The Connect- with Johnny Mitchell - Convicted Weapons Trafficker Exposes Secrets Of The Global Arms Trade & How He Made MILLIONS Off War

Episode Date: July 7, 2024

David Packouz's life started as a fairly normal one. When he was 23 he began working with his childhood friend Efraim in his new arms business. They began securing government contracts to supply arms to the US military during the second Gulf War. To increase their revenue and contracts they began sourcing ammunitions from China via Albania which was illegal to do. When the US Government caught on to what they were doing, it resulted in federal indictments, betrayal and prison time. David's story was told in the Hollywood blockbuster movie WAR DOGS. He's here today to tell us exactly how everything went down! Go Support David! Courses: https://wardogsacademy.com Music Company: https://www.singularsound.com/ InstaFloss: https://instafloss.com/ This Episode Is #sponsored By CUTS CLOTHING Refine your style with @cutsclothing and get 20% off with code CONNECT at cutsclothing.com/connect! #cutspartner Join The Patreon For Bonus Content! https://www.patreon.com/theconnectshow Learn more about your ad choices. Visit podcastchoices.com/adchoices

We saw this solicitation for this massive, massive contract. And it was all for munitions. It ranged from like pistol ammo all the way up to tank rounds and anti-aircraft rockets. It was like the whole range. We were going to make about 20% on that contract. $60 million in profit. My guest today is a man named David Packhouse. David is a former weapons trafficker.

His story was portrayed by Miles Teller in the hit movie War Dogs. David was a young entrepreneur from South Florida when the Iraq war began in 2003, Through a shady childhood friend, he got into the business of selling arms and ammunition to the federal government. AK-47s, rocket launchers, grenades, anti-tank shells, and hundreds of millions of rounds of ammunition. Whatever you needed, he could get it for you. David was in the business of war. In today's episode, he exposes how the international arms trade, both legal and illegal, actually works and shares stories from his experience working with foreign militaries, unscrupulous middlemen,

and even the Albanian mafia and how that all led to a gigantic FBI bust. And make sure to stick around for the Patreon episode where David talks about what he's doing today. He's the founder of War Dogs Academy where he teaches people how to become government contractors and sell weapons and a whole lot of other products to the federal government. This is great business to get into today. So if you're a young entrepreneur, this is a wonderful resource. All right, no more talk. Let's get into it.

You're going to love it. I give you David Packhouse right here on The Connect with Johnny Mitchell. So the secretary calls me up and she's like, hey, I just want you to know the feds just raided the office. And they're boxing up all the documents. They told us to step away from our computers immediately. And they kicked us all out of the office. And we're not allowed to come back into the office. And I'm like, oh, crap, the jig is up.

We knew we were screwed. That's when I see lights behind me start the flash. And I didn't even think. I just hit it. I was driving like my life depended on it. And then I parked the car, popped out, closed the door, and I started running. And he pulls out a burner, shank. It's like six inches.

Then he passes it to me. And he goes, here, that's yours. Don't ever leave the cell block without this. He was the reason I made it out of that place alive. So you grew up in Miami. What character are you? Are you in the movie? I'm Miles Teller.

Okay, gotcha. Gotcha. You're the hero. Yes, exactly. The better of the two guys. Yes, exactly. Now is that... I'm the good guy.

Is that movie true to life? Is that pretty accurate? I would say it's mostly true. It's like 70% true. There's significant chunks of it that were Hollywoodized or, you know, but the overall arc of the story is true. And you guys going over to Ukraine, I think? You mean Baghdad? Yes, yes.

Triangle of Death scene. No, that part. Well, that part is true. But with a big caveat, that didn't happen to us. It actually happened to the screenwriter of the film, Stephen Chin. So Stephen Chin got the He got the contract to write the Wardog screenplay because he had written another screenplay

That was very well regarded in Hollywood circles That had never become a movie, as most screenplays never do, Called Iraq Iraq, and it was about another two contractors, American contractors who were on the ground in Iraq. And I think it was in 2004 or so, he wanted to go meet these guys so he could write this screenplay. And of course, there are no commercial flights into Iraq. So he flew into Jordan and hired a Jordanian driver to drive him to Baghdad.

And his driver didn't want to pay for gas. So he stopped in Fallujah because no one was guarding the gas stations. And they got shot at by insurgents and got saved by the U.S. Army like in the movie. Okay. So in the movie, that's you guys. Yeah. In the movie, that's us. So when Stephen Chin was writing the screenplay, Todd Phillips, the director told him, he's like, you know, these guys,

are just like in the office in front of a computer all day. We need more action in this movie. Why don't you put your story in there? And so there was a barretta deal, which is what that whole thing was about. But in real life, the barretta deal, we didn't deliver it. We defaulted on that. How did the writer discover your story?

So the way the movie happened was, well, our entire business collapsed because the New York Times wrote this front page investigative article about us that was very unflattering and misleading. They said that a lot of stuff we were delivering was low quality, which wasn't true. And that created a big political firestorm. And so that got the attention of Rolling Stone who wanted to write like a deep investigative piece on us. And so that took the rolling.

So I cooperated with Rolling Stone to write that article, which took them like three years to write because my lawyer wouldn't let them publish until all our legal. Jeopardy was over. And when they finally came out with that article in 2011, that got the attention of Todd Phillips, the director of the hangover movies and later Joker. Yeah. Legendary director. Yeah. And so he thought the story was amazing. And so he optioned the rights. It's a really fun movie. Yeah. Like it's a solid, like good watch. You're Jonah Hill, who plays your partner. Yeah, yeah, Jonah Hill plays my partner. I'm Miles Teller. You're Miles Teller.

Jonah Hill. Miles Teller is me, I should say. Correct. That's right. That's right. Yeah, he's no you. Miles Teller's no David. I have way better hair.

Come on. Absolutely. Who is your partner in real life playing that Jonah Hill's playing? Ephraim DeViroli is his name. All right. So take us through how all of this transpired, if you would, please. How did you need Ephraim? Yeah.

Ephraim. And yeah, what's your background? How did you ever think? you were going to be this like infamous weapons contractor? Never in a million years. Crazy. Yeah, yeah, never. I mean, I never even owned a gun until actually after I got out of the arms business, ironically,

and I was about to sue Ephraim for screwing me out of like $5 million. And I thought he was going to like hire someone to kill me because it would be cheaper. And so then I bought a gun. That was the first gun I bought. Does he have that in him? Does he have, is he a crook like that? I don't think he has the, he is a crook. book, absolutely. I mean, he screws over everyone he comes into contact with, but he's more of a thief

than like a violent criminal. He's not a gangster. Yeah, he's not a gangster. Okay. Yeah. And, and, and, but but he's a shyster. He's very much a shyster. He literally, like, he's never done a business deal where the other person has come away feeling happy. Like, and he, he does that specifically. Like, he, he, he told me, he's like, if the other guy's happy, there's still money on the table. Wow. That's how he, like, wow. views business. He operates like a stereotypical Hollywood executive. Like a shark. He's like, yeah, yeah, definitely not making Israeli people look good. Definitely not. He's not Israeli, but he is Jewish. There we go. I just didn't want to say it, you know, YouTube. Nat, did you ever,

do you get to bang Anna Day Armis? I wish. No, she's beautiful, but no, I mean, did meet her. She's just as beautiful in real life. God, damn. Yeah. Yeah. But so you didn't have a girlfriend. What was Did you have that whole, like, structure like you did in the movie? Yeah. I mean, I was married. I got married a little bit later, but I did have a girlfriend and I did have a baby at that time. Yeah, so that part is true. The baby's still around?

She's 17 now. Amazing. Yeah. Yeah. That'd be really weird to start up the interview with, no, my baby died. Yeah, yeah. That would be very bad. Take two.

Very sad. Yeah. Okay. So what is your background? You grew up in Miami Beach. Yeah. Well, I was born in San Diego. Louis and my family is their Orthodox Jews so very religious my dad was a rabbi so extra

religious and I'm one of nine children I'm a third from the from the oldest and uh born in St. Louis but only live there for a few weeks as a baby and then my family moved to Israel for my dad's work what was your dad in he's a rabbi so okay so it's a professional rabbi it's a professional rabbi how do rabbis in the Orthodox community make money? So traditionally rabbis make money as like the head of a synagogue and the and the congregation supports them. My dad was a little bit different because he he worked for a Jewish educational organization. Ironically, their their entire mission was to make non-religious Jews bring them back into the fold and make them religious. So it was extra hard on him and on me when I decided I didn't want to be

religious and went the other way. It was kind of like a rejection of his entire life's work. So, yeah, so that was very tough. And I was the first kid in the family to become not religious. Wow. To go away from Orthodoxy. Off the path, as they call it. Oh, my gosh. Were you estranged from your family for a while? For a while, yeah, it was very, it was, they didn't want me to like come over and infect the other children with my ideas. And, I mean, they had, they had a good reason to be concerned because eventually out of nine, six of us became not religious. So yeah. Blame Miami. I'm sure they blame me a little bit, but that's okay. I feel proud of it. I feel very proud that I brought them to freedom in my opinion. Yeah, totally. It was one of the best decisions I ever made in my life was to

leave the religion. Wow. Yeah, because it's a very stifling, for people who don't know, Orthodox Judaism is, it's very intense and very OCD. So, like, they have rules for everything. You have to pray three times a day in the synagogues. You have to go synagogue three times a day. And it's not just like any prayer where you, like, close your eyes and talk to God. You know, you have to do a specific prayer in Hebrew from a book. You're in there bowing with the book open.

Exactly. And it's a whole, it's a whole thing. Like, you have to stand up for this part, sit down for that part, bow down for that part. You know, the leader of the prayer says one thing. You say the other thing. It's like a very ritualized same thing. every day for your entire life. So it's,

and of course there's a million other rules about what you could eat. And on Sabbath you can't use electricity. So, you know, that kills your entire Saturday. And it's oppressive, you know,

to women, I think a little bit. I think it's hard on some women. They have to have a lot of kids at a really young age. So they don't have to, but it is part of the culture that that is a high goal in life.

And so it is expected. that they have, that they get married early and that they have many children. On average, Orthodox families have about like eight, nine children. That's an average. Like my, one of my uncles has 10 kids, another one has 11 kids. So it's like nine kids in my family, that's average. Yeah. Yeah. It's like old school Catholicism. Yes. My dad had, my family's had my dad, you know, that was like Ohio in the 50s. Exactly. But that's modern day. Yes, Jews or Orthodox Jews are, really cranking them out. They're business people still.

Orthodox Jews still have businesses. This is how they support themselves. You go to neighborhoods in Brooklyn. You see that it's very insular, but they do business with other people. What about weapons trafficking? How would they think about that? Or do they care?

Could you have stayed in the faith, but also become an arms contractor? Yeah. It really, that's more of about who you're selling. in that too, right? So, you know, people who sell weapons, they get a bad rap, so to speak, because weapons can be terrible and they can kill people, but they could also defend yourself from getting killed by other people. So, you know, a knife can chop vegetables or it can chop your

neighbor's throat, right? So there's not a taboo against, there's not necessarily a taboo in Orthodox Judaism against certain kinds of businesses. Um, I mean, maybe against certain, like, probably porn-related businesses would not go over well. Um, there's definitely taboos against that. But, um, not against the arms business per se. Okay. Okay. So it was a strictly a decision to leave the faith is, is what alienated you from your parents. Yeah, that was well before I got into the arms business. What, how old were you? When I left the faith. Mm-hmm.

So I was kind of going back and forth throughout my teen years. But the final nail in the coffin, so to speak, was when I went to university and took a general anthropology course when I was about 20 years old. And I realized that many different branches of science contradict the Orthodox Jewish interpretation of the Bible. So the way Orthodox Jews see the Bible is that it's word for word the word of God. right and therefore it's all 100% true and there isn't a single mistake in there etc because god wrote it right it's literal it's literal they believe it literally they believe that moses got it from god and mount sinai and you know word for word it's unchanged since then and that's why you have to follow the rules you know the the laws of the bible because that's

the word of god and there's some things in the bible that are in big contradiction with science It's like the most glaring example is the story of the flood and Noah, right? You know, there's the story that Noah built an ark, and in the Bible it says the waters rose 15 amos, which is a unit of measurement above the highest mountain peaks, killed everything that crawled upon the earth except for Noah and the people and animals in his ark. And that happened. It gives a specific date for it. It's about 4,000 years ago. And we just know that's not true. I mean, there's no record of mass extinction.

happened 4,000 years ago. I mean, there's mass extinctions that we see in other time periods, but not 4,000 years ago. Like we see it millions of years ago. The dinosaurs, 63 million years ago, nothing 4,000 years ago. There's Chinese civilization records that go back 5,000 years. And they didn't get killed out by the flood. The animals in Australia have obviously been separate

from the animals on the mainland in Asia for like 40 million And that's a genetic drift. You see the way languages evolved, the scientific science of languages of how languages have separated. You could trace at what point in history different languages have said. So there's many different branches of science that contradict that story. Gosh, that's what they're trying to sell in the Old Testament. Because I literally am reading the Bible right now. I just read Noah, right?

Just read the story of Noah. They're trying to say that was only 4,000 years ago. That's what it says. That's so crazy because even like a casual reader of history could tell you, we were already out of the hunter-gatherer period, 4,000 years ago. We were farming 4,000 years ago. I mean, in the Bible, they're also farmers. Right.

So they skip, but I mean, come on, everybody knows that history goes back way longer than 4,000 years ago. Right. I mean, written history goes back about 5,000 years ago, but there's archaeological evidence that goes back well before. And if the story of Noah had happened the way it says it in the Bible, which is what Orthodox Jews believe that it's literal, we would have seen a massive amount of evidence for it. We would have seen mass extinctions all over the world in the fossil record. We would have seen a break in civilization in India and China. We would have seen a break in the language evolution all over the world in the genetic diversity. It just didn't happen. All of science has to be wrong for that story. to be true literally. Hey, everybody, summertime is here, and it's getting super hot out. And what I hate most about the summertime heat is that it's impossible to look good and wear the right clothing

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I'm a proud atheist. Wow. Gosh, you really made a 180. Yeah. Well, you know, I was kind of forced into it because when you grow up with such an extreme version of religion put upon you, and that version has very, very high expectations of the way you're going to lead your life, and it's an unpleasant series of expectations. And you kind of have to fight against it. And so when I wanted to leave the religion, my family didn't just let me go quietly. They were constantly arguing with me, no, you're wrong. This is true.

