David Packouz is a former arms trader. In 2005, he joined the arms dealer Efraim Diveroli at AEY, bidding on contracts for the US military. In 2007, AEY won a $300 million contract to supply munitions to Afghanistan. Packouz was part of a cover-up to disguise the true identity of the ammunition, concealing that it was of Chinese origin.
After an investigation by The New York Times, he was charged with 71 counts of fraud and faced 355 years in prison. He was sentenced to seven months of house arrest and issued with a 15-year arms-dealing ban. His story was the subject of the 2016 movie "War Dogs" and Guy Lawson's book "Arms and the Dudes."
Packouz speaks with Business Insider about corruption in shipping and transport, the influence of middlemen and politicians, and links to organized crime.
After leaving house arrest, Packouz developed Instafloss and founded the music company Singular Sound, which developed the BeatBuddy. He also cofounded War Dogs Academy, a contracting training service.
Arms trafficking involves the illegal trade and smuggling of weapons across borders, bypassing laws and fueling conflicts. Arms dealing is the legal sale of weapons by authorized dealers, conducted under strict regulations like background checks and export licenses and overseen by bodies such as the UN Arms Trade Treaty.
After an investigation by The New York Times, he was charged with 71 counts of fraud and faced 355 years in prison. He was sentenced to seven months of house arrest and issued with a 15-year arms-dealing ban. His story was the subject of the 2016 movie "War Dogs" and Guy Lawson's book "Arms and the Dudes."
Packouz speaks with Business Insider about corruption in shipping and transport, the influence of middlemen and politicians, and links to organized crime.
After leaving house arrest, Packouz developed Instafloss and founded the music company Singular Sound, which developed the BeatBuddy. He also cofounded War Dogs Academy, a contracting training service.
Arms trafficking involves the illegal trade and smuggling of weapons across borders, bypassing laws and fueling conflicts. Arms dealing is the legal sale of weapons by authorized dealers, conducted under strict regulations like background checks and export licenses and overseen by bodies such as the UN Arms Trade Treaty.
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FunTranscript
00:00My name is David Packhouse and I'm a former arms dealer.
00:03I was arrested for trafficking $300 million worth of arms internationally.
00:08And this is how crime works.
00:12There's a lot more stuff going on behind the scenes than people think.
00:16And usually with the consent of the major powers involved.
00:22When we started winning big contracts,
00:24that's when I really started feeling like we were treading in deep waters.
00:29I feel like I got incredibly lucky.
00:31I went through a crazy experience and I managed to avoid getting killed
00:35and I managed to avoid doing prison time.
00:37And for that I am eternally grateful.
00:40And I got a really cool movie made about my life.
00:43And how many people can say that, right?
00:50Well, I never expected to become an arms dealer, that's for sure.
00:53I was in my early 20s going to college studying chemistry.
00:58And working part-time as a massage therapist.
01:01And I had a few side businesses selling SD cards online,
01:04selling bedsheets and linens and towels to nursing homes.
01:09And then I bumped into a friend of mine that I had known since I was a kid,
01:13a guy named Ephraim DeViroli.
01:15And his company was called AEY Inc.
01:18We started out as friends.
01:20Every waking moment we had, we were slaving away,
01:23trying to win contracts, deliver on contracts, finding sources.
01:27So we saw this solicitation posted on the government website.
01:30And it was all munitions.
01:31So it wasn't for weapons.
01:33It was all for the stuff that gets fired by the weapons.
01:36It's like 150 million rounds for the AK-47,
01:4030 million rounds for the PKM machine gun,
01:421.1 million grenades, something like 70,000 anti-IKRF rockets.
01:47The quantities were enormous.
01:49We'd never seen anything even close to this.
01:52This particular contract was going to the Afghan National Army.
01:56It was being supplied by the U.S. Army
01:58because we had invaded Afghanistan after September 11th.
02:01The Bush administration decided to arm the Afghans to the teeth
02:06so that they wouldn't have to worry about running out of munitions
02:09if the next administration would pull out of Afghanistan.
02:12Legally, the contracting officers in the federal government
02:16are not allowed to tell you what the other competitors bid at.
02:22But the contracting officer told me over the phone,
02:25you know, we really want to help you guys out
02:27because we want to see you succeed.
