[Congressional Record (Bound Edition), Volume 155 (2009), Part 16]
[Senate]
[Pages 21052-21053]
[From the U.S. Government Publishing Office, www.gpo.gov]




               WASTE, FRAUD, AND ABUSE IN PUBLIC SPENDING

  Mr. DORGAN. Mr. President, when Senator Kennedy would come to the 
floor with a booming voice, full of passion about an issue, it was an 
extraordinary thing to watch and to listen to. He had that kind of 
passion. I do want to say there are a lot of things for us to be 
passionate about. One of the things I have talked about on the floor of 
the Senate is the waste, fraud and abuse in public spending. All of us 
believe in investing in programs that work to try to help make life 
better in this country and advance the interests of this country. But 
it makes me furious to see the kinds of things I see from time to time 
that represent waste, fraud, and abuse and unbelievable incompetence. 
Let me describe just one.
  We know this not because of some extraordinary work by this body. We 
know this because of some extraordinary work by C.J. Chivers and Eric 
Schmitt at the New York Times because they wrote a story about it.
  Let me tell you the story, and I am sure it will make every American 
as angry as it makes me. This is a picture of Efraim Diveroli, a 22-
year-old CEO of a firm awarded $300 million in U.S. contracts to 
provide armaments, bullets, and guns to the Afghan fighters. That is 
right. A 22-year-old man using a shell corporation established by his 
father, working out of a building with an unmarked door in Miami, got 
$300 million in contracts from the Department of Defense. He was a CEO. 
By the way, there is no evidence of any other employees except him and 
his vice president. Yes, his vice president was older, 25 years old and 
a massage therapist.
  Let me say that again. The Department of Defense gave $300 million in 
contracts to a 22-year-old CEO of a company--a company that was run by 
a 22-year-old CEO--and a 25-year-old vice president massage therapist.
  Why do I tell you this today? Because a new story just recently 
described the fact that Mr. Diveroli pled guilty to a fraud conspiracy 
charge relating to the $300 million in U.S. contracts. He faces up to 5 
years in prison.
  I have spoken about this man and this circumstance probably three or 
four times on the floor of the Senate to ask the question: How on Earth 
could this have happened?
  Let me just show, if I might, what this was about. This was about 
products. No, not staplers or reams of paper. These were killer 
products, ammunition; ammunition that was supposed to be provided to 
the Afghan fighters. As it turns out, ammunition that spills out of 
boxes. Here are some other examples.
  In this chart, these are bullets, 40-year-old, Chinese-made 
cartridges they found somewhere in the world and sent them over to 
Afghanistan and the Afghan fighters.
  Here we can see spilling out of boxes 42-year-old Chinese ammunition 
that was delivered in Afghanistan from these two folks.
  The 22-year-old CEO with whom both the Defense Department and the 
State Department did business, by the way had previous contracts with 
the State Department. They were unsatisfactory, and despite that, he 
got $300 million in contracts from the Defense Department. This 
photograph is from 2007. That is when he got the $300 million in 
defense contracts. This photograph happens to be a police photograph 
because he was arrested for assaulting a parking lot attendant. At the 
time, he was found to have had a forged driver's license which made him 
out to be 4 years older than he really was. He said he forged the 
license and didn't need it any longer now that he is 21 because he only 
wanted to buy alcohol in the first place.
  They ran the company, AEY--the 22- and 25-year-olds getting $300 
million in defense contracts after they had gotten contracts with the 
State Department and judged to be unsatisfactory--out of a building in 
Miami. It was an unmarked door in a Miami Beach building. That is all 
you could see. The only evidence that exists suggests that this was a 
company with just two people.
  Mr. Packouz, the 25-year-old massage therapist, has also pled guilty. 
So both have now pled guilty. I have shown examples of the arms they 
were supposed to have procured for the Afghan fighters, and when they 
were delivered, the Afghan fighters called them ``junk''--junk--stuff 
that was made in the 1960s in China.
  The way they purchased this so-called junk violated U.S. law in the 
first place. The New York Times originally published this story. That 
is when I saw it. That is when I came to the floor of the Senate and 
asked a very simple question: How did this happen? How on Earth could 
this have happened? Who is minding the store? If the Army had made the 
slightest effort to look into the backgrounds of Mr. Diveroli and Mr. 
Packouz, they never would have granted contracts to them.
  The award was made in January 2007 by the Army Sustainment Command. 
On May 7, 2008, I met with Army LTG William Mortensen to find out why 
on Earth they gave contracts in this circumstance. Mr. Mortensen was a 
three-star general, Deputy Commander of the Army Materiel Command, 
which commanded authority over the Army Sustainment Command. They had 
awarded this contract. General Mortensen has since retired. He was 
completely unapologetic about this, by the way. He said the Army 
contracts were with companies, not individuals, and on paper the 
Diveroli company looked just fine.
  Of course it didn't because they had not looked at the paper. Had 
they looked at the State Department with which that company previously 
contracted, they would have found out this is nobody with whom to 
contract. He told me nobody in the Army had thought to look through the 
background of Mr. Diveroli and Mr. Packouz, even though this was a 
company which consisted, as we know, of