And, you know, that's wrong. and this is true. And so I'd have to have these very intense debates with my dad, with the other leaders of the Jewish community. And so I had to have a series of debates with much older people than me and over the course of years. And so I was pretty much forced into thinking very deeply about this subject. And when you really look at it, the best way of knowing the truth about the universe that we currently know of is through the scientific method. That's why it exists, right? That's how we've discovered radio waves and flights and all the amazing things that we have today is because science has figured out how the universe works and we take advantage of that, right?

And so if you're going to tell me that there is something about reality, right, something is real, then it needs to stand up to scientific scrutiny because if it's not, then I could say anything. I mean, I could tell you, people always say, oh, how could you be an atheist? You know, you don't know that God doesn't exist, right? You can never know. So you're only, you can only be an agnostic, right? And I'm like, well, do you believe that Santa Claus exists? And you don't know he doesn't exist, right?

Maybe he exists, right? Maybe he's in the North. But no, you're an atheist as far as Santa Claus goes. You're an atheist as far as Thor goes. You're an atheist as far as, you know, all the ancient Greek and Norse gods. You're an atheist as far as every god out there except for one. I just go one God farther. Oh, your parents must have been just heartbroken.

I'm actually feeling for them right now. I'm imagining being your father hearing this on the Sabbath. I mean, I would rather have had you bring home a Cuban stripper than these blasphemous ideas. Yeah, well, that was a problem too. Yeah, sure, sure. But come on, maybe it's Miami. You don't want your kids to become godless materialist. don't raise him in Miami Beach.

Yeah, I mean, ironically, I mean, there's, there's a pretty large Jewish community in Miami. Oh, I know, yeah. And there's a pretty large Orthodox Jewish community in Miami Beach. And it's been there for a long time, right? It's been there for a very long time. And it's, they're very insular, right?

So I mean, my school in my Orthodox Jewish school that I went to, it was an all boys school. I didn't talk to a girl who wasn't related to me until I was like 17. And so it was an enormous culture shock when I left the full. But my school was on the edge of South Beach. So I'd be, you know, in my white button-down shirt,

my black hat as, you know, as they dress. And then there's like people partying in South Beach, like one, two blocks away in the clubs. And did you want that? Did you feel a longing for the outside world? Absolutely. Wow. And so you really, when you finally got out of it,

it's like, wow, time to like really drink up the world, really make the most of it. Absolutely. And I believe you got into this hustle just out of college or still in college? Well, I was in college at the time. I was 23 when I first started when I first. So after high school, I went to Israel for two years because my parents wanted me to become more religious. They were worried about my eternal soul.

and so they wanted to get a nice good bit of brainwashing in as my mother said and I told her oh you just want to brainwash me and she's like sometimes a brain needs a good wash that's what she told what a sweetheart

yeah yeah and now do they brainwash you quickly before we get into the story what kind of propaganda are young Jewish children from all over the world who go to Israel what kind of propaganda

are they subjected to on the religious side and on the political Zionist side? Oh, both. I mean, yeah. Could you elaborate? Sure. Well, I mean, on the religious side, they want you to believe that the Bible is 100% true, right, word for word, that we are the chosen people by God. We are the only ones who have the truth. All the other 10,000 religions in the world are all wrong and they're all fake and they all believe in false gods. We have the only truth. We have the only truth and therefore we're special right and because we're special god gave us the land of israel and therefore uh everything else is subordinate subordinate to that including peoples like say maybe the palestinians just uh yeah no absolutely absolutely because god gave the land to us and therefore

it's ours and not theirs and so and and i mean look the palestinians believe the same thing in the other way. I mean, they believe that we stole it from them and therefore it's theirs and not ours. I mean, it depends how far back in history you want to go. I mean, the Romans kicked us out of, kick the Jews out of the land of Israel in like 70 AD. So, you know, like who owns the land is a very heavily debated. Up for debate. It is a very heavily debated issue. And, you know, I try to get into the politics of it because it's a very, very sensitive subject. And I have friends and family. across the entire political spectrum.

Sure. Yeah, that's all fair. Man, if God wanted Jewish people to be religious, he shouldn't have made him so smart. Like, that's the ironic thing, you know? I'm going to tell my parents that. Yeah, yeah. So you're actually, you've, you've mended fences with your parents.

Yes, yes. Oh, it's great to hear. Yeah. No, I'm on very good terms with my family. Okay, great. Yeah. Took a few years. Well, yeah.

Eventually. Brought five other kids along. Yes. But eventually forgave me for that. And there's been healing. Yeah. No, we're all on very good terms. And there's some beauty, I think, to Orthodox, not just Jews, but all religions.

There's something really insidious and soul-sucking about the material world, about capitalism, about America that Orthodox just reject. Right. You know, so have you taken away the good parts of it? So I, that's another thing people, you know, confuse is spirituality and religion. religion, right? They're not the same thing. So spirituality, in my opinion, is your internal experience, right? You know, your connection with yourself, with the universe, with your, your place. Say it, David, higher power. I mean, it depends on your definition of higher power. That's right, but it's up to you. Well, I mean, if you define it as anything, it can be anything. Right. But, and I think that you can get spirituality through meditation, you can get spirituality. You can get spirituality.

spiritual experiences through walks in the woods, through music, through close conversations with friends. So there's many ways of achieving spiritual experiences. Religion is a organized, like, set of rules and philosophies, right? It is a claim on reality. It is a claim of this is how the universe works, and this is what you should do, right?

That is what religion is. Now, religion claims that this is the only way to achieve spirituality, and I think that's very wrong. It's not. You can be an atheist like myself and be very spiritual. And I have many spiritual experiences I have had throughout my life. And I believe that I am personally very spiritual. And I continue to have very spiritual experiences. And I seek that out. And I appreciate and value that to a great extent. But I don't need a structured religion to tell me how to do that. Now, I think that there is, A lot of wisdom in most religions have wisdom within it. And you can achieve spiritual experiences through religious practices. And all religions have practices that you could achieve various spiritual experiences. But you don't need the religion to do that.

You can achieve spiritual experiences without it. And I think that you can take away the good parts of religion and have. the benefits of it without all the bad parts. Sure. Sure. Okay. Well, tell us about these fucking guns, man. All right. So once upon a time. God made bad. Yeah. Here we go. Yeah. I read that book way too many times. Yeah. So let's see. Where'd you go to college? Right. So I went to to Israel for two years because they wanted my brain to have a good washing. And, Then I went to University of Florida in Gainesville. It's central northern Florida.

I realized that I needed to make money while I was in college. So because my parents weren't going to support me. Were you middle class? Yeah. Okay. I mean, I would consider. I mean, I think my dad probably would have gone into the lower, into the like upper middle class, but because we had nine children,

we were solidly middle. High overhead. Yeah, middle, middle class. We had neighbors who were doing way better than us, but they had like two kids. You know what I mean? So yeah, nine kids are expensive, especially when you pay for their private Jewish school.

Absolutely. So all the money goes to that right there. So, yeah, I went to University of Florida, only lasted there for a few semesters, and then I realized I needed to make money. and I'd always had in the back of my mind that I wanted to study massage therapy because, I know, where does that come from? So while I was in Israel, as I said, I didn't talk to a girl until I was like 17 years old.

So I was very, very awkward, very low level of social skills because I just didn't grow up with that. And while I was in Israel, it was like the first time I really started interacting on a regular basis with with girls. And there was this one girl who had, I had this big crush on. Of course, I didn't, you know, know how to do anything about it. But we went to this music festival and a group of us. And at the music festival, there was a massage school. I'd set up this tent where they were given out free massages. And I got the first like professional massage of my life. And it was amazing. And after we were leaving the tent, you know, she also got a massage. And she goes, oh my God,

that was so amazing. Any guy I'm with has to know how to give good massages. And right then, I swore to myself, I'm going to learn how to give good massages. And so when I went to University of Florida, I realized I need to get a job. And all my friends were working like waiting tables or flipping burgers or whatever, making close to minimum wage. And I realized, you know, massage therapists, they make like $75, 100 bucks an hour, right? If you're working privately, one massage, you make more money than an entire day worth of flipping burgers. And it's got the additional benefit that girls seem to like it. So I decided to go to massage school.

And so I put university on hold, went to massage school in Miami. And then I realized there's not going to be any massage clients up in Gainesville, which is a tiny little college town. And so I stayed in Miami, started working as massage therapist part-time, went back to school, studying chemistry. Really? Yeah, chemistry, yeah. Yeah, because I always was decent at math and science. I've always been into science fiction. That was actually the initial catalyst of what made me start to doubt the religion was I was reading a lot of science fiction when I was like 13, 14. And a lot of sci-fi is written by scientists who are pretty skeptical of religion.

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And chemistry was my long term. Everyone said, get a scientific degree because you're going to have a lot better solid job prospects. And I was like, well, I have the skills and the mind to do it. So it sounded like a good backup plan, not really a backup plan, but a good plan going forward. I mean, my ultimate dream really was to become a rock. star because as I think every young man dreams looked up to modus yeah exactly yeah yeah not not so much him but but yeah like I was a very big fan of like the grunge era bands sure uh so I loved like alison chains and and nirvana and pearl jam and sound garden all that that's what the music I

grew up on so when I was 15 years old I started playing guitar um and it was actually Nirvana smells like teen spirit that inspired me to play guitar that just that rocking guitar part in the beginning. And so I was like, oh, I need to learn how to play guitar. And now jumping forward where you have a business that makes equipment for musicians. Exactly. For rock bands. Yes, absolutely.

That's awesome. Yeah, it is. That's really cool. And I actually got to meet some of my musical idols through that business. It was actually really cool. Like who? So we'll jump ahead. So I made a product called The Beat Buddy, which is a the world's first.

my first invention is the world's first drum machine in the form of a guitar pedal. So you could control the drum beat hands free while you play your guitar. I actually had this idea while I was under house arrest for the whole War Dog's scenario because I couldn't jam with any drummers. And so I bought a drum machine, which is a tabletop thing. But every time I wanted to change the beat, I'd have to press a button on the machine and then go back to playing my guitar. And I thought, I need something that's hands free so it doesn't interrupt the flow of the music.

and nobody was making anything like this. And so I got a patent on it and developed this product called the Beat Buddy, like your buddy that plays the beat. Right. So now we're seeing your mind. We're seeing your mind, which is scientific, right? You've got the logic and the fundamentals of a scientist. Yeah.

Oh, so let me just finish it. So you asked me who I met. So at a trade show, it was like maybe a year after the Beat Buddy came out. So it was like 2015 because we came. out in 2014, about 10 years ago. I had a guy come up to me and he's like, oh, you made the beat buddy. I recognize you from the videos. He's like, I'm Mike Inez. I'm the basis of Allison Chains. He's like, I just bought your beat buddy two months ago and I've been writing all my new music on it on the road. And I was like, I learned to play guitar listening to your music.

It was so cool. It was so cool. Yeah. So like when they came to Miami, he gave me backstage passes. I got to meet the band. It was super cool. They're like one of my favorite. bands in the world, Allison Chang. Wow. Yeah, so that was super cool. You could have just been praying on Saturdays, man. Why didn't you just stay? Yeah, you know, look at you. Right.

No, that's amazing. Hey, everyone, just a quick intermission. I want to tell you about my stand-up comedy dates this summer. July 19th and 20th, I'm going to be in Chicago, Illinois at the comedy bar. Come on out. I got four shows there. And then in September, September 27th to the 29th, I'm going to be in Vegas doing Skank Fest. I'm on a ton of shows there. That's the greatest comedy festival in the world.

Get tickets at linktree.com slash johnny Mitchell. Once again, that's linktree.com slash johnny Mitchell. I'll see you on the road this summer. All right. So you're you're in college. You're given massages, given happy endings. No, I was not for the record. So how did this progress? Yeah. So the way it happened was I was, I've always been like entrepreneurial. And my first business actually was when I was six years old. I don't know if you want me to get into that. Sure. But yeah, it was my first business, it was, I was, we were living in Israel at the time. And we lived in this apartment building that didn't have a garbage shoot. And so you'd have to. to end, there's no elevator either. So you had to take the garbage down the stairs and out to the dumpster on the corner and toss the trash out. And so my mom asked me and my older sister, who's like a year and a half older than me, uh, to take the trash out. And we were complaining, oh, we don't want to take the trash out. And my dad came by and he's like, oh, what are you guys

complaining about? You know, you, you, you, you were looking out of this all wrong. You know, you think this is a big, big chore, but it's really a big opportunity. And we're like, what are you talking about? And he's like, look, nobody else wants to take the trash out either, right? So why don't you go to all the names? neighbors and offer them a service. You could take out their trash. You know, don't throw out the trash every day. See every other day.

And you charge them, I don't know, like a shekel a week, which is about a quarter. And we're like, oh, that's a great idea. You know, we could make some money. And he's like, yeah, it is a great idea. And I want you practice and take your mother's trash out. Yeah, yeah. Hit the bricks. Yeah.

And so we went to all the neighbors and we signed up like eight neighbors. And we were taking the trash out. And at the end of the week, we told our dad, like, this is way too much work. Because we had to like put it, we were small. So we had like a, this wire like cart on these wheels and we have to fill, put the trash bag in the cart and like take it down the stairs. Get chunk, get chunk, chunk, down the stairs. And then like swing it up into the dumpster, which was like way, you know, higher than us.

And so we told our dad, oh, this is way too much work. And he says, well, well, what if it would you were making twice as much money? Would it, would you want to do it then? And we're like, wow, for twice as much money, yeah, we would do it. And he's like, so just tell them that you're raising the price to two shuckles a week and 50 cents. And we're like, we can't tell them we were raising the price. We just told them a week ago that it was one chuckle. And he's like, look, if you don't raise the price, you're going to quit anyway.

So you might as well give them the opportunity to pay what you're willing to do the work for. Like, okay, that makes sense. So we go to all the neighbors and we say the price is now double. And most of them were like, yeah, no problem. 50 cents a week, not a big deal. One neighbor quit. And from then on, we saw their daughter take out the trash, which he'd never done before. realize, you know, why are we paying the neighbor's kids when we have a perfectly fine kid of our own?

