Arms dealer AEY never certified as disadvantaged business

Defense contractor AEY was never certified as a disadvantaged business for the purposes of government contracting, Elizabeth Newell and Robert Brodsky reported in yesterday's edition of Government Executive:

"They are not an SDB," an official from the South Florida office said. "They are not 8(a) or anything like that. They are just a firm that is listed in [the Central Contractor Registry] for purposes of being able to secure contracts."

Companies classified as small and socially or economically disadvantaged under section 8(a) of the 1953 Small Business Act are eligible for business development assistance in addition to access to contracts. The SDB program focuses on helping such companies gain access to the federal marketplace. The award criteria for each classification are different.

Another agency official said only SBA can receive, process and issue final decisions on small disadvantaged business applications. SBA 8(a) and SDB program officials have no record of AEY or its owners. [GE]

AEY and its 22-year-old president Efraim Diveroli have been debarred from future contracts pending an investigation into a $300 million contract with the Army to supply ammunition to the Afghanistan national police force. AEY allegedly shipped Chinese-manufactured rounds from stockpiles in Albania and represented them as Hungarian-made ammo. The US military is not allowed to acquire munitions made in China.

According to Government Executive, AEY is first listed as a small disadvantaged business (SDB) in mid-2006 on a contract with the State Department. By this point, the firm had been doing business with the federal government for over two years and had already won contracts worth millions of dollars.

It's not clear how AEY came to be listed as small disadvantaged business. The firm may have misrepresented itself. Alternatively, the fault may lie with the government.

Almost as soon as the New York Times exposed the dodgy ammo deal, rumors began to circulate that AEY had benefited from some kind of pro-Jewish affirmative action. Certain xenophobes got very excited about the fact that Hasidic Jews are deemed minorities for the purposes of certain federal programs. Never mind that the (a) SDB isn't one of those programs, and (b) the Diverolis aren't Hasidic.

Diveroli and other top AEY executives are scheduled to testify before the House Oversight Committee on the 14th of April. Let's hope AEY's spurious SDB status is on the agenda.

Comments

[americangoy]

Lindsay, you are a fantastic investigative reporter.

Well done - you get a pat on the back and an atta'boy from me!

Linking to your blog post haste!

[Allan Zahr]

Lindsay, you are missing the larger story. This is about NATO expansion into the Balkans. How can NATO incorporate Albania if their President is taking bribes? What good is the Albanian military if their ammunition dumps explode? Did you talk to Gary Q. Kokalari about Albania? He appears to be one of the sources of the NYTimes story about Diveroli. I don't know what Henry Waxman's angle is. But when Bush went to Albania, he was greeted warmly. Maybe Waxman is thinking to politically slight Bush's warm Albanian welcome by highlighting negative material about Albania. Florin Krasniqi has experience smuggling arms into Albania. What does he have to say about all of this?

[icr]

Just a reminder that Michael Diveroli's Worldwide Tactical is listed on Fedvendor as "minority owned".
Is there any way to find out what kind of "minority ownership" it is supposed to have?

http://www.fedvendor.com/contractor/USR20070315033441156/profile.htm

[icr]

Clarification: questions re spurious "minority" staus claimed by companies owned by this clan should not be limited to AEY.

[Steve Sailer]

Not only is Michael Diveroli's Worldwide Tactical listed as "minority-owned," as the commenter above pointed out, but Botach Tactical, where Michael learned the weapons business from his (former?) in-laws, the Botach/Boteach clan, is listed as "small disadvantaged." It's a little hard to imagine three separate firms "accidentally" being "miscoded."

The Reagan Administration designated Hasidic Jews as "disadvantaged" in 1984, at least for Minority Business Development Agency purposes. Non-Hasidic Orthodox Jews are not considered "disadvantaged" by the federal goverment.

The one picture on the web of Efraim Diveroli's grandfather Yoav Botach, the apparent owner or co-owner of Botach Tactical, shows him clean-shaven, so he's not Hasidic at present either. Yoav's son, television rabbi Shmuley Boteach has said he was raised in a "Modern Orthodox" home.

In their possible defense, however, it's possible that the Botach / Boteach clan converted temporarily to being Hasidic when Yoav's son Shmuley Boteach became a Lubavitcher Hasidic rabbi. (Shmuley has since broken with them.) So, perhaps the Botaches and Diverolis merely forgot to change their designation when they stopped being Hasidic?

I'm sure Congressman Waxman will dig deeply into these matters ...

[cfrost]

As a federal employee with purchasing authority, I regularly buy stuff through the General Services Administration. The procedure requires that you consider several vendors and take minority/veteran/woman owned businesses into account if possible. Usually I try to throw a few bucks in that direction if the price isn’t too high. – The first consideration is the budget and we don’t have money to burn.

Purchasing is a tedious chore that I try to get done with as little time and mental energy as possible, as I have a very limited appetite for bureaucratese. Here’s an example - (From the GSA website Q&A page, item 14, pertaining to this subject.)

I handle nickel and dime stuff and it’s often a major pain in the ass. I have a very hard time believing that a 22 year old with no experience can steer a bazillion dollar contract through the shoals of federal bureaucracy on his own.

[Barbara]

The Diverolis had a patron who might, eventually, come to light. Although this is not an area I work in directly, I work with those that do, and there are contracting decisions that are so inexplicable you realize that buried one, two, or more layers deep, someone REALLY wants to give someone private money for some less than noble purpose. It's possible that they "self-designated" as SBD, but most agencies are all over that and ask for documentation. Someone didn't. That's the someone you start your investigation with. It's one reason why privatizing government services almost always carries more costs than you realize.

[Barbara]

Actually, that should be give someone "public money." It's often but not always a quid pro quo. It could be as simple as some undersecretary somewhere was the college roommate of Diveroli's father, although it's usually not quite that naked.