In 2005, Efraim Diveroli, 19, offered his friend David Packouz, 23, a job at his arms company, AEY Inc. The two young men began an expansion plan that included scanning government contracts on the internet and contacting foreign arms traffickers. By the end of 2006, they had 149 small contracts worth over $10 million. However, they had their sights set much higher: the U.S. military. And through a series of smaller contracts, which afforded them a solid performance record, they would succeed. AEY Inc.'s international profile would grow exponentially January 2011, when Efraim and David were convicted of fraud of the U.S. government.
David Packouz was born February 6, 1982 as one of nine children to Rabbi Kalman Packouz and Aish HaTorah in St. Louis, Missouri. He majored in chemistry at the University of Florida before switching to Miami-Dade College, graduating as a licensed massage therapist. He met Efraim Diveroli at the Beth Israel Congregation, the largest Orthodox synagogue in Miami Beach, and the two bonded over their mutual love of hanging out the beach, playing guitar, and smoking weed.
Efraim was born December 20, 1985 in Miami Beach, Florida to Michael and Ateret Diveroli — strict orthodox Jews. His family was somewhat high-profile as his grandfather was one of the wealthiest property owners in Los Angeles and his uncle is the famous rabbi, author and TV host Rabbi Shmuley Boteach. At 14, Efraim went to work for his uncle at his police supply business. After a falling out with his uncle, Efraim took over his father's shell arms company, AEY Inc., in 2003, at just 18 years old.
Four years after Efraim took over and and two years after David joined, AEY Inc. secured a $298 million million U.S. government contract to supply millions of rounds of ammunition (for AK-47s, SVD Dragunov sniper rifles, and aviation rockets) to the American-allied Afghan army during the War on Terror. The two 20-something stoners, one a former masseur and the other a high school drop out, had actually managed to beat out Fortune 500 giants like General Dynamics to secure the impressive deal. Through a massive underbid, Efraim's dream of becoming the biggest arms dealer in the world was finally coming true.
David's dream, however, was somewhat different. "I was going to make millions," he told Rolling Stone magazine. "[But] I didn't plan on being an arms dealer forever — I was going to use the money to start a music career. I had never even owned a gun. But it was thrilling and fascinating to be in a business that decided the fate of nations. Nobody else our age was dealing weapons on an international level."
After learning their bid had been accepted, the two celebrated with dinner and a few lines of cocaine on the dashboard of Efraim's brand-new Audi. They expanded their two-man enterprise and opened a real office in Miami Beach, even hiring two receptionists. But finding such huge shipments of ammo would become a difficult task, one that led David (whose official title was "account executive") to Abu Dhabi, then Russia, and ultimately, Albania. The quality of the ammo wasn't important, as long as it worked. Despite offers from AK-47 suppliers in Hungary and Czech Republic, David decided on Swiss arms dealer Heinrich Thomet's contacts in Albania because they did not require large down payments, which allowed for larger orders.
However, there was a problem — the Albanian ammo originally came from China, and this was a violation of the terms of AEY's contract with the U.S. Army banning Chinese ammunition because of an American embargo on the Chinese military industry. So the boys conspired to repackage the ammunition — which is considered fraud.
After a few minor delays and a seizure scare by the Kyrgyz KGB, the plane landed in Kyrgyzstan and the ammo was approved by the Afghans, despite every shipment being stamped with the place of manufacture. But with no complaints regarding the quality of the rounds, everything seemed to be going smoothly. AEY Inc.'s accounts were receiving millions of dollars worth of wire transfers from the Pentagon. Efraim was a millionaire. David, who had not yet received his commission, was going to be a millionaire.
But with success comes strife. Efraim and David disagreed about how much of the cut David was entitled to. There was no legal document outlining the terms — it had simply been an oral agreement between friends. The two eventually struck a deal, but with David conceding to a significantly smaller commission than he originally agreed to.
With success also comes enemies. One American arms dealer complained to the State Department, claiming AEY was buying Chinese AK-47s and shipping them to the Iraqi army. This allegation turned out to be false, but it triggered a further criminal investigation. On August 23, 2007, federal agents raided the AEY offices in Miami Beach, seizing all files and computers. The raid led them directly to the emails about the Chinese markings on the Albanian ammo and the conspiracy to re-package them.
"The e-mails were incredibly incriminating — they spelled out everything," David said. "I knew once they saw them we were in trouble. We were so stupid. If we didn't e-mail, we could probably have denied the whole thing. But there were the names and dates. It was undeniable. I realized I was going to get caught no matter what I did, so I turned myself in. When the agents came to my lawyer's office to interview me, they were joking about how they had seen all the e-mails and notes. They were laughing."
On March 27, 2008, the U.S. government suspended AEY Inc. and charged Efraim and David with 71 counts of fraud. The charges and ensuing trial received a swarm of media attention, particularly due to Efraim and David's ages and their penchant for weed. "Arms wunderkind" Efraim and David soon earned the titles "Stoner Arms Dealers" or "The Dudes" by the global media.
In January 2011, after both parties pleaded guilty, Efraim was sentenced to four years in federal prison, while David was sentenced to seven months' house arrest. David later found acclaim when he designed the popular BeatBuddy guitar pedal drum machine.
The story was adapted to a novel by Guy Lawson in 2015, titled Arms and the Dudes. The real-life crime saga has also inspired the biographical crime comedy feature War Dogs, with Jonah Hill starring as Efraim Diveroli and Miles Teller as David Packouz.