And one neighbor complained in standard Israeli fashion, what you can? You can't just double the price. This is crazy. This week you put it up five cents. Next week you put it up 10 cents. Double what you do. This is crazy. You know, and we're like, no, we stuck to our guns. And he's like, fine, fine, fine, fine. And he agreed to the, wow. So that was our first business. So you've always been, you've always found a need. niche and you've coupled that with an invention. Like you have a company now that you invented

it's like a flossing. That's right. Insta floss. Yeah. So, but weapons contracting for the government. Right. I don't know that that tracks your other businesses, which is, so this is why this story

is so interesting is that this kind of goes off the path of your style of entrepreneurship. Entrepreneurship. So yeah, let's tell us about how this came to be. Right. So around that time, I was like 22 or so. This was like in 2003 or so.

Right. So we'd just gone into Iraq. Yeah. And there digital cameras were becoming a thing. There was the switch from like film to digital cameras. I bought a digital camera, but SD cards were super expensive back then. So I kept on looking for a better price. in an SD card, and I realized that I could buy it in bulk from China and sell the rest of the SD cards on eBay and make a decent profit. So I started doing that. And then a friend of mine that I knew from Israel, you know, I told him about the SD card business, and he's like, oh, you know,

I'm actually selling bed sheets and towels to nursing homes. But I'm buying from distributors in the United States, and I know they're buying it from overseas. If you find a supplier overseas, you seem to be able to find suppliers overseas. I'll buy from you if you give me a better price. So I looked for bed sheets and linens, found a great supplier in Pakistan, started selling to him and started selling to other nursing homes and hospitals, started doing pretty well. And did that for maybe like nine months or so.

And then I bumped into my old friend, Ephraim Devoroli, who in the movie is played by Jonah Hill. How did you know Ephraim? So I met Ephraim. Ephraim was also from an Orthodox Jewish family. We didn't go to the same school, but our families went to the same synagogue. Boy, he really got away from it, didn't he? I mean, you got away from the religion.

He got away from the religion and the values and the morals. Yeah, absolutely. Was his background one of abuse or did he have shady parents? Like, how did he get that way? So his parents are actually normal people, especially his, particularly his dad is a super nice guy. his mother, you know, was also very nice, but like she, she tended to be kind of the standard Jewish mother where she would blame all her son's problems on all his bad influence friends. Like she thought I was the bad influence on her son.

And everyone knew that it was the other way around. But, you know, that's how it goes. So the way that happened. So we met in synagogue because our families went to the same synagogue. Neither of us liked to pray. So we'd sneak out. And he's actually four years. younger than me. So he was friends with, I was friends with people who were two years younger

than me and they were friends with him. And that's kind of how we got into the same friend group. When he was 16 years old, he got caught smoking weed in his Orthodox Jewish school and they kicked him out. And so his parents said, well, look, if you're not going to take school seriously, you're going to find out what life is really about and you're going to join the workforce. So you're going to go work for your uncle in L.A. And his uncle owned this big, I think still does, big pawn shop in South Central L.A. He started putting him to work in the warehouse, moving boxes, whatever. Then he realized he was pretty good at talking.

So he put him to work doing sales in the pawn shop. And he's 16 years old and he got obsessed with the guns in the pawn shop. Pondshop sells guns. Right, of course. Especially in South Central. Exactly. So he starts getting obsessed with the guns. And you know, like teenage boys, they get obsessed with guns, guitars, cars, or sports.

Titties. Yeah. Well, everyone's obsessed. with tinnies, right? You get obsessed with those things because you think that it's going to lead to girls, right? Because you think it's cool. So he was a gun guy. I was a guitar guy. I was like, you know, obsessed with music. So he starts selling like the guns and, you know, the various accessories related to it. A lot of cops would stop by the pawn shop to buy various things. His uncle would love to schmooze with the cops and give him special deals. And the cops said, well, you know, if you really

want to sell on a larger scale to the department, you have to go through the official bidding process. And that's how he got into government contracting. So the way the government buys things is they are required to by law put it up for open bid. So they post on their website what they want to buy and people who want to sell it to the government, they put in, they give them their best price and the government decides who's the best value, you know, the combination of price and reliability, quality, et cetera. And then they get awarded the contract to sell that thing. So his uncle starts bidding to the local and state police gets Ephraim to help him with that stuff

and he learns how to do the government contracting like that. Works for his uncle for about two years. Then they have a falling out. They each claim the other screwed him you know, like out of like 70 grand. They're both known to be scumbags in the industry. So I believe him both. And Ephraim comes back to Miami

and he decides to start his own company. He was actually not, 18 yet. So he was like 17 years old when he gets back to Miami. He takes over one of his dad's businesses that his dad incorporated a business called AEY Inc. In the movie, Jonah Hill is like, it doesn't stand for anything in this particular scene. It actually stands for the his dad's, the initials of his dad's three sons. The E and AEY is Ephraim. So it's Avrami Aframi Aframi Yashaya. You know, what AEY stands for. And so he takes over his dad's company that he wasn't using it, his dad had incorporated it to do some label printing, but it was lying dormant for a few years.

He registered that, registers that company with the federal government, starts bidding on contracts. And this is right after the invasion of Iraq. So there's a massive amount of contracts because Bush administration got into a whole scandal by giving these no-bid contracts to Halliburton, which was the vice president's. Dick Cheney, Lynn Cheney's wife, sat on the board of Halliburton. And Dick Cheney was the CEO of Halliburton. before he became vice president. And so it was a massive scandal. It was obvious corruption.

And so to kind of push back against that, they put more money to the like the small business program. And so he really started taking advantage of this and started winning all these multimillion dollar contracts to supply stuff, particularly military stuff to Iraq. What kind of military stuff besides guns? So like ammo, bulletproof vests, various accessories like magazines. Right.

rifle scopes. And where is most of that stuff made? So it depends on what it was. The accessory is mostly the United States, but the Iraqis and the Afghanis, they're trained on Warsaw Pact weapons. So there's two major different types of weapons classifications in the world. There's the Warsaw Pact, which is the former Soviet Union. And there's NATO, which is the West.

So NATO uses the M16, which uses the 556 round. And that's the newer gun. Well, I don't know if it's newer, but it's a different type of gun. I think the M16 is newer than the AK-40s. Yeah, because NATO comes after the Soviets fell. Yeah. And I think the AK-47, I don't remember when that came out. But yeah, I think the M-16, yeah, the M-16 is a newer gun.

But they're different. Like the ammo in one isn't going to work in the other. So the Iraqi army, which the United States was trying to build, they're trying to build a functional country there after we took out Saddam Hussein. They're trained in all the Warsaw Pact stuff as well as the Afghani army. So, but the Warsaw Pact stuff isn't really manufactured much in the United States. Right. So that stuff has to be bought from former Soviet republics like Eastern Europe. Oh, so that must cost more. No, it's actually way cheaper. Why is that? Way cheaper. Because they have a lot of it lying around, rusting. And they're happy to,

to get rid of it for any price that you're willing to pay. Right. Okay. And which the U.S. Army, the U.S. government was thrilled about because they want to spend as little money as possible. Okay. Is that true, though? Because all we hear about is how wasteful and bloated the military budget is and the federal government is, which has got to be true. So it's true and false at the same time, right? It's true in the sense that the government isn't the people who are running the procurement process. They're spending their own money, right? So it's not like the less they spend, the more money they keep in their pocket. So they don't have that motivation, right? Like a private business would. On the other hand, specifically because of that, there's a lot of rules in place to prevent corruption. So the requirement

that things have to be put out for open bid for competition, with the exception of Halliburton, right? So there's rules like that. There's rules. There's rules. that the government can't tell bidders what the other people are bidding at, you know, because that would encourage them to raise their prices if they knew there's more room there and they can make more money. So there is various rules put in place to prevent corruption. Now, obviously, it doesn't always work the way that it's intended to. But, but it's not like a country like Russia, for example, where it's blatant. And as long as you're given the higher up, their kickback, you could, you know, you can siphon off as much as you can. Totally. So it's a lot less corrupt than other countries. Okay, cool. So a lot of people may not know that. Because we associate the American military with rampant corruption and lobbyists and, you know, kickbacks and federal government. Look, there are different forms of corruption in the political system.

Sure. Sure. It's different here. It's different here. You can't just hand a politician a Wad of Cash and say, do this, right? You could, however, run a fundraising campaign for them and invite all your rich friends to donate the maximum amount and then say, you know, it would be really nice if you would do this. And these are the reasons I think it's in the country's best interest for you to do this.

And, you know, and I'm also planning on doing a fundraising event for you, you know, next month. So, you know, let's stay friends. It's a big wink wink, wink, wink. That's what it is. It's very white collar, our corruption, our clientalism, if you know. Exactly. Or a client state. Yeah.

So it's not direct, but it is pretty indirect. But for- It's directly indirect, if you could say. For private citizens who want to sell to the federal government, it's not very corrupt. There's quite a few checks and balances. Yeah, there's quite a few checks and balances. Okay. So how did Ephraim start sourcing all of these contracts?

Is it listed on the Internet by now? Oh, yeah. Around this time? Well, so the contracts, so whenever the government wants to buy something, they have to list it on their website, right? And now they change the website. Nowadays, it's sam.gov, sam.gov. And you can go on sam.gov and type in whatever it is, you want ammunition or whatever. And you'll see all the things that the government wants to buy and all the requirements that they have for you to sell these things to them. And once you are registered with the government, you could bid on these contracts. So it's all listed there. They do have different requirements for different size contracts. So these days, anything under $250,000 you could win as a brand new company. Anything more than that, you'll have to prove that you've done this kind of business before. They call it past performance. So, you know, as a beginner, you'd want to win a few small ones and then you can go for the big ones.

My friend runs a pretty profitable company. A good friend of mine sells food and food accessories to federal prisons. That's exactly how he did it. He just like you went online. and just looked at the list on the website. That's exactly how you do it. Simple. So how did you come into business with Ephraim?

Right. So after about a year of him working on his own, we bumped into each other at a mutual friend's house. We went there to smoke weed. And he asked me, you know, as people do, you know, what are you doing these days? And I told him about my bed sheet business, about the SD card business.

And he says to me, you know, a lot of the stuff you're doing, a lot of skills that you have in your businesses, they could be applied to the business. I'm in, you know, finding suppliers overseas, arranging logistics, figuring out the financing, etc., etc. But I bet I'm making way more money than you. So you should come work with me because I could use a smart guy like you. We could really, you could help me expand my business. And I said, well, how much money have you made?

And he says to me, he's like, you know what? I'm going to tell you. But not because I'm bragging. I'm not bragging. I'm just going to tell you to inspire you. And he opens up his computer and he blogs into his computer. And he shows me his bank account. And he has $1.8 million in the bank.

And he was 18 years old at the time. He'd been working for one year. And I thought, wow, he made almost $2 million in one year. And that's not even guns. That's just accessories for war. He did a combination of things. He did a combination of things. He was some ammo, some guns.

gun some accessories. He was doing a lot of wide variety of things. And so I was like, wow, this guy, I mean, I was making decent money. I was, you know, more than comfortable, but I wasn't making millions. And so I thought, well, he obviously knows something I don't. I said, okay, I'm in. You know, teach me, teach me what you know. And so he started teaching me the whole federal contracting system, how to identify solicitations that we have a chance of winning, et cetera, et cetera. And at first, the idea was that I would just expand his business, go into a field that he wasn't in. So he would do the guns. And I was going to focus on fuel because fuel is a very large business.

A lot of money spent on fuel. And it's something that's a consumable. So it's constantly needed to be replenished. And so the government actually lists fuel is something they're looking to buy from contractors? Why don't they just go to BP or Texaco or, you know, whatever oil giant is around? So why don't they do that for everything, right? Why don't they go to Winchester to buy the ammo or, you know, or whoever? So they do go directly to a manufacturer when it's a very specific item that only that one manufacturer can make.

So they call that a sole source award, right? So when they want to buy an F-35 fighter jet, they have to go to Lockheed Martin. They're the only ones who make it, right? And they have special rules for the sole source. Usually it's like a cost plus kind of thing. where the manufacturer will show them what their costs are, and then they add a specific profit margin. Of course, that has all sorts of bad incentives for them to increase the cost.

And that's where a lot of the bloat comes from. But for a fungible good, right, something that's the same, no matter where you buy it from, like fuel or ammo to a lesser extent, they don't really care who they're buying it from. They just want the best possible price. and sometimes the BP or, you know, Chevron is the best price, but sometimes not, right? Because like, for example, let's say they wanted to buy clothing. You know, they could go to the clothing manufacturer and say, manufacture these, you know,

a million pairs of pants for us, right? But there also could be the case where, let's say, Macy's has a million pairs of pants sitting in a warehouse that they're desperate to get rid of. And they're willing to sell it below the cost that they paid for it because they just want to clear out their warehouse. house and they need the cash. So it makes sense for the government to put it out for open bid because they don't know what's out there. And they don't know the various economic incentives of the various suppliers. So they just get, they know they get the best price when it's competition

rather than going directly to the manufacturers. So how would someone like you undercut BP? Right. So a lot of times the large companies, they don't even bother to bid on the small contracts because it's just not worth their time. So, and there's even, and not necessarily even BP, but there's like distributors and stuff. Like there's a whole network of fuel distribution network. And sometimes they just don't bid on things. And sometimes you can get those contracts and just be very competitive.

Sometimes they'll be using a transportation company that is not giving them a great deal. And so you can get a better price in them because you have a more competitive transportation company. So there's various ways of, how are you doing it? So pretty much the way the process is is you just go on the internet, on Google, and you search for sources of suppliers. You go as far deep in the Google searches as you can, build a whole spreadsheet with all the suppliers there. And go not just Google, but also like trade directories, have a large amount of suppliers listed. And you ask people for references. You can go to trade shows to build connections.

There's various ways of building sources for suppliers. And then you ask them all for the best possible price. You negotiate as hard as you can with them. And Ephraim was really good at that. He was a very good negotiator. And you knock them down in price as much as possible to be competitive as possible. And then you put the maximum profit you think that you can win this contract under. And that varies depending on how well you know the industry.

If you know the industry really well and you know who you're competing against and you know about what profit margins they put on their stuff, you can try to undercut them. If you don't know the industry, well, you're pretty much just shooting in the dark. So that's why, you know, with War Dogs Academy, where I'm teaching people how to do this, I always recommend that people focus on a niche, right?