02:29You guys were just so incredibly competitive.
02:31You came in $52 million under the next competitor.
02:35We were competing against multi-billion dollar publicly traded companies
02:39with like 70 years of experience.
02:42They did a series of audits on our company
02:44and that included a financial audit.
02:46They wanted to see we had a whole bunch of money, logistics audit.
02:49They also had a supply audit
02:51where they asked us to list all of our suppliers.
02:54You are required to provide documentation
02:58as far as where it's coming from and where it's going to.
03:01So they will require an EUC, which is an end user certificate.
03:06The issue is if a military loses control of their equipment
03:10then it doesn't matter how many end user certificates they signed,
03:13it may end up in the hands of someone that was not intended.
03:18You saw videos of the Taliban riding American Humvees
03:21and shooting American weapons,
03:23including all the munitions that we shipped to Afghanistan.
03:26When we won the contract, it felt amazing.
03:29Ephraim picked me up and he told me, he's like,
03:32get dressed, we're going to celebrate.
03:34And he takes me to this Italian restaurant.
03:37He orders a whole bunch of champagne for the table.
03:40People think it was just, you know, all fun and games
03:42and we're just going out there and partying it up in Miami
03:45and doing drugs and meeting women and whatever.
03:48And there's a small element of that.
03:49But we actually worked a lot more than we partied.
03:52Before I got into this business, I didn't know anything about arms.
03:55I never even owned a gun.
03:57When we started winning big contracts
03:59and started getting affected by the international political situation,
04:03that's when I really started feeling like we were treading in deep waters.
04:13So the United States is actually the biggest arms manufacturer in the world by far
04:18and biggest arms exporter in the world.
04:20So there's two major calibers in the world.
04:23That's two different weapon systems.
04:25There's the Warsaw Pact, which is manufactured by the former Soviet Union republics.
04:31And there's NATO, which is manufactured by the NATO alliance, the West.
04:35And they're not intercompatible.
04:37The United States doesn't manufacture Warsaw Pact weapons.
04:41So when they want to supply a country with Warsaw Pact weapons,
04:45then they need to go to third parties.
04:47And that's mostly the former Soviet republics.
04:51The United States places various countries on arms embargoes for various reasons.
04:56China was placed on an arms embargo in 1989
04:59because there was the infamous Tiananmen Square massacre.
05:03They also placed Russia on an arms embargo shortly before they awarded us the contract.
05:09Originally, the United States was planning to buy all the munitions directly from Russia
05:13because they were the only single supplier that could supply
05:17the entire list of munitions that the United States was looking to buy.
05:22And that's why they put the contract out for bid for a broker like us
05:27to give them a single price for everything
05:30because they didn't want to deal with 50 people.
05:32So they would rather deal with a middleman who dealt with all the end suppliers for them.
05:38For the small caliber ammunition, which is the 7.62x39 ammo,
05:43the ammunition used by the AK-47, which is the standard assault rifle of the Warsaw Pact,
05:48the best price that we got was from the country of Albania.
05:53At the time, Albania had a massive stockpile of Warsaw Pact ammunition,
05:59and they were trying to join the NATO alliance.
06:02And NATO was requiring them to get rid of all their old Soviet ammunition.
06:07I think that there's probably more labor law violations making clothing
06:12than there are making arms.
06:14The issue with the arms industry as far as worker safety
06:18is that they are manufacturing dangerous goods.
06:21And obviously, manufacturers want to avoid disasters like that
06:24because it's bad for business.
06:26It's not good for their bottom line when their factory blows up.
06:29So they do care about avoiding things like that.
06:32On the other hand, there was an infamous occurrence in Albania
06:37at a town called Girdek, where the Albanian government
06:41was in the process of dismantling some of their old Soviet-era ammunition.
06:46They were doing it in an irresponsible way,
06:49and it caused, I think, the largest non-nuclear explosion in history.
06:55The way the Albanian deal happened for us
06:58is that we had been doing business with a Swiss arms dealer named Henry Tomei.
07:04In the movie, he's played by Bradley Cooper,
07:06and he was very connected, particularly in the Balkans.
07:10And that's how he was able to get this deal for the AK-47 ammo
07:15at such a good price for us.
07:17We were paying Henry, and Henry was paying the Albanians.
07:21We met Henry through our investor.
