter, Facebook. Tell the world what you think. Today's SNAP JUDGMENT episode was brought to you by myself, letter R and the finest group of audio magicians the world has ever known. Please let them take a bow - the uber producer, Mark Ristich, the beat of the beat, Pat Mesiti-Miller. Anna Sussman blows off jury duty, Julia DeWitt carries a lighter, Davey too-fast-too-furious Kim can't take the bus, Joe Rosenberg found a rack of suits just laying in the street, he can give you a good deal. Nancy Lopez uses her knife for purposes other than cooking. Eliza Smith bites the bullet. Ana Adlerstein bites. Leon Morimoto wears his sunglasses at night. Matt the enforcer Ducat and Jazmin Aguilera is here to see you now.

Did you ever push things off the side of a tall building just to see what would happen? Well, next time, I promise not to push things belonging to the Corporation for Public Broadcasting. I honestly didn't know computers could just splinter like that. Much love, though, to the CPB. PRX, the Public Radio Exchange, is now exchanging things other than public radios. Stop by their offices with some of your old junk; they'll take it. Tell them Glynn sent you, prx.org. And this is not the news - no way is this the news. In fact, you could hear the tornado sirens blowing, ask your girlfriend to marry you right then and there only to realize that you don't have a girlfriend, and your mother's friends are all looking at you funny, and you would still even then not be as far away from the news as this is. But this is NPR. Transcript provided by NPR, Copyright NPR.