Military officials promised changes Tuesday after a lashing by congressional Democrats and Republicans, who expressed anger and astonishment...
WASHINGTON — Military officials promised changes Tuesday after a lashing by congressional Democrats and Republicans, who expressed anger and astonishment that a 21-year-old Miami Beach man with a spot on a State Department “watch list” and a history of offering excuses for failing to deliver on military contracts was awarded a $298 million deal to arm allied forces in Afghanistan.
A congressional investigation found that Efraim Diveroli, now 22, was granted the contract even though he, his company, AEY, and a supplier he worked with were on a State Department watch list for suspicious international weapons dealers, said Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee.
Waxman, D-Calif., said the awarding of the contract revealed a “fundamentally flawed system,” noting Defense Department officials had overlooked AEY’s “long record of failed and dubious performance.” That record, as compiled by the committee, included delivering damaged helmets to Iraq, falsely blaming a hurricane in Miami for failure to deliver 10,000 pistols to Iraq’s security forces and delivering the wrong model of laser pointer and rifle attachments to the U.S Embassy in Colombia.
“It appears that anyone — no matter how inexperienced or unqualified — can win a lucrative federal contract worth hundreds of millions of dollars,” Waxman said.
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Congressional investigators also determined that an ammunition contract for Afghanistan, which the company is also accused of mishandling, may have been unnecessary: Bosnia, Bulgaria, Hungary and Albania, the East European countries from which AEY bought its ammunition, had offered to donate the type of Soviet-style rifle and machine-gun cartridges the Afghan army and police forces use.
The Army in March suspended AEY from future federal contracting, citing shipments of Chinese ammunition and claiming that Diveroli misled the Army by saying the munitions were from Albania. U.S. law prohibits trading in Chinese arms.
Defense officials acknowledged shortcomings in the contracting process and vowed changes, though they were unable to tell the panel whether AEY still has business in Iraq.
“I will have to get back to you on whether they’re still performing,” Jeffrey Parsons, executive director of the Army Contracting Command, told Rep. Stephen Lynch, D-Mass., who said he’d seen crates of supplies with ties to AEY on a recent trip to Iraq.
Military contracting officials said the review of AEY’s performance didn’t raise any red flags because the company’s previous contracts were too small to require mandatory reporting.
Parsons said AEY failed to tell the military it had several contracts that were “terminated for cause” before it was awarded the $298 million contract in January 2007. He said the Army was changing its policies to require that all canceled contracts — regardless of the amounts — be reported.
“In my opinion, while there certainly is room for improvement … this case is more about a contractor who failed to properly represent his company … rather than a faulty contracting process,” Parsons said.
Military officials said they didn’t know the State Department had flagged Diveroli and the company because contracting officers weren’t required to review the watch list containing 80,000 individuals and companies suspected of illegal weapons transactions. Parsons said he didn’t know whether the list was available to outside agencies.
Stephen Mull, acting assistant secretary of state at the bureau of political military affairs, said the agency shared the information with other agencies upon request. According to Mull, AEY was placed on the watch list in January 2005. Diveroli was listed in 2006, with an entry noting “there appear to be several suspicious characteristics of this company … Future license applications involving Diveroli and/or his company should be very carefully scrutinized.”
Waxman said Diveroli was invited to testify but declined through an attorney, citing his Fifth Amendment right not to incriminate himself. Noting that Diveroli was indicted in Miami last week on charges of defrauding the U.S. government, Waxman said, “His Fifth Amendment concerns would appear to be well-founded.”
In the fraud case, authorities said Diveroli and three employees conspired to defraud the federal government by selling it more than $10 million worth of the Chinese-made machine-gun rounds, telling U.S. officials the ammunition was from Albania.
The committee probe concluded that the senior U.S. diplomat in Albania tried to cover up the Chinese origins of the ammunition. An investigation of the envoy has begun.
Material from The New York Times is included in this report.