07:24Efrem didn't have that money, and so he was looking for investors,
07:28and his father introduced him to someone that he had done business with,
07:32a guy named Ralph Merrill.
07:34So Ralph had been doing business with Henry since the early 90s.
07:38Henry tried to keep as low of a profile as possible.
07:42You would never look at him twice, just passing him on the street.
07:45He looked like a bank tycoon.
07:46There are many middlemen involved in the arms trade,
07:50and you usually only discover them when they get busted
07:54by some various law enforcement operation.
07:57Victor Butte is the most famous middleman.
07:59He's the Russian arms dealer that Nicholas Cage's character in Lord of War is based on.
08:05Most middlemen try to operate as much as they can within the limits of the law.
08:12It's just less risky that way.
08:14And Henry was the same way.
08:15I mean, he still has to worry about the international system
08:18and the various organizations that may want to interfere with his business transactions.
08:24And so he has to arrange his logistics and his sources of supply with that in mind.
08:36It was a team of people.
08:38It was a team of people that would open up the wooden crates, open up the metal tins,
08:43put the ammunition into these thick plastic bags,
08:46and put it into these double-walled, corrugated cardboard boxes.
08:50That way, we were able to minimize the shipping weight
08:53because we were shipping everything by air into Afghanistan,
08:57because Afghanistan is surrounded by unstable countries,
08:59and it's very dangerous to do arms shipment over land to Afghanistan.
09:04Alex was my best friend.
09:06When we were looking for someone to manage the repackaging situation in Albania,
09:13we hired him to go over there and do that.
09:16At first, we didn't know we would be doing repackaging,
09:18but we wanted him to just go there and inspect it because he had some military experience.
09:23And then he discovered that the ammunition was Chinese origin.
09:27There were Chinese markings all over the wooden crates and all over the metal tins.
09:31Ephraim was like,
09:32listen, we're only going to be talking about this over the phone, okay, just in case.
09:36We can't, no emails, no text messages.
09:39But then Ephraim wanted to make sure that Alex was giving him correct information,
09:45so he insisted that Alex email him pictures of the boxes of the crates.
09:50And then everyone just started talking about it openly,
09:52and they built up quite a few number of emails where it was very,
09:59very obvious and specific about what we were doing.
10:02We just didn't want to take the risk of losing a $300 million contract.
10:07And so we thought, well, you know, maybe we shouldn't tell them.
10:11Maybe we should just repackage the ammunition so they don't suspect a thing.
10:15And so that's what we did.
10:17We hired an Albanian guy named Kosta Trebiska,
10:20who owned a cardboard box manufacturing company in Albania to provide the boxes and
10:26to provide the labor to repackage the ammunition to get rid of all the Chinese markings.
10:31And we started delivering it in that configuration.
10:34It was about 100 million rounds that we had to repackage.
10:38We weren't 100% sure it was illegal because the ammunition we were buying from Albania
10:44had originally come from China, but it had come from China in the 70s,
10:48which is well before the arms embargo was actually put in place.
10:52So this ammunition didn't violate the terms of the arms embargo.
10:55It was legal as far as the terms of the arms embargo,
10:58but it did violate the terms of our commercial contract with the army.
11:02If we were going to deliver this ammo, it was going to be a breach of contract
11:08because our contract specifically said no Chinese ammo, period.
11:11Where they stored all the weapons and ammo were in the small arms anyway,
11:16were in underground bunkers.
11:18They built a massive network in Albania of underground bunkers,
11:21and they filled that with all the small arms and ammunition
11:23in order to protect them against bombardment.
11:26So when we went over there to inspect it,
11:29that's where they took us to these really long, narrow underground bunkers.
11:34Anyone who knows the history of Albania would know that the vast majority of their munitions came from China.
11:41Us as a couple of kids from Miami, we didn't know that.
11:45The US army should have known it.
11:47Whether they knew it from the beginning, I don't know.
11:49But I do know when Ralph went to trial,
11:52internal government emails got submitted,
11:55and the army said these munitions are critical for the mission in Afghanistan.
12:00Once the New York Times published a very embarrassing article
12:03and exposed the whole situation,
12:05and then they pretended like they had no idea and they canceled our contract.
