The Iced Coffee Hour - REAL “War Dogs” Arms Dealer Exposes INSANE Government Corruption, Fraud, & National Coverups

Episode Date: March 24, 2024

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The federal government's budget is $6.7 trillion. They're buying everything under the sun. Bullets and tanks and nuclear bombs and fighter jets. And they're buying literally everything. And I'm like, we won the fucking contract. He's like, yeah, mother-f-un. Ephraim was just being Ephraim. All that mattered was the bottom line.

It didn't matter who got in the way, who he trampled over, who got screwed. I realized that I might be facing a lifetime in prison. I seriously thought about killing him. David Packhouse, thank you so much for coming on the iced coffee hour. I am obsessed with your story. I've seen the movie. like several times. I absolutely love it. We're so honored to have you here. Well, thank you. I'm honored to be here. So you're an international arms dealer, or you were an international arms dealer.

It was. And I saw on another podcast, someone called you a warlord. Yeah. Arms dealers get a bad rap because they sometimes supply warlords. I never did that. I supplied the U.S. government. So anything that was done with the arms that I supplied, you could blame the U.S. government for that. Well, the Rolling Stone Mag called you a merchant of death. Right. I mean, we were supplying weapons and ammunition to the federal government, who was supplying it to the Afghanis and the Iraqis, and, you know, it's military hardware.

It's intended for one thing. So what type of kid grows up to be an international arms dealer? Well, it was never my intention growing up to be an international arms dealer. That was not what I got into. It wasn't something I intended to do. I just kind of fell into it because a friend of mine, Ephraim DeVerole. famously got into it and kind of took me along to the ride. What were a few of your first jobs?

Were you always interested in business or making money? My first job, I guess, I could say. I had when I was six years old. My dad, I was living in Israel at the time, and we lived in this apartment building that didn't have an elevator, it didn't have a garbage shoe. And so my mom was asking me and my older sister

to take out the treasurer. and we had to like take it down the stairs and take it to the dumpster on the corner. And we were complaining. We didn't want to take out the trash. And my dad comes and he's like, you know, why are you guys complaining? And we're like, we don't want to take out the trash. It's too much work. And he says, well, you know, you guys are looking at this all wrong.

You know, you're thinking that this is a big, like, hassle, but really it's a big opportunity. And we're like, what are you talking about? He says, well, think about it. All the neighbors, they don't want to take their trash out too. So you can go to all the neighbors and offer. a service. You'll take out their trash. You don't have to do it every day because you don't have a full trash bag every day. Take it out every other day. And you could charge, I don't know, maybe a shekel a week that comes out to about a quarter a week. And so we thought, wow, that's a great

idea. So we went to all the neighbors and we offered our service and we signed up about eight neighbors. And after the first week, we told our dad, you know, this is way too much work because we had, we were like little. So we had our mother's cart that was on wheels and we'd fill it up with trash bags and go kachunk, kachunk, kachunk down the stairs and then take it to the dumpster on the corner and then we have to heave it up over into the dumpster. And we told our dad, this is way too much work. And he said, well, would it, you know, we said we didn't want to do it anymore. And he said, well, would you want to do it if you're getting paid twice as much money?

And we said, well, twice as much money. Maybe that's worth it. Okay, twice as much money. We do it. He said, well, then just tell the neighbors that you raise the price. And, you know, now it's two shekels a week. And we said, but we can't do that. We just told them a week ago that it's one shekel.

And he said, well, if you don't raise the price, you're going to quit anyway, right? So at least give them the chance to pay what you need to do the service. And so we went to all the neighbors and we told them. And almost all of them were like, yeah, no problem. Two shekels is like 50 cents a week. And one neighbor quit. And from then on, we saw their daughter take out the trash. She was around our age.

We'd never seen their daughter take out the trash before, but I guess they figured, you know. They got used to that luxury. Yeah. You ever wish you did three shekels? You know, you always wish that you charged more, right? Because you don't know how high you could have gone before you start losing the customers, right?

But I'm sure we probably could have even done four. And then you could always work down. Yeah, that's true. You have one person a deal. That's true. Especially if it's a new service that no one's done before. they don't know what a normal price is, right? So it's pretty much you're setting the expectation.

So you always want to set it high. And then if people, if you don't get the customers that you want, then you could go down and see if it's a pricing issue. How did your dad come up with this idea? Was he just like a business guy at heart? He was a rabbi. So it wasn't like he was a business guy, like looking for every opportunity. I think he was just trying to inspire us to stop complaining and do the chores that our mother was asking.

