A Disadvantaged Arms Dealer

AEY President Efraim R. Diveroli is giving a bad name to 22-year-old arms dealers everywhere.

Government Executive reported today that in mid-2006 AEY registered itself as a “Small, Disadvantaged Business” in the federal government’s contracting data system. Up to that point, business had been good for Diveroli- the company had already netted $7 million in government contracts. But since the designation they’ve gotten $204 million from the government. This includes the first $155 million of a $298 million contract to be Afghanistan’s top weapons supplier.

That contract has since been suspended, as it turns out Diveroli shipped munitions to Afghanistan forces that were made by Chinese manufacturers in 1960. U.S. companies are not allowed to buy arms from China.

How in the world AEY was deemed a disadvantaged business- and whether that led to the Afghanistan contract- is the latest ghoulish twist in the Diveroli saga. As Government Executive reports, more than 90 percent of applications for disadvantaged status are denied and their is no discernible reason why AEY would ascertain that status (no, being young doesn’t make you disadvantaged). Businesses that are labeled disadvantaged can win contracts even if they’re not offering the govt. the most competitive price.

Diveroli is scheduled to appear before the House oversight committee April 19. Meanwhile, the Army is investigating AEY for fraud and illegal arms trafficking. Such an investigation will likely put AEY at a real disadvantage in bidding for future contracts.