12:10There are plenty of opportunities for corruption at every step of the game,
12:14but in the logistics sphere, it is particularly vulnerable to that.
12:20People are desperate to get their goods moved from one place to another.
12:25Because you need flyover permits from each country
12:29that you transport military hardware over to the US,
12:33you have to have a lot of people in the US.
12:36that you transport military hardware over their airspace.
12:41We couldn't do a single delivery until every single country
12:44between Albania and Afghanistan gave us flyover permission.
12:49Turkmenistan refused to give us flyover permission.
12:53And then I realized that Turkmenistan has a national airline
12:58and they offer cargo delivery services.
13:00So I got a cargo delivery quote from them
13:04to transport the ammunition from Albania to Afghanistan.
13:09They gave us a quote, which was surprisingly competitive.
13:12And then the next day after we accepted the quote,
13:15Turkmenistan issued the flyover permit.
13:18So all it took was a bit of a financial incentive.
13:22One fishy situation that we saw in the logistics,
13:29we had a 747 cargo aircraft
13:33loaded with about half a million, $600,000 worth of AK-47 ammo
13:38land in Kyrgyzstan to refuel.
13:41Kyrgyzstan is to the north of Afghanistan
13:43and the United States has an air force base over there
13:47that they use as a staging point into Afghanistan.
13:50The Kyrgyzstani government claimed that we didn't have all the proper licenses
13:55and they impounded the plane in our shipment.
13:58And we knew that we had all the proper licenses
14:00because the pilot wouldn't have taken off otherwise.
14:03So we were wondering what was going on.
14:05And it turned out that they were trying to raise the rent
14:09on the air force base.
14:10Eventually they renegotiated,
14:13they doubled the rent on the air force base,
14:16I think to $60 million a year.
14:18And then they released our aircraft.
14:21So we were kind of pawns in this kind of strong arm tactics
14:25to try to squeeze more money out of the federal government,
14:28out of the U.S. government.
14:29It was definitely a situation where we thought that
14:32there were various political maneuverings going on
14:36that we had no idea what was happening
14:38and we had no control over it either.
14:41And all we could do is just inform the State Department
14:44and the U.S. Army about it
14:46and hope that they kicked it up a few levels
14:49in the chain of command and get it straightened out,
14:53which they eventually did in the Kyrgyzstani situation.
15:01When things started going well
15:03and we started delivering on a regular basis
15:06and Kosta, the Albanian box guy, was doing the repackaging.
15:12We were delivering three, four aircraft loads a week.
15:15Efrem decided that he wanted to squeeze more money out of the deal
15:18as he always did.
15:19He asked Kosta, the box guy,
15:22if he could find out what the Ministry of Defense
15:24was paying for the ammunition that we were buying
15:27because we were paying Henry, the Swiss arms dealer,
15:31and we weren't paying the Albanians directly.
15:33So Kosta comes back a few days later
15:36and he says your ammunition is getting paid
15:40two cents a round to the Ministry of Defense
15:43and we were paying Henry four cents a round.
15:45So that pissed off Efrem to no end.
15:48And so Efrem decides to go over to Albania
15:51to try to renegotiate with the Albanians
15:54and try to strike a deal directly with them.
15:56He asks me to forge a whole bunch of documents
15:59to make it look like the Albanians' competitors,
16:01our other suppliers,
16:02were giving us much better prices than they actually were.
16:06It is surprisingly easy to forge documents,
16:10particularly if you already have a legitimate document
16:14and all you have to do is change some numbers on it.
16:16And he takes those documents to the Albanians
16:20and he says, look, if you don't give me a better price,
16:22I'm going to have to go with your competition,
16:25with the Czech people, with the Ukrainians.
16:28And the Albanians take one look at it
16:30and he's like, those documents are all fake.
16:32Don't show me your fake documents.
16:35And so they knew right away.
16:36They arrange a meeting with a guy named Mikhail Delyorgiy.
16:40So Efrem meets with Delyorgiy
16:42and another guy who was at the meeting
16:46he recognized later as being the prime minister's son.
16:51Delyorgiy tells Efrem,
16:53you know, I know you want a better price on the ammo.
16:56And I also know that you are paying
16:58this other Albanian guy, Kosta, to do the repackaging.
17:02So why don't you give me that contract to do the repackaging?
