NYT confirms my hunch about Diveroli's AEY

When the New York Times broke the story that a 22-year-old high school dropout in Miami Beach had gotten a $298 million contract to supply ammunition to the Afghan army, there was much speculation about the no doubt complicated and nefarious conspiracy behind it all.

But the more I thought about it, as I wrote back in March, the more the scandal sounded merely like the traditional New York mail order camera shop business model of semi-bait and switch: you offer a ridiculously low price, take the customer's money, then see if you can scrounge up something that will keep the customer from taking you to court. Maybe you can bully a supplier into selling you exactly what you've already sold, or maybe the customer will accept something kind of like what they thought they were buying. After your reputation gets too awful, you just change your firm's name.

Indeed, that's the reputation of Botach Tactical, the weapons dealer owned by Efraim Diveroli's mother's family.

It's an easy way to make money if you just don't care when your rightfully angry customers scream at you over the phone. Most people don't like being confronted when they're guilty of breaking promises, but if it doesn't bother you, then you've got a bright future in this kind of business.

Now, C.J. Chivers reports in the NYT:

Several arms-industry officials said the problems were obvious. AEY was a new company with a young and inexperienced staff. Part of its business model, the officials said, was to make extremely low bids on contracts and then seek help from competitors to supply the munitions.

Private arms dealers said the practice caused predictable problems. “They low-bid these prices so low that there was no high-quality source for it,” said Sanford Brygidier, managing director of Aztec International, of Ocala, Fla.

Mr. Brygidier, who said he has been in the arms business for 36 years, added that Mr. Diveroli would tell potential suppliers that they had to accept his prices because he had the contract and there would be no other buyers. “He wanted this, he wanted that, he had immediate cash,” Mr. Brygidier said. “I told him, basically, that this wasn’t kindergarten and that we were not in the education business. I told him not to call me anymore.”

Mr. Shapiro, Mr. Diveroli’s lawyer, declined to answer questions about whether AEY had sought munitions from companies it had underbid. He did not dispute that its prices were generally low.

“It seems to me that Mr. Diveroli’s prices would have had to have been lower than his competitors’ for the Army to have awarded him the Afghanistan contract,” Mr. Shapiro said.

The low-price assumptions, the industry officials said, appeared to be what had led Mr. Diveroli to Albania, where the government sold its munitions for as little as 2.2 cents a round, a price that strongly suggested their age and poor condition.

Ed Grasso, president of Sellier & Bellot USA, which has provided new Czech ammunition to Afghanistan, said new rifle cartridges of the types AEY bought typically cost 20 cents to 30 cents a round.

By early this year, Mr. Diveroli seemed to be desperately searching for munitions, three dealers said. He turned up in Las Vegas in February at the SHOT show, which calls itself the world’s largest firearms exhibition.

He went booth to booth, seeking suppliers to fill the Army’s orders, including those for shoulder-fired rockets, they said. “He was looking to buy RPG-7 rounds, and let me tell you, he wanted to pay $30 for these things,” one dealer said. “You can’t get that item for that price, not if you’re buying quality.”

A round for an RPG-7, the dealer said, typically costs $60 to $85.

He added, “He would just come in and give us a list of stuff that he was trying to shop, and at prices no one would touch.”

My published articles are archived at iSteve.com -- Steve Sailer