[[Page 21053]]

just two people. He told me, under similar circumstances, the Army 
would probably make the same decision again and give contracts to such 
people again. Then he told me if Mr. Diveroli and Mr. Packouz were 
acquitted, the Army would go back to doing business with them.
  If General Mortensen had wanted to know a little bit about with whom 
they were doing business to the tune of hundreds of millions of dollars 
he could have gone to MySpace. Mr. Diveroli had a page on MySpace. He 
describes himself as a super nice guy. He said on MySpace:

       I had problems in high school so I was forced to I work and 
     probably grew up way too fast.

  He said:

       Basically I'm just chilling with my boys.

  And he likes to go clubbing and see movies.
  He could have checked, of course, more than MySpace.
  He could have checked perhaps a criminal record and found he had been 
charged with domestic violence and with drunk driving. He could have 
Googled his name and discovered the vice president, in addition to 
being a massage therapist, was a professional song writer.
  With these kinds of backgrounds, I am just wondering, where is there 
accountability? Where is the accountability? I understand that because 
two enterprising reporters for the New York Times broke this story, and 
we probably would not know it now because this did not come from 
oversight hearings, it did not come from a Truman committee we should 
have in this Chamber investigating these things, but it was 
enterprising reporting that did this. I understand that. So because of 
that, we have a couple of people charged criminally.
  The question I ask is, where is the accountability in the Department 
of Defense for deciding they are going to move $300 million through the 
hands of these two? Who did that? Who is responsible? Were they asked 
to account for it and to answer for it to the American taxpayers and 
the government for which they worked?
  The answer is no, and that is what is wrong, and it is why I come to 
the Senate floor to recite this again. There is some good news. 
Finally, we have criminal charges that have been adjudicated, and the 
fact is, two people have pled guilty. But will this be happening today 
somewhere in the Pentagon? Will it? Did it happen with water that was 
sent by a contractor to all the military bases in Iraq, the nonpotable 
water that has more contamination than raw water from the Euphrates 
River? Did it happen there? The Army said no. The inspector general, at 
my request, investigated and said, yes, it did happen.
  I can go on at length about dozens and dozens of similar 
circumstances. The question is, who is accountable for the spending of 
this money? Who has been made to be accountable? Who had to answer for 
it?
  I ask the Secretary of Defense and others: Is there somebody made 
accountable for this situation? I understand there is criminal 
accountability for these two people. But is there accountability for 
the people who decided to employ them, despite all the evidence that 
this made no sense for our country?
  I ask that question for a very important reason. We are going to have 
a debate about Afghanistan. I have very strong feelings about that 
issue as well. What we are seeing now is more and more contracting 
being done in Afghanistan just as the ratcheting up of contracts 
occurred in Iraq. More and more and more contracting. Who is minding 
the store? What kind of oversight can we expect? Or will we a week from 
now, a month from now, or a year from now read another story by a 
couple of good reporters who dug it out to say something happened that 
is unbelievable and the American people got defrauded to the tune of 
millions of dollars or, in this case, hundreds of millions of dollars.
  All of us have responsibility at this point to make accountable those 
who allowed this sort of thing to happen and not just in this case. I 
have done 20 hearings now as chairman of the Policy Committee, which 
have helped to unearth a great amount of evidence of waste, fraud and 
abuse.
  Well, I know my colleague in Oklahoma is patiently waiting, and I 
wish to give him an opportunity to speak. I only want to say this. This 
is a conclusion with criminal charges and guilty pleas with respect to 
this issue, which I think is a metaphor for a much larger set of 
problems that we in the Congress and in the administration have a 
responsibility to address and to address soon. This issue of big 
Federal budget deficits is very real. They are unsustainable and 
dangerous. One of the ways to deal with them is to tighten our belts 
and start cutting spending where spending is being wasted. This was an 
unbelievable waste of the taxpayers' money, and my hat is off to the 
reporters who discovered it. I have been following it now for a couple 
years on the floor of the Senate, and at least I am able to say guilty 
pleas have been received.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oklahoma.
  Mr. INHOFE. Mr. President, I have been here this afternoon and hope 
to get a little more time than we are getting. Right now we are into 
the final debate on the vote that will take place at 5:30. The Senator 
from Nevada, Senator Ensign, has agreed to let me have 10 minutes, so I 
ask unanimous consent to speak for 10 minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. Mr. President, could we point out that we are to go to 
the bill at 4:30. I discussed with my colleague that we have 30 minutes 
on each side on the bill, and if we could go to the bill and then have 
my colleague speak on that portion of the bill, I think that would be 
the right approach.
  The PRESIDING OFFICER. The Senator from Oklahoma is recognized for 10 
minutes.

                          ____________________