17:06I'll make money on the repackaging contract.
17:10And then I can give you a little discount on the ammo
17:12because, you know, I'm making money elsewhere.
17:15And Efrem said, that's a great idea.
17:18That guy's fired.
17:19You're hired.
17:20Let's do this.
17:21Kosta calls me up, the box guy calls me up
17:24and he says, hey, you know,
17:25I understand you guys are switching suppliers
17:27to do the repackaging.
17:29I understand it's business,
17:31but I got stuck with $20,000 worth of boxes.
17:34So I tell Efrem, why don't you pay Kosta 20 grand
17:37and get the boxes transferred?
17:38And Efrem's like, nah, what's he gonna do?
17:41And I said, well, he knows everything, right?
17:44And I said, are you sure you wanna do that, Efrem?
17:46He's like, yeah, he's not gonna do anything.
17:48So it turned out he was wrong, right?
17:50Because Kosta got really upset
17:53over that $20,000 worth of boxes.
17:56And he called up the New York Times
17:58and that's how the New York Times
18:00started an investigation on us
18:02that ultimately led to our downfall.
18:05And he called up the local Albanian press
18:08and informed the Albanian journalists
18:11that the Albanian politicians
18:13were getting kickbacks from our contract.
18:17And one or two weeks later,
18:19he ended up dead in mysterious circumstances.
18:23He was on a dirt road in the middle of a field,
18:27no one else around.
18:29And somehow he had been run over by his own car.
18:33They found him face down in the dirt
18:35with his car rolled like 30 feet away from him.
18:38So yeah, I mean, if it was an accident,
18:40it's a very strange accident.
18:42I think that Albania has a very long history
18:45of organized crime
18:46and that the organized crime
18:48is intimately involved in the political system.
18:51I am definitely not going to Albania ever.
18:54I think I'm going to stay out of that country
18:56for, you know, just in case.
18:59I am not worried about it anymore
19:00because that was about 18 years ago.
19:06And a lot of the people involved
19:08ended up going to prison in Albania.
19:10So Dili Yorgi, he ended up going to prison.
19:13Yili Pinari, which is the guy
19:14who was the head of the export company,
19:16ended up going to prison.
19:17The prime minister's son
19:19actually ended up suing me for defamation.
19:22The court case ended up getting tossed out.
19:30Definitely the more illegal it is,
19:32the higher the profit percentage is.
19:34I mean, that's just the nature of business.
19:36The higher the risk, the greater the reward.
19:38The Wagner Group from Russia
19:40makes some of the most profits in the world
19:43in the arms business.
19:44They provide military services to dictators
19:47in exchange for access to gold and diamond mines.
19:50Every arms deal is unique.
19:52In the example of our contract
19:56to supply Afghanistan,
19:58Henry, he was paying two cents a round
19:59to the Albanian government.
20:01We were paying him four cents a round.
20:04It costs us about five cents per round
20:07to do the shipping.
20:09And we were selling it
20:10to the United States government
20:12for about 10 and a half cents.
20:14So we were making one and a half cents in profit.
20:18So about 15% profit margin
20:21on that ammunition in total.
20:24In all business, there's always the element
20:26for exploitative people and organizations
20:32to take advantage of the less fortunate.
20:36In our case, when Deliorgi
20:39took over the repackaging operation,
20:42he actually had the Albanian military
20:45use soldiers to do the repackaging operation.
20:48And I highly doubt he paid them
20:50anything more than they were already getting paid
20:52with their very low salary as soldiers.
20:55While Kosta, who was a private businessman,
20:58actually had to pay his workers a normal wage.
21:02They weren't getting a government salary
21:04as military personnel.
21:07So he was making a lot less money.
21:14So the New York Times published their article
21:18March 2008.
21:20And it was a very unflattering article.
21:22It was, there was a picture
21:23of rusty looking ammunition
21:25on the front page of the New York Times
21:26next to Efrem's mugshot.
21:29It was Bulgarian ammunition
21:31that we had, that Efrem had bought sight unseen
21:34because it was only a very small quantity.
21:36And we had some extra room
21:38on the flight from Bulgaria
21:40because we were buying the grenades from Bulgaria.
21:42It was corroded and barely functioned.
21:46And the receiving officer in Kabul
21:48took one look at it and said,
21:49I'm not paying for this.