At that age, though, what importance did you have with, religion was your father very insistent that you follow the same path that he did? Yeah, well, my dad was a Orthodox rabbi. So for people who don't know, that's a very intense form of the Jewish religion. And so, yeah, I mean, I grew up like that. I went to an all-boys school, didn't talk to a girl who wasn't related to me until I was 17. It was a huge culture.

You didn't talk to until you were 17. What about like out in public? like grocery store. It's very, the Orthodox community is very insular. So you don't really associate with people who are not Orthodox Jews. How was that then talking to your first girl at 17? Because I can imagine that's got to be like the most terrifying,

earth-shattering thing like. It really was. What was the circumstance for you talking to? I'll tell you. I'll remember it forever. So I was sent to, so when I, at the end of,

at the end of 10th grade, I was asked politely by the head of the school, the private Jewish Orthodox school that I was going to, to not come back next year. And the reason was that they didn't feel like I wanted to be there. I didn't want to be religious. And they were right. I didn't want to be there. I would fall asleep during prayers. You know, I didn't take my Bible studies seriously.

So they were like, this guy doesn't want to be here. And they were totally right. So my parents sent me to the next best option, which was a school called Hebrew Academy in Miami Beach. And it's also an Orthodox school, but it's a modern Orthodox school, which is a, there's different sects. There's the ultra-Orthodox, which are the ones with the long curls, the Hasidim. And then there's the modern Orthodox. My parents were in the middle. So I went to an all-boys school.

We didn't have a TV at home. Of course, we kept all the commandments, the Sabbath and everything. But the modern Orthodox, they send their kids to, they have co-ed school. So it's still private. It's still a study Bible, but it's a much shorter school day. and there are girls in the class, right? So my parents sent me to that school. I remember my first day in class.

I was sitting in class, and this really cute blonde girl was in front of me. She was facing forward, and she, like, turns around. She's like, oh, you're David, the rabbi's son, right? And, like, I tried to say something, but, like, my voice caught in my throat. And then, like, my face, like, turned white. And then she, like, looked at me,

and she, like, kind of, like, turned around, started, like, whispering to her friends. And then my face turned red. It was the most embarrassing thing ever. It was really, um, Was that seen as a positive to be like, oh, yeah, it's the rabbi son. Like, it's almost like a status thing. It is a big deal.

Yeah, yeah. It was, my dad was a pretty well-known rabbi in the community. So, yeah. But then how did you then, like, throughout the rest of your life, did you notice that you, like, kind of suffered in that aspect of your life because you never really got acclimated to that? For years. So it took, like, years to finally make up for that.

It took years. Yeah. Like, I probably didn't get comfortable talking to girls, probably until, like, my, early to mid-20s. I've said this time and time again, the less money your business spends, the more money you get to keep. But with higher expenses on everything,

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Again, netseweet.com slash iced, netseweet.com slash iced with the link down below in the description. Thank you so much. And now let's get back to the podcast. What was it about religion that didn't appeal to you? The way Orthodox Jews practice Judaism is that they ritualize everything. So there's a ritual and a rule for everything. So when you wake up in the morning, before you open your eyes, you're supposed to think, thank you God for waking me up, right?

And then you go to the bathroom. And once you, after you use the bathroom, you're supposed to wash your hands, but you can't just wash it normally, right? You have to fill up this, like, big cup, this like mug kind of thing. And you have to do one, two, one, two, one, two, like that. Then you, after you leave the bathroom, you have to say a prayer to God thanking him for letting you go to the bathroom. And then before you eat anything, you have to say a prayer before you eat it. And depending on what you're eating, it's a different prayer. It's a specific prayer.

It's not like, you know, with Christianity, you close your eyes. just speak to God or whatever. No, it's a specific prayer that you have to say in a specific way. And so, and then you have to go to synagogue three times a day and read that specific reading. Like, you stand up for this part. You sit down for that part. You say, you know, the leader of the prayer says this. You say that. It's very ritualized, right? It's kind of like, it felt to me like you were a bit of an automaton, right? And there's people who find spirituality in it, and I'm not saying that you can't, but I didn't, right? To me, it was just everything was wrote. It was very, I felt very robotic and very constricted.