Because the more you know a particular niche, the more competitive you can be. And also, the less work it is to bid on new contracts within that niche, because you already found a large, most of the suppliers. And there may be other suppliers out there, but you already did all that research in the previous contract. Right. So once you know your niche, you can kind of guesstimate where you need to be on price.

So then how long did you stick with selling fuel before you just went straight to strictly to weapons? Right. So the first contract I won was for 40,000 gallons of propane. It was delivered to an Air Force base in Wyoming. We were splitting the profits 50-50, Efferman I at the time. and so my end of the deal I made like $8,000, which wasn't bad for like two and a half weeks worth of work or so. Then I started working on some other things

and he came to me and he said, look, I have this contract that I won is for rare gun parts, you know, obsolete historical rare gun parts. It was going to the Air Force, the Special Forces, because Special Forces, they need to train on pretty much all the weapons out there

because they don't know what they're going to encounter in the field. Right. And so, but this, it was like 130 different rare gun parts. And he knew that no one really wanted to bid on this contract because it was going to be a massive pain in the ass to fulfill because you'd have to scour like every gun dealer in America to find all these things.

And so he knew he could bid it at a high price because no one else was going to bid on this thing. And he ended up winning the contract. But he didn't want to put in all the work to find all these things. And so he told me, look, you know, work on sourcing the contract because he already won the contract. Work on sourcing this and we'll split the money with that. And so that's how I, that was my first like weapons related contract that I worked on.

And I worked on it. It took me like a good two, two and a half months to like complete that contract. Made a decent amount of money on it. And how do you find, how did you find those rare, rare weapons parts? Pretty much just calling every gun shop in America. Wow. It was a lot of work. Yeah.

It was a lot of work. Yeah, a lot of emails. So the, you could Google, but also the ATF has a federal firearms list where you can get. Wow. That pretty much lists every license. firearms dealer in America. And it's a lot. It's like 30,000 people.

But it's just, all of this is basically public information. Yeah, this is all public information. This is not secret. Right. No, there are, we did get some sources from references, you know, like, you'd know somebody and be like, oh, I want to introduce you to that person or whatever. We'd meet someone at a trade show. So those, like, connections

like that wouldn't necessarily be on the internet. But we always started with the internet. Whatever was public information, we'd start with that. Okay. So how did it go, how did it evolve from there. Right. So then I worked on a whole bunch of random contracts that I lost because that's very common in the government contracting sphere because it's a competition. So you usually lose more than you win and you just have to be okay with that. And I worked on a vehicle contract, on food, on some

clothing contracts and I lost like a few of them in a row. But it kept on working. And then about like nine months in after I started working with him, we saw the this solicitation. a solicitation is a request for a quote, right, by the government, for this massive, massive contract. And it was all for munitions. It wasn't for the weapons, just the munitions. And it was going to be going to be paid for by the U.S. Army and going to be given to the Afghan National Army and the National Police because they were arming Afghanistan. And the idea back then, where this was in like mid-2006, they put out the solicitation, George Bush was president and he was super unpopular. and they figured that next president is probably going to be a Democrat,

which they were right about Obama. And they thought that next president, Democrats are definitely going to pull out of Afghanistan immediately, which they were wrong about, took until Biden to pull out. So they figured, well, if the next president is going to leave the Afghans high and dry, they didn't want the Afghan government

that they built there to collapse and the Taliban to take over. So they decided, which ended up happening. We got to get to a shitload of weapons. Right, we got to arm them to the teeth so that they could fight off the Taliban. Turned out that it didn't really help. And now the Taliban has all our weapons and ammo and they're, you know, but they didn't know that at the time. So they put out this contract and it was like 30 different types of munitions.

It was all, it ranged from like pistol ammo all the way up to tank rounds and anti-aircraft rockets. It was like the whole range. How much was the contract worth? So we, by the time we bid it and we were by far the most competitive, it was worth just under $300 million. Holy fuck. Yeah. And what's your profit off that? What did you build in?

So we built in a 9% profit margin. But after we won the contract, Ephraim renegotiated with all the suppliers and got like an extra 10% on top of that. So we were going to make about 20% on that contract. So two times 300. Yeah, it was $60 million. Yeah, $60 million in profit. Wow. Yeah.

That's what we were set to make. Wow. And how did you source all these munitions? Where do you find a tank round? Right. So this was all Warsaw Pact stuff. So it was all mostly from Eastern Europe and Central Asia. So I pretty much Googled to see which companies make this.

And there are trade directories like Jains is a very famous one. Army Technology is another one where they list all the companies that make particular items. So you can put in tank round and see what companies manufacture that. Right. And you can contact them because they have contact. Now back then they didn't even like use. email because it's like former Soviet countries. So they only had like fax machines and you'd have to like call them up. And sometimes the fax machine was the number listed on their site was wrong and

you'd have to call them up and get the number and happen like their phone lines were bad. So you'd have to like confirm they got the fax because it would often fail halfway through. And they often didn't speak English. So you'd, you know, have to wait for the one guy who spoke like a few words of English to come. And so it was a massive pain in the butt. It took like about two months or so to source the entire thing. And do you, I think in the most of the most of, you, I think in the movie, don't you guys end up going over there to meet the suppliers? Yes. Did you actually do that in real life?

So, yes, but you went to the factories. Yes, but I personally didn't go to Albania. That was, they combined our characters with me and one of my best friends, Alex, he was the guy who was doing the packaging in Albania. They didn't want to introduce a new character in the movie. So they had me go over there. Okay. But I went to other places. I've been like to...

What countries between all of these different munitions makers? Give us the countries. So I went to... I met a lot of them in Paris, actually, because there was a big trade exhibition there. And every year or two, there's a trade exhibition called Eurository in Paris where it's a trade show. And all the defense companies set up a little booth. And they have... A lot of them have, like, the products on the show floor.

So you'll see tanks on the show floor and, like, drugs. And weapons and everything. And so I met a lot of them through there. I went to South Africa, to India. What are they making South Africa? So they have, mainly I went there. Well, they were making one particular sniper rifle that we were interested in. It was a really good sniper rifle.

And one particular South African company. But we were mostly interested there in seeing, like, if they had like old military stockpiles. And that was like where you get like the best prices. Okay. Because the militaries around the world, they, they always have stockpiles of munitions and weapons. Yeah. Just in case, a war breaks out or whatever. And after a certain amount of time, they want to, they want to buy new stuff because they're not like comfortable relying on stuff that's like over a certain amount of time old.

And they're willing to sell the old stuff at really good prices. Right. So we were always on the lookout for military stockpiles because the U.S. Army, with every, contract, they would specify, like, whether or not there was like an age limit on the, on the ammo. So with the Afghan contract, now this $300 million contract, there was no age limit. All they cared about was that it was functional. That they said it has to be serviceable without qualification was the terms they used. So it just had to go bang and out the barrel, so speak. And so we were looking for the least expensive possible stuff that was, that met those

qualifications. And what about Albania? You know, those are notorious gangsters, right? Those eastern states. And we know a lot of their weapons production ends up in the hands of criminals. What were they making? Well, so they didn't manage, they had some manufacturing capability, but not much. So they actually got armed by the Chinese. We didn't know this at the time, but that's what got ended up getting us in trouble. So Albania is an interesting, history. It was run by this dictator during the Cold War that was that he felt like he was a true communist and that the people running the Soviet Union were not and that they were a bunch of corrupt people who were not true communists and didn't have the best interests of the people at

heart. And so he took himself out of alignment with the Soviet Union and made an alliance with the Chinese who he felt were true communists. Now, he knew that the Soviets didn't take too kindly people pulling out of their, you know, their alignment. So, Czechoslovakia is a great example. So he thought that the Soviets were going to invade him. And he also, because he's a communist, thought that NATO was going to invade him too. So he thought the world's two superpowers were going to invade a tiny little country. And so he got his new best friends, the Chinese, to arm him to the teeth and he built this vast network of bunkers all over the country and filled it with the Chinese weapons.

Which are AKs? Yeah, they use Warsaw-packed weapons. Okay. But they manufacture their own. So they make AK-47s. It's all like Warsaw-packed calibers, but they do manufacture their own stuff. And so I think under license from the Soviet Union, that's how they got started. But he filled up the bunkers with all the Chinese.

weapons and his plan was what he called total war where everyone man, woman, and child becomes a soldier and everyone fights to the death. That was that was his plan. Of course, the war never happened. He never got invaded. So when the Cold War ended, Albania was one of the most armed places on earth like per capita. And there, there was a point where their economy collapsed and their paper became their money became worthless. Exactly. Money became paper. And so, So they were using ammunition as currency. That's how armed they were. Wow.

Yeah. So you'd buy like a, you know, some bread with like a carton of ammo. Wow. Yeah. So there's a total glut. Yeah. There's tons of ammo. Tons of ammo.

So you were getting it cheap there. Right. And so at this time, Albania was trying to join NATO. And NATO, because they use different caliber weapons, one of their requirements to join NATO is that you have to use their weapon system so that all the members are interoperable. So they could all share weapons and ammunition. as an alliance. And so they said to Albania, one of the requirements for you to join NATO

is that you get rid of all your old Soviet stuff. And so they were having to pay to get it dismantled. And so they were willing to sell it for anything. They're giving away for pennies. Exactly. Literally pennies. We ended up paying like four cents a round

for the AK-47 ammo. So how do you, so you flew over there to Albania and you ordered how much ammo from them? So we got the deal from a Swiss arms dealer named Henry in the movie he's played by Bradley Cooper. And Henry was good friends

with the Albanian Prime Minister's son. So he hooked up this deal when we were asking for where we were sourcing the contract, he gave us by far the best possible price on the AK-47 ammo. And of course, we didn't know at the time that it was Chinese, and this is a problem

because our contract specifically said no Chinese munitions can be delivered either directly or indirectly under this contract. And the reason it said that was because in 1989, there was an arms embargo placed against China by the United States because there was the Tiananmen Square Massacre where a lot of Chinese college students were protesting for democracy and the Chinese government rolled in tanks and gun them down. There's a very famous picture, Tankman, I think they call it, where a man standing in front of a line of tanks. That's right. And so that was on national, international TV and it became a massive scandal. And because of that, the United States placed China on an

arms embargo. Wow. How wild is that? So you can import everything in the world from China except their munitions. Or anything military related. There's a list. It's called ITAR. Okay. And that's in it's in place to this day? Yeah. All right. Fascinating. So it's illegal for U.S. companies or citizens to to buy or sell the items on this ITAR list. I see. To, with the Chinese. Let me, I'll ask you something. What is the difference between what you guys did,

arms contractors and arms traffickers? Bradley Cooper's character, Henry, was an arms dealer. Right. But you didn't consider yourself arms dealers. So can you explain the difference and what arms dealers do? I'm fascinated by this. Right. So there's the,

there's the legal arms trade and there's the illegal arms trade. The legal arms trade is between countries and, you know, various companies. And so there's the internationally recognized political system, right, the UN, et cetera. And the way it works is if you want to sell, you know, any weapons or anyone to any particular person or organization, you have to get what they call an end user certificate, right, from the end user, from the buyer. And that end user certificate is a document saying who this is going to be going to. And it's a guarantee, it's a promise, that this is not going to be transferred to anyone else without the original person's, without the seller's permission. And all legitimate suppliers require an end user certificate at EUC, right, that you're not

going to get an export license from a country unless there's a valid EUC from a, from a buyer that is approved by that country. And different countries have different, like for example, the United States has an arms embargo against China, but, you know, other countries don't. So it's illegal for US. So United States, a seller wouldn't accept an EUC from a Chinese. company, but the Russians would. You know, the Indians might. Okay, so, but what about an arms dealer? Like, how do arms dealers operate? Right. So you're referencing, like, someone like Victor Boot, who, who's a infamous Russian arms dealer. Exactly. They gave him. He was in prison in the U.S. and was sent back to Russia in exchange for Brittany Griner. That's there for weed. That's right. That's right.

Fair trade. Yeah. So, you. Yeah, they, so Victor Boot, he's operating with the consent of the Russian government, right? So I'm sure he's given kickbacks to Putin's people. I mean, you don't operate in Russia otherwise. However, what was he doing? He was selling to organizations that were widely considered, that were designated as terrorist groups. So he, so the way they got him actually is they entrapped him into, they told him that they wanted to sell some weapons or ammo to the FARC in Colombia, which is a designated internationally by the UN as a terrorist organization.

And so they arranged a meeting with him to, who he thought was going to be people selling to the FARC. And it was undercover agents and they arrested him. That's how they got him. Okay. So he, that's what he was selling. So nobody, like if the UN designates an organization as a terrorist group. Nobody can sell weapons to them openly, legally weapons. Now how is he sourcing his weapons?

How does an illegal arms dealer source their product? I mean, Russia is, well, before the Ukraine war, was the second biggest arms dealer in the world after the United States. So I'm sure he was getting it from Russia. And because he's operating with the Russian government's consent, so it's not a problem for him to source it. Now, it may be a problem for shipping companies, right? Because international shipping company is going to want to transfer illegal goods.

And you can't stop in any third country ports to refuel or anything like that. because they're not going to allow that kind of stuff. So he would have to arrange his own logistics. And so he had an operate, and probably still does, operate like a fleet of aircraft that he would route within countries that would not give him problems. I see. Okay. So it's a mix of basically dealing with the right regimes that don't care that you're

selling to terrorists or underground organizations. And, you know, one terrorist organization, one. One person's terrorist organization is another person's freedom fighter, as they say, right? The FARC's a guerrilla group. The FARC's a guerrilla group. You know, the great example is Iran, who supports Hezbollah and Hamas and various groups in Iraq and Syria. And as far as Iran is concerned, they're freedom fighters. But as far as the West is concerned, they're terrorist organizations, depending on who you're talking to.

Now, legitimate arms dealers like Henry, Bradley Cooper's character, how do they operate? He was basically just middlemanning the deal between you and the Albanians. Explain your relationship and how you guys met and what he did for you. So we met Henry through Ralph. So Ralph was our investor.

Ephra met Ralph through his dad. I don't know how his dad knew Ralph. I think they might have done some business together at some point. When Ephraim won his first federal contract and he needed a financier because the way the government works is they only pay you 30 days after you deliver. Yeah. Right.