21:50Rejected the receiving it.
21:54However, they didn't have
21:56any ammunition recycling facilities in Afghanistan
22:00and didn't want to pay for it to get shipped back.
22:01So what they did is they moved the ammo
22:04to the side of the airport
22:05and just let it to continue corroding
22:07and rotting in the open air.
22:09And so that's when everything really fell apart.
22:12The Justice Department raided AEY's offices.
22:15I had already left at that point
22:17because Efrem informed me
22:18he didn't feel like paying me either.
22:21And so I quit.
22:23The Justice Department said,
22:24well, you guys knew that the true place
22:26of origin was China.
22:27And not only did you know,
22:29but you had a whole repackaging operation
22:31to disguise that fact.
22:33And so each certificate of conformance
22:35that you submitted to the government
22:37is an act of fraud.
22:39And you delivered 71 aircraft loads
22:43of this Chinese ammunition.
22:45So that's 71 acts of fraud.
22:47And each one can get you up to five years in prison.
22:50So you're looking at 355 years.
22:53Or you can plead guilty.
22:56And if you plead guilty,
22:57we'll combine 71 acts into one.
22:59And then you're only looking at five years maximum.
23:02So I pled guilty.
23:04And I feel very, very fortunate.
23:06I only got sentenced to seven months of house arrest.
23:09I didn't do any prison time.
23:11Efrem probably would have gotten
23:13somewhere along the same lines,
23:15maybe a little more.
23:16But he just couldn't stay out of the arms business.
23:20Eventually, he got entrapped by the ATF
23:23into picking up a handgun.
23:25But he hired the best lawyers in Miami
23:26and got it negotiated down to like four years.
23:29I mean, of course I felt betrayed.
23:31He was supposedly my best friend.
23:33And all the previous contracts that we had won,
23:37he took the profits that
23:38I was supposed to get paid on that
23:40and rolled it into the next contract to finance it.
23:42Because the way he put it was,
23:44listen, I'm using my money to finance these contracts.
23:46You should use your money.
23:47And you just made a bunch of money on this contract.
23:50And we just won this other contract.
23:51So why don't we take the money from that contract
23:53and use it to finance the next one?
23:54And then the next one.
23:55And then the next one.
23:56And then the final one.
23:58And then he decided not to pay me on any of it.
24:01So I didn't end up making a penny
24:03from that entire business.
24:05We are not friends.
24:08The last time I saw him was
24:09when I was suing him for the money in a deposition.
24:12And he pretended like he was happy to see me.
24:14He was like, oh, good to see you.
24:16I mean, like, no.
24:19Listen, when you give me the $5 million you owe me,
24:22then I'll be happy to see you, maybe.
24:24But not before.
24:26I feel like I got incredibly lucky.
24:29And that I went through a crazy experience.
24:32And I managed to avoid getting killed.
24:34And I managed to avoid doing prison time.
24:37And for that, I am eternally grateful.
24:39Because our contract created
24:41such a massive political scandal,
24:44they tightened up some of the review process
24:46and the background check procedures that they have.
24:50I do know some people who are still
24:52in the government contracting business.
24:54And I've been told that it has not changed that much.
25:00I'm told that cost-plus contracts, for example,
25:04are a lot more rare these days.
25:06A cost-plus contract is where the government wants you
25:09to create a specific product
25:11or provide a specific service.
25:13They'll pay you everything that it costs you,
25:15plus a set percentage of profit.
25:17So the most famous example of this is Lockheed Martin
25:21when they build the F-35 fighter jet.
25:23When they're building a new technology platform,
25:25they don't know what it's going to cost them to develop.
25:27So they get into cost-plus contracts
25:30where whatever it costs them to develop,
25:32the government will fund,
25:33plus an agreed-upon percentage of profit.
25:36SpaceX has contracts with NASA
25:39to transport astronauts to the International Space Station.
25:43And those are all flat-fee contracts.
25:45They develop that entire capability on a flat-fee basis,
25:48not on a cost-plus basis.
25:51So that's one of the first major aerospace contracts
25:55that was done on a fixed-price contract.
26:03So the way the War Dogs movie happened was,
26:06Rolling Stone published a very long article
26:09about our story in 2011 after we were sentenced.