And most suppliers, particularly internationally, require payment before shipping. Right. So you need to float that. You need a big bank. Exactly. Just real quick, on a, this massive contract, this $300 million contract, how much cash outlay investment was required on your end? So we had at the beginning of that contract when we first wanted, we had to, we had a,

about $5 million in cash. Okay. Yeah, for the company. And we were able to finance it that way. And the way we did it was we would, we got a fact, what they call a factoring agreement with, with Wells Fargo, actually. So the, and what a factoring agreement is when you deliver, delivery to the government, they give you a DD-250 form.

It's a receiving a document that they sign off, that they receive the products and everything's good. and then you usually in most cases you submit that to the contracting officer, the government employee who's responsible for managing the contract, and then you get paid, right, like 30 days later. Now, we wanted to get paid faster because we didn't have enough money to keep making deliveries on time if we would wait 30 days for each payment. So we got a factoring agreement with Wells Fargo, which meant we would submit that receiving report to Wells Fargo.

They would pay us immediately. They would submit it to the government. The government would pay Wells Fargo. I see. And Wells Fargo obviously charged a little bit of interest. But off a $300 million deal, $5 million was the investment? Yeah. That's insane.

Because we would only have to pay one aircraft at a time. So we were flying. We had to ship everything by air freight because Afghanistan is a landlocked country. It's surrounded by unstable countries like Pakistan run by warlords and who would love to get their hands on our munitions. So we had to fly everything in at great expense. Okay, hang on, put a pin in that. So a grenade pin in that. How did you, you met Henry through, you had an investor now.

Right. Ralph. He's putting money in just so you guys can buy more and get more contracts. Exactly. So he's financing the contracts. He'd known Henry for a while. Like, I think they had done a deal where Henry had some connections. And I think the way their first deal was they, Henry had some connections in South Africa. And it was like illegal to import.

like weapons from South Africa because it was being like run by the apartheid regime. This is like in the early early 90s. And, uh, they realized that the ATF only classifies, uh, the receiver of the gun as the weapon. So the receiver is the part that like the bullet gets fired out. Okay. And so what they did is they bought a whole bunch of weapons from South Africa, um, very cheap because the South Africans were looking to get rid of them. They cut it up, removed the receiver, shipped all the other parts of gone to the United States legally, Ralph had a factory. He manufactured just the receiver, put it all back together and made a really good profit. So that was the first deal they did together. And so when Ralph started funding Ephraim, he and Ephraim was looking for sources

for various contracts, he introduced him to Henry. Henry is from Switzerland. He had pretty much seems to have, he's been doing the business since he was like 18 years old. So he's very connected all over the world. So he's got a network of connections with the- these nefarious or quasi-neferious characters in all of these different states. Right. You know, in the Eastern Bloc. He's Swiss. He's neutral.

Right, right. Exactly. Meaning they have zero morals. Zero ethics. We just deal whatever the money is. Right. So no fan of the Swiss people. They guarded Hitler's money.

That's true. All fuck off. So they, they're the ones that basically he became like a middleman. Yeah, Henry is a middleman. Okay. Yeah. He owned his own arms manufacturing company for a little bit called Bruges and Tomey. They're still around.

Okay. According to the company, he's not involved anymore. Okay. Yeah. Okay. But he's mostly a middleman. Yeah. Okay.

So how much did he make? So he just takes a percentage of the bullets that you buy from Albania. Exactly. Okay. Yeah. Okay. So walk us through this deal. How long did it take to source all?

of the munitions for this big contract? To source it all, the initial sourcing to bid the contract took about two months. And but of course once we won the contract, we kept on sourcing because always looking for new suppliers, always negotiating with current suppliers. So it was a constant thing. Okay, but how long did it take to fulfill it? So we won the contract in early 2007. I think it was like January 27th, 2007. I remember these particular dates.

Big, big day for me. Sure. And we kept on, or I should say, I mean, I left about six months later when Ephraim informed me he didn't want to pay me anything. But the contract kept going, the company, AEY, kept on delivering until March 28, 2008. Okay. So this is, so you're not getting them all of the. munitions in one shot. This is like a...

It's a constant thing. So, yeah, the way they don't give you the entire order even in one shot. They split it up into what they call task orders. Okay. And so they'll give you against the $300 million contract, a task order. Right. So actually our first task order was $600 grand, which we thought was a big problem because they're actually only required to legally give you the first task order.

So they ask you to quote the entire $300 million contract, but legally they only have to give you the first task order. could be any size they want. Right. So we, obviously, the price is very different, whether you're delivering one aircraft or 300 aircraft. So, but we quoted assuming that they were going to give us the entire order. So when the first task order came after we won the contract, it was only 600K, we were like, oh, shit, are they going to give us anything else? Because we can't deliver profitably off this. But then like two weeks later, they gave us a $50 million task order. So we realized they were just waiting for the money to clear. Okay. So how do you get it?

And these are munitions that are going to Afghanistan. Yes. So you're not, how does that, how do you get, I mean, how many bullets? Like in a contract worth 300 million, just estimate. Like, how many rounds is that? So there were, as I said, there were 30 different types of munitions. And I think of the AK-47 ammo, which is 762 by 39, there was about 150 million. Holy shit.

How do you just get, how do you get 150 million rounds from Albania to Afghanistan? in. Well, we had to ship it by air freight. Yeah. And when we found out that it was Chinese, we had to do a whole repackaging operation because we thought we would get in trouble for it. Okay. So, yeah, this is a problem because you've got the contract legally. Yeah. You've got the money put up. Yeah. You got things are in motion. This is not a good time for anything like this to happen. Right. Yeah. So we didn't even know that it was Chinese origin until we went over there to inspect it. And when we went over there to inspect it, we realized there's Chinese markings all over the boxes,

all over the crates, all over the metal tins that the ammo was in. And this was a problem for us, because as I said, our contract specifically said no Chinese ammo can be delivered directly or indirectly. Now, this ammo had been given to the Albanians by the Chinese in the 70s. So before the arms embargo, so it was legal, as far as the arms embargo.

It didn't not violate the arms embargo. However, our contract didn't specify anything to do with the arms embargo. It just said no Chinese period. So we thought, well, you know, it violates the terms of our commercial contract with the Army, but it doesn't violate the embargo. So maybe we can ask them to let us deliver this. And, you know, maybe we could ask them for a waiver, you know, a letter allowing us to deliver. But then we thought, well, maybe they're going to say no because it's,

it's not really fair to our competitors. We beat, like, general dynamics and ATK systems, and they're, like, multibillion-dollar publicly traded companies. And they were very upset when they lost this contract. They submitted, like, complaints to the government, you know, they did this whole thing trying to get the contract away from us. And so we knew they were looking for any opportunity to get the contract away from us, that are competitors.

So we thought if we tell the army about this, maybe the army will say, well, it's not really fair to your competitors, that you be allowed to deliver this because they had to bid non-Chinese origin ammo. So maybe we'll take this $300 million contract away from you and put it out for bid again. You can bid on it again, on even footing. And so we didn't want to risk losing the $300 million contract. And so we decided that instead of telling them about it, which was a big mistake, we decided to repackage it. In retrospect, they probably would have done it.

Yeah. In retrospect, they probably would have allowed us to deliver it because it turned out we found out, later that they actually knew that it was Chinese the whole time. Oh, and they didn't care. No. Yeah. Fuck. Yeah.

Did Ralph? Sorry, not Ralph Henry. Did he know that this was Chinese origin? Oh, for sure. He knew it was. Yeah. He didn't tell you. He didn't tell us.

No. Yeah. How much did he stand to make? What percentage was he taking as a middleman fee? Right. So we found out that because, I mean, obviously he wouldn't tell that to us. So we got, we got a guy named Costa, to a Albanian guy who owned a cardboard box factory to do the repackaging, right?

Because we had to take it. We also wanted to save money on shipping because we're doing air freight and weight is the cost of air freight. And this ammo was packaged in these like heavy wooden crates and in these metal tins. So we wanted to reduce the cost because at the time there was a big spike in oil prices and we were actually going to lose money if we delivered it at the way it was. And so that was the initial reason we wanted to repack was just to save weight on air freight. But then we found out that it was Chinese origin. We're like, okay, now we really have to repack regardless. And so we hired this guy Costa to, he owned this box factory to supply the boxes and to supply the labor to do the repackaging. And so he was doing the repackaging. And Ephraim, who's always looking to make more

money, right? He asked Costa, he's like, hey, do you know anyone in the ministry of the defense of Albania, I'd love to find out what they're getting paid for our ammo because we're paying Henry and Henry's paying the Albanian MOD. And so Costa says, yeah, I actually have a cousin who works in the MOD. It's a very small country, Albania. And he's like, I'll ask him. And a few days later, he calls up effort. He's like, yeah, the Albanian Ministry of Defense is getting paid two cents around. And we were paying Henry four cents around. And so that pissed effort him off to And he's like, he's doubling his money, that motherfucker's screwing us. And now what we found out later, we didn't know at the time, is Henry was most likely paying kickbacks out of his end of the deal to the politicians.

Right. That's, you know, to the Albanian prime minister's son and to that network. There was also the Albanian mob was involved. And so Ephraim got really pissed and he decided he wanted to cut Henry out of the deal. And what's your price per round right now? now at this point. You mean what we're selling it to the government? No, your price. Oh, we're paying four cents around. Okay. We're paying Henry four cents around and Henry is paying the Albanian MOD two cents around at least officially, right? You know, what kickbacks he's given, we don't know. He obviously

wouldn't tell us and we don't want to know because that's illegal for us to know. Right. Because it's illegal to bribe government officials, even if they're foreign government officials. So, Ephraim decides that he's going to try to cut Henry out of the deal. And he's, and he, decides to go fly to Albanian trying to negotiate with the Albanians directly. He tells me, he's like, look, what I want you to do before he leaves, he wants, he's like, what I want you to do is take all those other quotes that we got from all the other suppliers, and I want you to change the prices on them. So it looks like they gave us way better prices.

And I could use that, say, hey, if you don't give us a better price, I'm going to go with these other guys. And so I use some PDF editing software, change the numbers, printed out, no big deal, right? Give it to him. Is this the first nefarious or semi-underhanded thing you'd ever done? Or had you ever done anything illegal before this? Not, I mean, not that, not directly. You know, there were, Ephraim had done a few, like I had was involved or, you know, like I was aware of, I should say, of a few shady things he had done to, like, win the contract.

So there were a few, like, things that he submitted to the government in the process before we won the contract that were probably not completely above board. Okay. Like, for example, they wanted to see that we had, they did it with a series of audits, they call it, which is like little mini investigations into the company before they award you the contract. They want to know that they're awarding a very big contract to a responsible company that's going to deliver. So one thing they wanted to know was that we had enough money to deliver the contract to be able to finance it. And so Ephraim used one of Ralph's properties as proof of, like, assets. Yeah. And Ralph had gotten that property that he owned, what do they call it?

Appraised. That's the term. Appraised at a very high price that was way out of proportion with what was in reality. I don't remember exactly how we did it. But he got it appraised very high, like literally like double or four times. Well, that's not real. thing. Yeah.

I mean, they're trying to get Trump for it, but it's not really, every asshole thinks his property's worth more. Right. But I mean, they knew what the reality was. Okay.

So, yeah, so things like that. So, like, I mean, I knew of those things. And there were some other things as well.

Okay. I don't know how much detail. So, keep going. So yeah. So he asked me to change. And I'm not even sure that changing that is necessarily

illegal. I don't know what the exact legality of this. Fraud, maybe. Maybe. Maybe. But it's a different foreign country. It's Albania. There's hardly any rules over there.

Yeah. So anyway, I give him the documents. He goes to Albania. He goes, talks to the head of the Albanian export company, Yili Panari, and shows him the documents. And Yili takes one look at the documents. And he's like, don't show me your fake documents. Oh, wow. Yeah, they're Albanian.

They're the king of a doctoring documents. He knew right away. Yeah. Well, he knows the industry. He knows that he has the lowest price. He knows that the checks and the Ukrainians are. going to give way lower prices than him because they're going to have to pay to dismantle it if they don't sell it. So he knows he has the lowest price.

So yeah, he knew right away. He's like, don't show me your fake documents. And Ephraim, like kept them bothering him. Oh, come on, I need this bad. You need to give me a better deal. We'll work directly. We don't even need Henry. I'm going to have all this other business for you in the future.

We're about to win all these other contracts. I swear, you know, blah, blah, blah, blah, blah. Right. Eventually, Yili is like, you know what? I'll make a meeting with the guy who can make this decision. And he makes a meeting with a guy named Deleurgi, right? Deliorgi, we found out later, was like the head of the Albanian mob. And somehow he's involved with this.

And he's connected with the prime minister's son who was also at the meeting. But that's how it goes over there. Exactly. That's how it goes in Russia, how it goes in a lot of Eastern. The government and the mob are kind of work hand in hand. Totally. Yeah. So Deleorgi tells DeViroli, tells DeViroli,

that, you know, I know that you want a better price on this ammo. And I know that you're also paying this guy Costa Tribeska, this other Albanian guy, to repackage the ammo. So why don't you give me the repackaging contract? I'll repackage it. I'll make money off that contract. And then I could give you a lower price on the ammo. And Ephraim says, yeah, that sounds like a great idea.

That guy's fired. You're hired. Let's go. You know? And so they started repackaging the ammo. and the guy Costa, who owned the box company, he calls me up and he's like, hey, you know, I know that you guys are switching providers

for the repackaging job. I understand. No hard feelings, just business. But I got stuck with like 20 grand worth of boxes that I was planning to use for this contract. You guys are going to need this anyway. So why don't you just buy it from me? You know, so I don't lose 20 grand on these boxes.

And so I told that from like, you know, we buy these boxes for me. And he's like, yeah, you know, like the, the new, Deliurgy doesn't want to have anything to do with Go. So they already bought their boxes. They don't need them. You know, so I'm like, well, why don't you just pay him the 20 grand? Because, you know, we're kind of like leaving him out in the grid. And Nivoli says, ah, fuck him, you know.

So this guy does business. It's just how he does business. I'm like, what's he going to do? I said, Ephraim, he knows everything, right? Right. He knows about the repackaging and why we're doing it. Right. Give him $20,000.

Right. we have a $300 million contract. Let's not fuck that up. Yeah, you dumb fuck. Yeah. And he's Albanian. Yeah. And you're in Albania.

Yeah. And at this point, Ephraim had flown back to... He got himself out of there. Yeah. And the guys we were going with are the actual organized crime. They're not going to let this guy do anything. And so he's like, eh, you know, what's he going to do? Fuck him.

He's not going to do anything. Just let it go. And I'm like, okay. Well, I told him, I'm like, that's a very bad idea. but it's your money, right? So it turned out that Costa got really upset about it. And he called up the New York Times and he told them what we were doing. And he called up the FBI and told them what we were doing.

And his biggest mistake was that he called up the local Albanian press and told them that the Albanian politicians were getting kickbacks from this deal. And about a week later, he ends up dead. in a very suspicious car accident. He was like in an empty field on a dirt road and somehow his car had run him over. Yeah. Yeah, he was face down in the dirt. Hey, nobody asks any questions.

Yeah. It's just what happens sometimes. Yeah. So nobody really believes it was an accident, but they made it look like an accident. They called it an accident in the president. So, yeah. And so anyway, the, but the new guys, the DeLiorgi, what he did, was he just had the Albanian army do the repackaging

and didn't pay the soldiers anything. So he got 100% of the money. He didn't have to pay his workers. But now the story's out, though. Yeah. So the story is, so the, it's out in the Albanian press. Okay. Right.

And New York Times doesn't run it yet, though. And the New York Times is investigating. Right. They're investigating at this point. They haven't published anything. Okay. At this point, Ephraim, you know, the contract is starting to go well, right?

you know, we're delivering like three to four aircraft loads every week into Afghanistan. And flying out of Albania. Okay. And other places for the other items like Bulgaria for the grenades. And we also had some stuff coming from the Czech Republic. Yeah. So we had a few different countries we were sourcing from. Right.

But most of the aircraft were coming from Albania because that was the highest volume of stuff. It's mostly bullets. It's mostly as far as volume goes. Actually, it was the lowest value. of the contract because it was so cheap. Each aircraft load of AK-47 ammo is like less than 300 grand of our cost, or of what we were charging the government is like 270 grand. What was the highest priced item on the contract?

So, I mean, individual item was probably the anti-aircraft rockets. And I don't remember the exact number, but I think it was somewhere in the neighborhood of like $150 bucks a rocket, something like that. And how many rockets? I don't recall offhand, but it was somewhere, it was the tens of thousands. Wow. And where do those comes from? Where do those come from?

The rockets, I think we were sourcing them from Bulgaria. Yeah, along with the grenades. The grenades, we was one of our most profitable items. Okay. On the contract, the grenades, we were paying, we were making about like a 30% margin on it. And they were costing us, we were paying for them about $25 to $30 each, each grenade. So, and we were able to fit about two and a half million dollars worth of grenades on a single aircraft. Where are they from?

They're from Bulgaria. Okay. Yeah. And those shells, those anti-aircraft shells, that's like, those are the ones you see people stuffing into the big anti-aircraft guns on the ground, right? Yeah, exactly. Well, the rockets, I think they were out of, like, portable, like, launchers. Oh, okay. You're probably thinking of the mortar shells.

I am. I'm thinking of the mortars. Okay. Okay. Yeah, the rocket launchers. Yeah. Wow. Yeah.

So, yeah. So we, so the, and is the money coming in like every 30 days you're getting? No, because we had our factoring agreement with Wells Fargo. As soon as the aircraft lands and we get the receiving document, we got paid by Wells Fargo. Oh, brilliant. Like minus a percent. So you have millions of dollars coming in. Exactly.

And we're just cycling it through to go do the next aircraft, next aircraft. So we're constantly recycling the money. And, you know, in our bank accounts going up and up and up. Now, at this point, I hadn't been paid anything, right? Why? How is this? Right. Because.

This is crazy. So when I first won, like the fuel contract. By the time I, because the government pays you 30 days later, by the time we got paid, I was already working on another contract. And Ephraim tells me, you know, I'm spending my money to finance these deals. It's only fair that you should finance deals with whatever money you have. So why don't we take the money that you just made on this contract and roll it into the next contract to finance the next one.

And then once we did that contract, you rolled it into the next one, then into the Afghan contract. So at this point, I kept on rolling my money in, and I had been living off of my savings for like a year, year and a half. My savings, which I had made from like the SD card business and the bed sheet business were dwindling. And my daughter is, I have a daughter at this point. She's about six months old. But I thought I was going to be a multimillionaire very soon. You're going to cash out on what, half of 60 million? Yeah.

Well, the agreement for this contract was 25% because this was like more his bread and butter. and not like the fuel, which was a brand new business. So I was going to make like $15 million, which is more than enough. I was going to be very happy with $15 million. Were you going to get out after this huge deal? That was my plan. As soon as the deal was over, because I hated working with him.

He was just like a total nightmare to work with. Yeah, he'd like call me up at three in the morning, yelling and screaming out, we have to get to the office right now. And you know what I mean? Like crazy shit. And were you working other weapons contracts for other contracts, other deals? or when you got this big $300 million deal, this was it? You put all of your effort into that?

I put all my effort into it. Ephraim decided that he wanted to go after everything out there. And I told him, let's not do that. Let's focus on this and maximize our profits and deliveries. Make sure we deliver on this massive contract that we just won, which is like 20, 25 times bigger than anything we'd ever done before. And he was like, nah, no, we're just getting started. We're getting rolling, you know?

We're going to go after everything now. And so he started bidding on all these other contracts, the vast majority of them like $1 million, $2 million contracts, which is big in isolation, but compared to $300 million, he shouldn't have been wasting his time on it. So he was winning all these other contracts.

I was just focused on the Afghan contract. And so we were delivering on a regular basis, like three, four aircraft loads a week into Kabul. And then Ephraim comes into my office one night. And at this point, we had about 15 employees. So everyone had left the office for the day. I was working a little late.

And he comes into my office and he tells me, you know, a lot of the guys around the office, they're saying that you're not pulling your weight around here anymore. And I'm like, what are you talking about? The African contract's going great. You know, we're delivering on a regular basis. Everything's going smooth. And he says, yeah, yeah, the Afghan contract's going great. But, you know, we're really struggling with these contracts going to Iraq and you're not helping

with those. And I said, well, I'm not, I'm on commission only. I'm not getting paid a salary, you know, like I, why, you know, why, you know, you want to give me a percentage of the Iraq contracts? It's like, oh, don't be ridiculous. So you didn't help us win those contracts. Why should I give you a percentage of the Iraq contract? So why should I help you deliver on them? And I, and he says, well, because if the Iraq contracts don't get delivered, then the company can go down.

And that takes your Afghanistan contract with it. And I said, but I'm only getting paid on the Afghanistan contract. you want to give me a percentage of the whole company? And he says, well, you know, I'll tell you what. I wouldn't make this deal for anyone else. But David, you know, you're my best friend. Your hard work is a big part of where of the reason AEY is where it is today. So only because of that, I'm going to give you a very generous $100,000 a year in executive salary and 1% of AEY.

And I said to him, well, you know, the Afghan-Camp. contract is going to make us at least 90% of the money over the next two years. And I'm supposed to get 25% of the Afghan contract. So I think I'll stay with my 25%. Thank you very much. And he says to me, well, how about zero? Take it or leave it. That's the only offer on the table.

And I was this close to punching him in the face. I couldn't believe it. You know, because like I've been working on zero salary for like a year and a half at this point. all my previous winnings, you know, money was being rolled into this deal and now he's changing the deal completely under me. And you had nothing in writing? So we did have a written contract, but it was a very, it was a handwritten contract. It wasn't like run through lawyers or anything. However, that handwritten contract mysteriously disappeared.

And my scanner was, I was planning on scanning it and emailing it to myself. And so I put the contract on my living room table. and like a day or two later, like it mysteriously disappeared. And this was like right before he came into my office. So, yeah, very suspicious. I blame myself. I mean, I could have gone to Kinko's and, you know, made a copy.

I mean, like, I was an idiot, you know. But, you know, I didn't think he was going to screw me that blatantly like that. He done it with everyone else, though. He had, he had. So I should have known. Look, in retrospect, it was obvious. There's the Ephraim Playbook. It was the effort playbook.

And I'd seen him do it to other people. I don't know why I thought I was special. I mean, you know, just because he said I was his best friend. Didn't mean that he wasn't going to screw me. And obviously, he did. But this guy's no friends. He's a complete sociopath. Yeah, he doesn't know the meaning of friendship.

That doesn't work in his mind that way. So what do you do now? So that was a really, really tough because I was running out of money quick. And I had a baby to support. And I thought, I went from thinking I was going to make 15. million dollars over the next two years to about to go bankrupt and not being able to make rent. So I was super depressed for like two weeks. And eventually I realized, you know, I know this business and I have all the contacts and I have even some contacts that Ephraim doesn't have because I'd been to a

few trade shows without him and I didn't give him all my contacts. So I decided to start my own company, start to bid on contracts myself. In the means, meantime, I was negotiating with Ephraim because I realized, you know what, I don't really want to sue him for years. And I need money now. And he knew it too because he knew my situation. So this piece of shit knew that he, that I was desperate. And eventually he owed me at that point about $5 million. And he, uh, past contracts you've fulfilled. And mostly for the Afghan contract. Uh, that vast majority of it was for the, what we had made up until that point. Why were you not able to go in to the bank accounts and just transfer yourself money? You didn't have access to it. I mean, I, access to it? I probably could have done that. That would have definitely been very illegal, and I probably would have been arrested for doing that. So I didn't want to do that because I didn't want to commit a crime. Though I did think about it.

I did think about it. Well, okay. I guess if you guys aren't co-owners. Yeah, we're not co-owners. He owned 100% of the company. So, like, that would have been theft. That would have been outright theft. Sure, sure.

So it did cross my mind, but I did, you know, I'm happy I didn't do that. that, yeah. I'm happy I didn't do that. So, um, anyway, uh, so we're negotiating because like I was desperate for money and he knew it. So he owed me about $5 million. Eventually we negotiated it to about 300 grand, which is a tiny fraction of what he owed me. Right. But I figure with 300 grand, I'm good for the next few years. I don't have I could, that'll be enough to get me on my feet, get my new company up and going. I won't have to worry about making rent and supporting my kid. So I'd rather have 300 grand now than maybe five minutes. million in a few years maybe. And he's the kind of guy who will hide all his money overseas

anyway. Which I knew he had overseas bank accounts in the Seychelles Islands. So he was already hiding money overseas. So I knew that, like, I mean, this guy, there's nothing beneath him. So we were, we made an agreement that he would give me 300 grand. And the day that we were going to sign this agreement, I get a call in the morning from the secretary and at the office. I was still on good terms with everybody who worked at the company. I was considered the nine. I was considered the nice boss. He would walk into the office and start screaming at people, I don't pay you guys to fucking talk. Get on the computer and make me some fucking money. He's the kind of guy he was. And so everyone hated him. But they put up with him because they needed the work. And so I got along

well with everybody. So the secretary calls me up and she's like, hey, I just want you to know the feds just raided the office. And they're boxing up all the documents. They told us to step away from our computers immediately. And they kicked us all out of it. of the office and we're not allowed to come back into the office. And I'm like, oh, crap, the jig is up, right? And so I call up Alex, who's my best friend, who's doing the repackaging operation in Albania. And I tell him, hey, Alex, just want you to know, I just heard that the feds raided the office. And he's like, what? Why would the feds raid the office? And I said to him, I don't know, maybe because of the Chinese stuff. And he says, why? I mean, that's just like a commercial

I mean, that's not like illegal. It doesn't violate the embargo. He's, a degree in international relations. So, you know, he was well aware of all this stuff. And he's like, that doesn't violate the embargo. That's not, I mean, maybe that's a commercial dispute. They can get you for breach of contract and sue you, but like that shouldn't be an illegal thing. And I'm like, I don't know, man, I'm just telling you, the feds ready to the office. And he's like, okay, let me, let me sniff around and find out what's going on.

He calls up Danny, which is the guy that Ephraim ended up replacing me with after I quit. Okay. He calls up Danny and he tells, he tells Danny, You know, Danny, I need this particular document because I have an aircraft landing later this afternoon to get the export permit. I need you to get me this document. Knowing that the document is in the office and everyone had been kicked out of the office by the feds, he wanted to see what he would say. And so he hears Alex, Alex told me this later. You know, he hears Danny cover up the mouthpiece of his phone and whispered Ephraim, hey, it's Alex.

He needs this document. What should I tell him? and he hears Ephraim whisper back, oh crap, that document's in the office. We can't get it. Tell him that there was a bomb threat. Yeah, yeah. Tell him there was a bomb threat in the office

and that we all had to leave and we can't get to it, but we'll get it to him later. And so Danny gets back on the phone, he's like, oh, there was a bomb threat. We can't get you that document. And Alex is thinking, why is he lying to me?

Why isn't he telling me the truth? Maybe Ephraim's planning to pin everything on me. Maybe he's going to say, oh, I had no idea about that. this whole repackaging operation. It was all Alex's idea. He wanted to protect his cushy job in Albania, and he did all this without my knowledge. And so Alex is like, I'm not going down for this piece of shit. And he was on the next flight home back to Miami. And so Alex and I both contact attorneys because the feds, the agents were trying to get through to us. They wanted to talk to us.

Right. Okay. And so everyone told us, don't talk to the feds without attorneys, of course. And nobody had been arrested yet. Nobody had been arrested. They just read, they did a search warrant. They executed a search warrant on the office. Was Ephraim at the office at the time of the raid? No, he was not. He was still home. But like all the employees were there. Right.

He would roll into the office late. So he was still home. But the employees were there. And so we hire attorneys and the attorneys talk to the agents, you know, and the agents say, oh, we just want to ask them a few questions, you know. And the attorneys tell us, look, why don't you guys go into your emails. They're like, and go into your emails, your text messages,

and search for any incriminating terms, right? Whatever it is you think you did wrong, search for those terms, like repackaging Chinese ammo, right? See what evidence they have before we make a decision here. So we did that. And it turned out that there was a lot because at first, DeFram said, you know, okay, we're only talking on the phone about this. We can't send any emails, right?

but everyone was in different time zones. And there were a lot of very harsh deadlines with like planes landing and documents and stuff. And eventually it got Ephraim sent an email and then everyone, oh, he's sending an email. So let's all, you know, and then everyone just started talking about. Ralph sent an email, our investor,

with instructions on how to sand off Chinese markings off wooden crates with literal pictures step by step of how to do this. How about this one? Say, I thought it was Korean. Boom, you're out. You know, who, were they going to read it? it anyway? Unfortunately, we said Chinese in the emails. It was all written evidence. So we knew we

were screwed. We knew that they had all the evidence they needed to convict us on this. There was no way we could deny it. How did they find out about it in the first place? Was it the people in Afghanistan, the army, the American military that picked up on it and then let the feds know? So no, it was not the people in Afghanistan. So we thought actually, we thought that it was Costa who, like, told them. The guy who ended up... Right. Yeah.