26:13The movie definitely makes it more exciting
26:16than it was on a day-to-day basis.
26:18But by and large, I think it's a very well-done movie,
26:21and I was very happy with how it came out.
26:23It ended up being about 70% accurate.
26:26I have three seconds of on-screen fame
26:29in the scene where Miles Teller,
26:30the guy who's playing me,
26:32is trying to sell bedsheets to a nursing home.
26:34In the first five minutes of the movie,
26:36there's a guy there who's playing guitar
26:39for the old folks there at the assisted-living facility.
26:43The scene that most people asked me
26:44about whether it was true was the Triangle of Death scene.
26:48And the funny thing about that scene
26:49is that it actually is true,
26:51but with a big caveat.
26:54It didn't happen to us.
26:55It happened to the guy who wrote the War Dogs screenplay.
27:00His name is Steven Chin.
27:02We never went to Iraq.
27:04There was a Beretta deal,
27:05which is what the whole Triangle of Death scene
27:08was based on.
27:09That part is true,
27:10but we actually ended up defaulting on that contract.
27:12We never delivered on that contract.
27:14Another scene that was completely fictionalized
27:17was the scene where Ephraim buys weed
27:20and then gets ripped off
27:21and then pulls out a machine gun
27:23and fires it in the air
27:24and gets his 300 bucks back.
27:27That never happened.
27:28We did have automatic weapons in the trunk.
27:31That's true.
27:32We're federal firearms license holders,
27:35so we were legally allowed to have automatic weapons.
27:38And we would take fully automatic Uzi submachine guns
27:42to the range and fire them off at the range.
27:45And everyone else is popping off pistols
27:47and we'd be like,
27:49and everyone else would get quiet and start,
27:51who's that?
27:53So that was cool.
27:55But yeah, but we never used it in a drug deal.
28:04There's always the risk of corruption in the arms trade.
28:07A lot of it is done in a very quiet manner
28:11because there's an enormous political element.
28:14The arms trade is always a game of cat and mouse.
28:18And the people who are trying to get around
28:20the enforcement mechanisms in the international trade
28:24are always looking for loopholes.
28:25And the people enforcing it
28:27are always trying to close those loopholes.
28:29So I couldn't tell you
28:32whether there are more loopholes open now
28:34than closed ones,
28:35but I'm sure there are different ones.
28:37Government contracting in general
28:39gives you some interesting insights
28:41on what the government is doing around the world.
28:44When I was doing government contracting,
28:49I saw a contract for security services
28:52for an army base in Chad.
28:54There was nothing about Chad in the news,
28:57but I saw this odd contract
28:58and I was like,
28:59hi, I wonder what's going on over there.
29:01And then like four months later,
29:02the US army is mounting a whole anti-terror operation
29:07against various like Islamic groups
29:09in the region over there.
29:10So when you look at what the government's trying to buy,
29:13you can kind of get a finger on the pulse
29:15of what the government is intending on doing.
29:18Now with the outbreak of war in Ukraine,
29:21the United States has realized
29:24that a lot of our industrial capacity
29:26that we were relying on for large-scale wars is gone
29:29because we didn't think we'd be fighting another one.
29:32So to supply Ukraine,
29:35because it was such an emergency
29:37and Ukraine needed it so fast and so badly,
29:41the United States supplied its own weapons
29:44from its own stockpiles
29:46and then worked on replenishing its own stockpiles.
29:49I hope that the arms business fades
29:51into a smaller and smaller segment of the economy
29:56and eventually disappears altogether at some point.
29:58I definitely think that humanity can spend their money
30:03on much more productive things
30:05than on ways of killing each other.
30:07Unfortunately, it doesn't seem like conflict
30:09is going away anytime soon,
30:11the Ukraine war being the most glaring example of that.
30:15And I think the future of military conflicts
30:18is probably going to be in large part fought
30:22by drones and automatic systems.
30:24There are several international frameworks
30:27to try to limit illicit arms trafficking.
30:31Organized crime within the United States
30:34and internationally is made possible
30:37through the illicit arms trade.
30:39The cartels wouldn't be able to smuggle the drugs
30:41that they do without the weapons to back that up.
30:45The issue with international agreements
30:47is that they're only as strong
30:48as the enforcement mechanisms.
30:50And there is no true international law enforcement agency.
30:56People ask me if I feel guilty for supplying weapons,
31:04which is a method of people killing each other.
31:08I would say in the case of our Afghan contract,
31:11I didn't feel guilty at all
31:13because we were supplying the people fighting the Taliban.
31:17I think the Taliban or the people of Afghanistan
31:20would be better off without the Taliban in power.
31:23There are people out there who think
31:24that any trade in the arms business is evil.
31:28And I don't think that that is true.
31:30I think that you can use a gun to kill somebody.
31:35You could also use a gun to prevent yourself
31:37from being killed by somebody.
31:38And I do think that people who are getting attacked
31:42deserve the capability to defend themselves.
31:45The defense industry, like any industry, is a business.
31:50Do I think it's wrong to make money off of weapons?
31:53Well, it depends who the weapons are going to.
32:01In my early 20s, I bumped into a friend of mine
32:03named Efrem Divoroli,
32:05and he had gotten into the arms trade through his uncle
32:07who owned a big pawn shop in LA.
32:09He was about four years younger than me at the time,
32:11so he was actually 18 years old at the time.
32:14And when we bumped into each other,
32:15I told him about the businesses I was doing.
32:18And he said, well, you know,
32:19a lot of those skills can be applied to my business as well
32:22because I need to find suppliers overseas,
32:24arrange shipping, logistics, financing, et cetera.
32:27So why don't you come work with me
32:29because I could use a partner.
32:31He showed me his bank account
32:33and he had $1.8 million in cash in his bank account
32:36after working in the business for a single year.
32:39So I thought, well, he's making a lot more money than me,
32:42so there's something I could learn here.
32:44So I said, I'm in, teach me what you know.
32:46And that's how I got into the arms trade.
32:48We were working literally 18 hours a day.
32:51The way federal government contracting works,
32:53when the United States wants to buy something,
32:56they have to legally,
32:57well, with the exception of the CIA's black budget,
33:00the rest of the federal government
33:01has to legally post what they wanna buy
33:03on their public website,
33:05which these days is sam.gov.
33:08And then anyone who is qualified to bid on those contracts
33:12can submit a bid.
33:14They analyze the various offers they have
33:17and the person with the best score wins the contract
33:20and gets the opportunity to deliver those goods
33:22or that service and collect a profit.
33:25In theory, they're supposed to look through
33:28the background of the companies that are bidding
33:29and see if they have any previous cancellations for cause
33:33and it lowers the chances
33:34that you will win further contracts.
33:36There's definitely plenty of room for improvement.
33:39The issue with the federal government
33:40is that there are many, many agencies
33:42and a lot of times they don't talk to each other.
33:45So you can have contractors who have acted in bad faith
33:49or have messed up with a contract with one agency
33:52and then another agency gives them a contract
33:54because they didn't check the records
33:57of the other agencies
33:58about the history of this particular contractor.
34:01Any contract of under $250,000
34:05is considered a small contract.
34:07Once you win a few of those,
34:09then you qualify to bid on the bigger contracts,
34:12on the multimillion dollar contracts.
34:14And once you win a few of those,
34:17you're qualified to bid on the tens
34:19and hundreds of millions of dollar contracts.
34:22In the space of a year and a half,
34:24we went from winning under a million dollars
34:28to $300 million.
34:31While I was under house arrest,
34:33I had the idea for my first business,
34:36my first invention.
34:37It's called the BeatBuddy.
34:38My company, Singular Sound,
34:40that manufactures the BeatBuddy,
34:42we came out with eight other products
34:44and so all music related.
34:46I came up with another idea
34:48for the mass market with my brother
34:50called Instafloss,
34:51which is a device that flosses all your teeth for you.
34:53And my latest business is called War Dogs Academy,
34:58where I teach people how to do government contracting.
35:02Ever since the movie came out,
35:03I've had literally hundreds,
35:04if not thousands of people contact me,
35:06asking me to teach them
35:07how to do government contracting.
35:10And of course,
35:11I had been banned from doing government contracting
35:14for about 15 years.
35:15I recently got off the banned list.
35:17We built an entire course
35:19to teach people how to start a business,
35:20how to register it with the government
35:23and how to win government contracts
35:24and build a long-term,
35:26legal government contracting business.
35:52you