He's the guy that ended up dead? Yes. Right. And before he died when he was calling around to the papers. Exactly. Maybe he called the FBI as well. Yeah. Yeah.

But it turned out that actually it was one of Ephraim's competitors who really hated him. Told, like, I forgot which organization he told, but he had made some story up. That was not true about, like, Ephraim, like, filing, like, serial numbers off Chinese, AK-47s and selling them and stuff, which was completely untrue. But it was enough for them to open an investigation. And I think, and then, like, Ephraim let his, uh, his, uh, brokers license that he had with the state department lapse because he didn't think he needed it. And so that, all that in combination was enough for the, uh, for the, for the feds to get a search warrant. And so they did a search warrant. And, uh, and so anyway, so I'll, uh, so when they, when they, I, we told our

lawyers about the evidence, they're like, look, if they have that kind of level of evidence, then there's no way you're going to win in court. Right. But again, though, I thought this was not, this was just a commercial issue. This didn't violate the Warsaw Pact. Right. So what illegality, what criminal illegality is there? Right. So that we were wondering about that. So they're, eventually they charged us with fraud, right, as a way to deceive the government. That's what, that's how they charged it. So, but, um, but, We figured, well, the government thinks this is illegal because they did a raid on the office. And we thought it was about the Chinese stuff, you know, right away.

And so we, they, so the, so the, our lawyers tell us, well, you know, if they have rock solid evidence against you, then you really have only one option and that's to cooperate, right? You're going to have to, because if you don't, you're going to go to court, you're going to lose, and then you're screwed, right? Like, are you facing prison time for that kind of fraud? Possibly. And I'll tell you, when they charge us, you know, you know, you know, know, the way they did the deal.

So they told us, look, you want to talk to them because even if you fight in court, you're gonna need like about 300K to pay a good lawyer. Do you have 300K? No, you don't. Okay, well, then your only option is a public defender. And you're gonna be one of 200 cases on their workload. You're gonna be lucky if they remember your name, you know? So of course, this is what the private lawyers are telling me.

They, you know, they, federal, federal defenders are really good. Yeah. It's not like that. I'm sure. Yeah. You know, I, I, I, I, like the state. Right. Yeah, that's, that's, that, I'm sure it's different.

But that's, that's what my private lawyers will tell me. So, you know, of course, they have a vested interest in saying that. Mm-hmm. So both Alex and I, you know, agree to talk to the feds. And, and, um, and they, the way they do it is they, of course, they separate us, they interview us separately. And they tell you, you know, um, you're going to tell us. tell us everything. Don't leave a single detail out. If we think that you've omitted anything on purpose,

then you get zero credit for cooperation, and we're going to tell the judge to go hard on you, you know, for deceiving us. So you better tell us everything. So we told them everything. And at the end of the interview, one of the agents tells me, you know, I'm sure you're probably wondering what we know. And just so you know, when we did the raid on the office, we found a to-do list on Ephraim's desk in his handwriting. And one of the items in the to-do list is repackaged Chinese ammo. Oh, what a fucking dumbass. Yeah. Oh, not only is he scandalous and amoral. He's fucking stupid. Yeah. Well, he's very smart in certain ways. I've always said he's an idiot savant. He's very smart in some ways and very stupid in other ways. He was, you know, so yeah. You know,

So they're like, yeah, we knew about it. But of course... Was that part in the movie? No, they didn't put that in. I know there were so many great parts they left out of the movie. Right. There's so many... That is such a funny...

I can't believe they would leave that out, especially the Tom Phillips movie. That's such an ironic twist. Like, it's not... It was nothing super deep and intricate. It was on Ephron's to do list. Yeah, exactly. Yeah.

No, they left... I mean, they had to squeeze two years of time into like a 90 years. minutes. So they left out a lot. But, but yeah, but they also added some things in, like the whole, you know, triangle of death thing because they need more action. Hollywood needs to fit a particular formula. Another thing they added in was the whole drama between me and my girlfriend, you know, where like I lied to her about being an arms dealer and because they needed some like relationship

drama for the girls in the audience. Yeah. And my, my girlfriend knew about it the whole time. She had no problem with it whatsoever. She said to me, as long as you're bringing in the money, It's okay. I love that. That's a good woman. That's all she cared. That's all she cared about. But of course, they had to, you know, have relationship drama for the film.

Right. Right. So, yeah. So they, so they, uh, after the interview, uh, we didn't hear back from the feds. Oh, the feds told us, look, you guys co-op, you know, me and Alex, you guys cooperate. You're not, you guys haven't even made any money from this. You're not the target of the investigation. Ephraim's the target.

We really only care about him. We're going to do our best not to charge you, right? So you won't, you won't, you won't be indicted. And we're like, great, because we can't afford to be indicted. Yeah. You know. And then six months pass. What are you doing that period?

That interim? So I, you know, I thought, oh, maybe they're just going to let this go. So I continued with my government contracting business on bidding on contracts. With weapons still. Yeah, yeah. Okay. With weapons. And how many?

And I got all the, I got all the licenses and everything. And are you fulfilling them? Are you getting contracts? Yeah. So I got like some small contracts. And then I built some past performance. and then I was bidding on this pretty large contract. I mean, for me, it was large.

I was actually set to make about a million dollars in profit from this. It was going to be by far my biggest contract. Are most of these going to Iraq now, or is it Afghanistan that's still the big? Most of them are in Iraq because Afghanistan, they had, they actually wanted to deal with just a single contractor. And that was the one that A.E. White won. In Iraq, they split it amongst a lot of people. And they realized that was a mistake. stake and that's why they made it a single contract for Iraq for Afghanistan.

I see. So yes, I was about to win a, by far my biggest contract, one that was, my first really big contract that was going to like set me up. And I was set to make about a million dollars in profit from it. It was for like anti-aircraft ammo. And of course, I needed financing from the bank to do this because I didn't have the money to finance it all myself. I had an investor, but he was only willing to finance it.

finance an aircraft load, not like, you know, I think it was like seven aircraft loads for this particular contract. And so I got a factoring agreement from Wells Fargo, just like AEY, because I already had the connections with the bank to. And the government, the army informed me they were going to do the audit process. And they were going to start the auto process, which meant I was in the running. You know, I was about to win this contract as long as I passed these audits. And one of the audits was the financial audit, just like with AEY went through. And a big component of the financial audit was the factoring agreement. The day they were going to start the financial audit, the New York Times finally publishes their investigative article.

And it's the front page of the New York Times is a picture of a rusty-looking ammunition. And next to it is my mugshot and Ephraim's mugshot. We did not look great. That's wild. We looked very criminal. And it was next to this rusty ammo. and they were implying that all the ammo we delivered was this like rusty, low-quality ammo,

which was not true. The ammo they had on the cover of the New York Times was not even the Chinese stuff. It was Bulgarian ammo. That Ephraim had gotten, he had gotten this ammo like about a tiny amount, like 30,000 rounds compared to 150 million. That's a tiny amount.

And he had gotten an offer for this ammo, and it was too small of an amount to make it worthwhile to go over there to inspect. but it was such a cheap price that he figured that it would be worth to just roll the dice because we had some extra room on the aircraft because we were doing a grenade delivery and we had some extra room on the aircraft. So he's like, you know, I'll pay for it. Get it delivered.

If it's good, we'll make a massive profit margin. If it's not so good, we won't, you know, I'm not paying that much for it anyway. It turned out to be, not surprisingly, total garbage. Corroated. Where was it from? It was from Bulgaria. Okay. Yeah.

It was Bulgarian ammo. It was not, none of the Chinese issues. But it was corroded. quality was garbage. And the receiving officer in Kabul took one look at and he's like, I'm not paying for this crap. I'm not issuing this to soldiers. Denied. And so we didn't get paid for it. But they didn't have any ammunition recycling facilities, disposal facilities in Afghanistan. And they didn't want to pay for to ship it back. So they just moved it to the side of the airport and let it, left it there to rot in the sun and the rain in the elements to continue to corrode.

A couple months later, the New York Times sent an investigative journalist to Afghanistan. And that journalist starts asking around about AEY, Inc. And someone said, oh, yeah, that's some of the stuff they delivered right there. And so they got pictures of that stuff. And that's what ends up on the front page of the New York Times. And the way they wrote the article, they heavily implied that all the stuff we were delivering was of similar quality, which was not true. So it wasn't slandering you guys as criminals or delivering Chinese? No, they did say that we were delivering Chinese source in the article, which they said was potentially illegal.

It was, you know, it was not clear whether. it was illegal or not, but they said potentially illegal. So this article, well, right away, I get a call from Wells Fargo. And they're like, hey, we just saw this New York Times article about you. And we're going to, unfortunately, I have to withdraw our factory agreement. And so that my entire, the contract, lost that contract. And two days later, this created a massive, like, political scandal. Congress had hearings.

They had on the floor of, there's still YouTube videos out there with, like, a senator on the floor of Congress with like one of those easels where they have the big papers and like there's a picture of me and of Ephraim and of the ammo like all taken from the New York Times like and they're saying God the Bush administration completely you know uh fuck this up by giving a bunch of you know kids this contract and look at the stuff they're delivering and oh right because it was a scandal back at the time like look at these our soldiers are ill-equipped yeah and they have old faulty allies but yeah but Because it wasn't going to American soldiers. It was going to Afghani soldiers.

But they were our allies. They were fighting against the Taliban. And so they were saying they're endangering our allies by providing low-quality ammo. And so it became a massive political scandal. The New York Times article got into the Associated Press Network and was reprinted by every major newspaper in the world. I had a Google alert for my name. And I saw my name pop up in every major city's newspaper. around like 300 papers, like literally 300 papers, reprinted. This is worldwide news.

And two days later, the Army, the U.S. Army puts out a statement saying we are shocked and appalled, you know, I'm paraphrasing here, shocked and appalled, we had no idea what was going on. We're canceling this contract. Turned out they actually knew about it the whole time because after the raid, the Justice Department, we found this out later because Ralph went to trial and so there was discovery. And so we got the government's internal emails through the trial process. And the Justice Department had sent an email to the army informing them that this stuff was Chinese. And the army responded back by emails saying, this ammo is critical to the mission. And if you want us to stop taking delivery on it, we're going to need a letter from the Attorney General

of the United States instructing us to stop deliveries. And that letter never came. Yeah. Shocking. They kept on taking delivery. for six months after, and they kept on paying for it, each aircraft, they kept paying for it, for six months after they found out. So then how can you get in trouble for that? So a week later, after the, after the article, you know, the Justice Department decides to charge us, not coincidentally, right? And they tell Alex and me, you know, hey, guys, you know, we know we told you that we wouldn't charge you. But unfortunately, we, you guys were just too involved in the whole scheme. We can't charge Effron without charging you. We're very sorry, but that's how it has to be. We're going to tell

the judge to go easy on you. This is politics, folks. Yeah, exactly. Exactly. And so the way they charged us was they said, you guys delivered, with each aircraft of this Chinese ammo, you delivered, you included a certificate of conformance. It's a document that specifies the type of ammo, the quantity of ammo, the year it was manufactured and most crucially the place of origin. And you guys put place of origin Albania. And you knew that the true place of origin was China. Not only did you know, you had this whole repackaging operation to hide it. And so each document that you submitted to the government is an act of fraud. And you delivered 71 aircraft loads. So that's 71 acts of fraud and you can get up to five years in prison for each one. So, but that's if you fight us. So you can

get 355 years if you take this to court. But if you plead guilty, we'll combine it into one act of fraud. So the most you can get is five years in a worst case scenario. The judge makes the decisions, you know, it's not us. But we'll tell the judge to go give you the low end of the guidelines because you're cooperating and you pled guilty. So as long as you plead guilty, we'll tell the judge to give you the low end of the guidance. Maybe you'll get a year. Maybe you'll get a year. Maybe you, even just probation, right? So what do you want to do? You want to get 355 years? You really want to dance? Yeah, exactly, and spent 300K. Do you have that 300K? Yeah. Or do you want to plead guilty and maybe get just probation? So obviously there's not really much of a choice. So Alex and I both

pled guilty immediately. Ephraim fought him for like another like few months, but then realized that the evidence was overwhelming. He didn't really have a chance of winning. So he ended up pleading guilty. Ralph decided to take it to court. He thought he could prove that he was unaware of the whole scheme. And that whole thing stretched because they didn't want to sentence us until his trial was over because they wanted to use us as witnesses in his trial and they wanted to hold the threat of the sentencing as leverage against us to force us to testify in his trial. Now one second, they told you when they first questioned you and Alex that their target was

Ephraim. So why was he the target? Because he owned the company. It was his company. Yes, it was his company. It was his money. He was making the decision. But they figured that they couldn't charge Ephraim without charging me, Alex, and Ralph,

because we were kind of the original crew. I see. Now, there were other people who, like Danny, who took over after me, was very well aware of the entire thing. And there's plenty of written evidence that he cooperated with the whole scheme. But they didn't need to charge, because Danny came afterward, they didn't need to use him in court to show how the whole scheme was set up. So they decided not to charge him. Was Ephraim charged with like a higher crime, but like a higher level?

Or did you all have the same charges? We all, and facing the same amount of time. So we were all facing the same charges. However, when it comes to sentencing in the federal system, they have, they use a point system, right? And you get extra points for being the ringleader. Right. For being the kingpin. So he would have gotten, he would have been facing a higher potential sentence than the rest of us.

And did you inform on him or did you testify or cooperate with the government and to that he was the ringleader? I mean, I didn't need to tell them. He owned the company. Everything was in the emails. Like nobody, they didn't need my testimony for that. But, I mean, once you cooperate, you tell them everything. You know, I mean, that's kind of how it goes. There's no half cooperation.

And by the way, this is, I talked, Matt Cox talks about this. I was on his podcast recently. Matt Cox, he was in prison with Ephraim, and he wrote Ephraim's memoir. Interesting story there. Yeah, and now he's out of prison and he runs his own podcast called Inside True Crime.

So Matt told me that something like... Ephraim got ass-raped. I knew it. Not that I know of, but no, no. But, no, he said something like, I think they did a study that something like above 90% of people who are indicted cooperate above 90%. But 100% of the people who cooperate lie about it.

Yeah, for sure, for sure. So, yeah, because obviously that people aren't treated that well in prison who are considered to be cooperators with the government, but everyone does it. Everyone does it. So Ralph, the investor, is the only one that took it to trial. Yeah, so he's the only one who took it to trial. Ephraim pled guilty. once you plead guilty you cooperate

that's just how it goes so after him cooperated as well and Ralph decides to take it to trial they don't want to sentence us until Ralph's trial is over and Ralph his first trial was a hung jury so they had to do the one one juror

didn't want to convict them it has to be unanimous right so they had to do the whole trial again in the second trial he got convicted and he got sentenced to four years Ralph. Ephraim probably would have gotten a relatively low sentence. But once we pled guilty, the government said, okay, well, part of the plea agreement,

you can't commit any more crimes, right? Obviously, because how are you going to like, you know, how are we going to tell the judge that you're, you know, you feel bad about this and you're a reformed citizen if you commit another crime? And they told us, you have to get out of the arms business. You can't be in the arms business. So I had to shut down my company. I couldn't, you know, I had to give all that up. Wasn't meant to be, it sounds like.

You know, it was kept on almost making millions, but not quite. Always managed to, yeah, just at the last second, you know, both good and bad things. I mean, I've managed to skate out of a very bad situation at the last second and also out of very good situations the last second too. So it goes both ways. It's called divine intervention. Yes, I guess you could say that. And I think your parents would agree that God did not want this for you. They definitely would believe so.

Absolutely. So now if it had happened, they would have said, oh, God is teaching you a lesson. So either way, God is God, right? So what were your sentences? So, yeah. So Ephraim was probably, he pled guilty. So his 71 counts also got combined into one.

And he probably would have gotten a low sentence, I imagine. But he just couldn't stay out of the arms business. And so he had his late. his latest lackey, which, you know, he had already screwed over Danny and replaced Danny. I think he screwed over the guy after Danny and then he had a new one. And so the new guy, he had that guy start his own company and started, he started doing business under his lackey's company's name. Right. But Ephraim's a real control freak. So he couldn't let his lackey do the negotiations. Whenever it came down to negotiating, he insisted on getting on the phone himself.

He was trying to negotiate some deal with a company. like an arms company in like central Florida. And he got on the phone with the owner of the company. The guy realizes who he is and Googles him and figures, man, this guy's a convicted felon. He's trying to do an arms deal with me. He's probably trying to entrap me into something to get his own sentence reduced. So he calls up the ATF and alcohol, tobacco firearms administration.

And he tells them, hey, I've got this convicted arms dealer trying to do an arms deal with me. What should I do? ATF tells the guy, why don't you introduce one of our undercover agents as your business partner? The guy introduces the undercover ATF agent to Ephraim over the phone. ATF says, the agent says, you know, I'm the kind of guy who needs to look you in the eye and shake your hand to close a deal. So why don't you come up to Orlando and we'll close this deal? and knowing that Ephraim can't leave the Southern District of Florida because he's out on Bond, awaiting sentencing.

Ephraim says, yeah, yeah, I totally get that. I'm that kind of guy too, you know? So he drives up, meets the undercover agent, undercover agent pops the hood of his car, takes out like a handgun. He's like, check this out. I've got the latest H.K. handgun on the market. I know you're into guns, so like, you know, check this out.

Ephraim looks at the gun and he's like, oh, yeah, I heard about that thing. Let me see that thing. I've heard, you know, he picks up the gun. He's like, let's go pop off a few rounds at the range, you know? I mean, what can I say? Once a gun runner? Always a gun runner.

Am I right? Like that corny? Like a bad movie script. He loved talking like that. Wow. Yeah, I'm not making that up. That's actually a fucking dork. He called his memoir, once a gun runner.

Man. And the agent. True asshole. They don't make guys like that anymore. Thank God. Thank God I don't believe in. the agent slams the cuffs on his wrist and says you're a felon in possession of a firearm

you can get up to 10 years for that even if he hadn't been sentenced though I don't know so because he pled guilty once you plead guilty you're now officially a felon even before you get sentencing you're on paper you're on paper a felon so even before sentencing so he is officially a felon in possession of a firearm which you can get up to 10 years

and of course he violated the term of his bond, so they didn't give him a new one. So he had to stay for like a year in county jail, which is no picnic. And eventually he got, he could have gotten 15 years total. He could have gotten 10 years for the gun charge, five years for the fraud charge. He hired the best lawyers in Miami. He spent a couple million dollars on him. So they hadn't found his money.

I was going to ask, that was going to be my next question. So he had, they did freeze his bank accounts. His American bank accounts. His American bank accounts. They did not find his overseas bank accounts as far as I know. but and they sentenced him. He hired the best lawyers. They negotiated it down to four years in prison.

Total. In total. And they only find him like 350 grand. He got to keep the rest of the money. And the reason for that is, the reason for that is, is because in fraud cases, restitution is based,

you know, when you have to pay back the victim, it's based on how much the victim lost. And the army didn't really lose anything. They got everything they paid for. They saved many millions of dollars by buying this stuff. So they weren't really, the only loss they could claim was the cost of taking the contract away from us and rebidding it out. And they estimated that to be about like 350K. Right.

So you guys fulfilled almost the whole $300 million. No, not even close. We actually only ended up fulfilling $67 million out of that. So Ephraim probably made in the neighborhood of about like $15 to $20 million in profit. from this contract, about 15 probably. And just shave off 350K and four years of his life. Yeah. So he got out with money.

He got out with money. When did he get out? What year did this all go down? So he got sentenced, we both got sentenced in 2011. Okay. So he got out in about 2015, 2016-ish. And you and Alex did no time? We did no time.

We got, I got sentenced to seven months of house arrest and Alex got five months of house arrest. Wow. Yeah. And what were your parents thinking? As this all went down. They were thinking he should have stayed in yeshiva. And, you know, which is the Jewish school, he should have not gone off the path. Were they worried?

Of course they were worried. Yeah, they were very supportive. Not supportive to the point where they would mortgage their house to pay for my legal bills. So I had to pay my own legal bills, but they were very supportive emotionally and socially. You know, they were there. I took it surprisingly will. surprisingly well considering. So yeah, I mean, I had to, I pled guilty.

And pleading guilty cost me 30 grand. How so? To pay the lawyer to negotiate. Yeah. You know, because you can't negotiate directly with the feds because they'll fuck you, you know? So even pleading guilty cost me 30 grand. And that was the last money I had left. So I was completely broke.

You were broke? I was completely broke. But I avoided years in prison and that was worth every penny. Yeah. How long were you on probation for? Seven months. after house arrest. Oh, that's it. That's it. Okay. So you're a pretty free man. Not far after, not long after. Exactly. Okay, great. And how long did it take you? We're going to switch over to the

Patreon now because I want to talk about a war dogs academy. And, you know, I really want to go into detail about how to fulfill government contracts. I think it's a great business. I always look for opportunities here to teach our audience how to go be entrepreneurs. And this is like, to me, it's not easy, but it's low-hanging fruit. Yeah, absolutely. Almost anybody can do it. Almost anybody can do it. Wardogsacademy.com, check it out. So, yeah, so the way Wardogs Academy happened was ever since the movie came out, which was 2016.

Yeah. 2016. Ever since the movie came out, I've had literally hundreds, if not over a thousand people contact me through social media, like on Instagram and whatever, to like asking me to teach them how to do government contracts. begging me in some cases to teach them how to do government contracting. And I was banned from doing government contracting since 2008 until I just recently got off the banned list. Okay. So I'm not banned anymore, but because I was banned, I wasn't doing it. And so I thought, well, you know, I mean, yeah, I know a lot about it. And I was successful in a way while I was doing it. But maybe they changed some things. You know, my might, my, my,

industry knowledge isn't completely up to date right now. And anyway, I have all these other businesses, singular sound, insta floss that I'm running and that are doing very well. And so I don't want to spend my time on this. About a year ago, I had a guy named Logan contact me through Instagram. And he was very different than everyone else. He said, you know, I just want you to know that about six years ago, my partner James and I, we were 21 years old. And we were completely broke picking produce on a farm and just to make some money. And the farm, it was back-breaking labor in the heat. And the farm had a movie night. And one of the movies they showed during movie night was Gordogs. And we thought to ourselves, man, these guys are our age. Like,

if they could do it, why can't we do it? And they became obsessed. They started teaching themselves everything about government contracting. And they tried to bid on a whole bunch of different things. Eventually, they landed like a small laundry services contract of all things. They built like a niche in the laundry services. They got bigger and bigger contracts. And now, six years later, they have a multimillion dollar business providing laundry services to the federal government all over the world. They're flying to Europe, to go to, you know, meet with like their people in Germany.

They have big contracts all over. And they have a multimillion dollar business. They went from being completely broke to having a multimillion dollar business. And he's like, and it was all because we were. inspired by war dogs. So we just wanted to say thank you, you know? And I was like super impressed. I was like, wow, I mean, you guys taught it to yourself. I didn't teach myself. I mean, I learned from Ephraim and Ephraim learned from his uncle, you know. It's not an easy thing to learn. It's, it can, you can learn it yourself, but it's complicated. And so I thought, you know, I have a lot

of people who want to learn this thing. Why don't I, I told them, I'm like, why don't we make like an online course where, you know, you guys are completely up to date about your, you have active government contracts now. You're currently bidding on new ones. And they thought it was a great idea because they're, you know, very big war dogs fans. So they're like, we can do this. And so one thing people ask me, well, you know, it's so profitable. Why would you want to teach anyone else this?

You're just making competitors for yourself in the space. And what people don't understand is that, first of all, there's about a million businesses who are registered to do business with the federal government. So another few thousand is not going to make a difference. Right. And also the government puts out about 30,000 contracts every single day. Oh my God. 30,000.

It's endless. Yeah. You can't. The government, news flash, the government doesn't stop spending money. There's going to be no pivoting. Yeah, exactly. It's ruining us as a society, but get your money well, it's going out of business sale. Well, I mean, it's a whole other discussion.

That's a whole other discussion. Yeah. But yeah, they are the ones who print the money. Yeah. So they're never going to run out of it. They're never going to go bankrupt. If they do, then we're all in trouble anyway. You know, we're all screwed.

Except for the people who own crypto, of course. That's right. So buy your Bitcoin. But, yeah, so they put out 30,000 contracts every single day, which is way more than you could even read, let alone work on. So competition is not for everyone. There's way more than enough for everyone. And everyone usually tends to specialize in a niche.

And there's a million different niches. I mean, they buy every. They're the single biggest customer on the planet by far, by far. I mean, they spend $6.7 trillion with a T every year. The Pentagon's budget alone is $800 billion. Yeah. You know, I mean, it's insane. The amount of money.

Our $300 million contract was a drop in the bucket for the government. Literally a drop in the bucket. That's bigger than most. The $6.7 trillion, I mean, that's almost like a quarter of the global GDP. Yeah. That's insane. Yeah. Yeah.

So go out and get that. It's enormous. So, yeah, I mean, the contracts are endless. And the great thing about dealing with the government is that, well, first of all, there's never-ending business. It's always going to be. But even in, like, in bad times, like when the economy is doing really bad, that's when the government rants up their spending.

Exactly. Like during COVID, they spend extra to get the economy going again, which means that bad economic times are actually good for government contractors. So it's a great business to be in. It's recession proof. It's recession proof. So tell us about this academy and where people can find it. So wardogsacademy.com is where people can find it.

And we built it with the idea that people don't know anything, right? So someone who's never even been in business before wants to get into a business for themselves. We go from the very basics of how to file, you know, how to start a company, what corporate structure you could have. How to register it with the federal government. How to identify potential solicitations on the government website that you could potentially win. How to apply for various programs within the government that they have to give yourself an extra edge in the possibility of winning various contracts. Like, for example, if you're if you have like if you're a veteran, you get like special considerations.

If you're disabled, you get special consideration. Women own businesses. If you live in certain areas of the country that are considered economically disadvantaged. You get special considerations. There's a lot of different programs that you could apply to get to get an edge on the competition. And so we go through all that. We go through how to find suppliers, how to find how to find logistics companies, things to watch out for mistakes to avoid. And the thing that we're most excited about as far as adding value to the course is that we realized when we were building this thing, that one of the biggest challenges, besides winning contracts, of course,

which is a challenge, but besides winning contracts, one of the biggest challenges for a brand new government contractor is financing. You know, Ephraim had Ralph to finance him, but he was very lucky. He found Ralph, right? So even if you win a contract, if you can't finance it, you can't deliver. Right. So if you don't know any Jewish people, it's going to be hard. Ralph is actually Mormon, which is funny. Yeah. So they're the Jews of the, uh, of the Midwest. That's right. That's right. The Jews of Utah. We have a lot of similarities with the Mormons. So yeah, in the movie, Ralph is a Jewish laundromat owner. In reality, he's a Mormon machine gun factory owner, which is a little more congruent, but yeah, but they wanted to go

to even into the whole Jewish thing in the movie. But yeah, so, so we realized. So we have a network of investors who finance government contractors that we make available to our students as well. holler at me. I might come in on that end. Yeah. No, it's, it's a great investment for investors because you know the government's going to pay their bills. Okay, great. So if you got cash and you want to come in on that end, you can also talk with war dogs. That's right. Okay, this is terrific, man. This is awesome. So listen, we're going to switch over to the Patreon and get a little into more details about how contracts are fulfilled, et cetera. But David Packhouse, thank you so much, man. I've really been looking forward to this interview.

and it delivered wardogsacademy.com and we will see you guys over on Patreon. I just want to give one shout out to my two other businesses. SingularSound.com for musicians out there who want the coolest products. We make very advanced guitar pedals like the Beat Buddy

and the world's most advanced looper, the Aerosloop studio. My other business, Instafloss, which is the world's first device that flosses all your teeth for you in 10 seconds. So check that out. Instafloss.com

like Instagram, but flossing, Insta floss. Amazing. Yeah, thank you. And, of course, Wardogs Academy.com. Yeah, yeah. Go clean your teeth, you dirty motherfuckers. All right, we'll see you next week. Thanks, David.

My pleasure.