And when was the moment that you decided that religion was not for you? So I realized, after taking a general anthropology course, that either all of science is wrong, right? And I'm not just talking about just one branch of science. I'm not talking about just like chemistry or archaeology or linguists. I'm saying like genetics, like everything has to be wrong. Or the Bible has some things in it that are not correct. Do you feel like religion is better or worse for society overall?

That's a great question. Very hard to know overall, right? Because there's definitely positive things that religion brings. It teaches people empathy, take care of each other. But then again, it's got a lot of downsides too, because oftentimes that golden rule tends to be applied only to your end group and screw the other people. You know, there are a bunch of heretics, burn them, right?

So it is my belief as a humanist that we can do all the things that religion tells us to do without needing an invisible man in the sky to tell us to do it. I don't need Sky Daddy to tell me that killing and ripping and torturing people is wrong. I just know that. And what were the biggest difference living in Israel versus the United States? Israel is a much more traditional culture. So I think all traditional cultures have a more bigger emphasis on family. I mean, modern American society is kind of like fraying in that sense.

There's a lot, you know, relationships tend to be a lot shorter here. And, I mean, Israel has a huge segment of modern non-religious people, and it's the same thing as over there as in any Western country. But there's a huge segment of religious people there too, and they subscribe more to the traditional lifestyle and that tends to have stronger family units and stronger relationships that tend to last longer not necessarily happily but they but there's a lot of social pressure to to maintain that yeah i would say that uh israelis are notorious for being very aggressive uh in business yeah i i say that i i spent almost a decade working in beverly hills real estate and there were a lot of israelis that were buying Beverly Hills real estate.

And you knew immediately that they were going to negotiate the contracts harder and better than anyone else. And they almost always got their way because they were so savvy in terms of throwing out deals and pitching something. And they got the lowest prices on homes. They're very good at that. So there's a very big haggle culture in Israel, in the Middle East in general. It's not just Israel. But yeah, it's like they expect you to haggle. And it's just part, like, Americans, like, think that haggling is kind of distasteful.

Yeah. Over there, it's considered, like, a, like, an art. Yeah, but I, see, I really, I was attracted to that because I found it so invigorating that everything is negotiable. Whatever they see, and I almost learn from this. Like, whatever you see, you can negotiate it. Yeah. And they would come in and, you know, the home inspector and say, hey, you know, I don't like the price on this, but I'll pay it. but you throw in this too.

Yeah. And they'll get their way. Or they walk in and say, you know, okay, well, if I pay this price, how about you include that? Yeah. Commissions were a big one. It's not, maybe not that way.

We'll pay this one. And like every little detail is negotiable. And, you know, as a kid, I'm seeing this. Like, oh my gosh. Like, everything is negotiable if you ask it. Yeah, that's true. It's interesting. Different cultures have different philosophies

on negotiations. and different strategies as well. I read a book a while back and I forgot the name of it, but they went through like different culture negotiating strategies. Like certain cultures, I think like the Chinese, they try to just wear you down by just like asking for the same thing over and over and over until you give up. So that's like a strategy.

Some people, you know, the Israelis will try to get, you know, like, okay, I'll give you this, but give me that. Yes. So it's like that's a big one. Yeah. Yeah, there's different cultures have different techniques. And I think understanding those, you know, who you're talking to is a huge leg up and negotiate. What do you think the American culture is when it comes to that?

Is it just simply don't ask and complain about it behind people's backs? It seems like that's the culture here. It's like, I'm going to be grudgeonly doing this, but I'm going to talk crap to everybody else about how much I dislike this. Yeah, I think that American culture is more like, like, you. You could negotiate, but pretend like you're not negotiating, right? You know, like it's, it's a, it's considered slightly distasteful to negotiate here. So when you do negotiate, you're trying to like doing it in like as nice of a way as possible or, or thinking of, you know, of reasons why it like makes sense. And it's like, well, we're all just like, you know, coming to, it's like less of a, it's like less confrontational.

Yeah, yeah. They try to keep the confrontation down to a minimum. That's American culture. That's so interesting. What other businesses did you do before eventually going into defense? After I came back from Israel and started college, I realized I needed to make money. And so I bought a, at the time, digital cameras were getting really big, right? This is a little while back.

What year was this? This is like 2002. Oh, yeah. I think that's when I got my first digital camera. That was a big deal. Yeah, yeah. Huge deal. They were all the rage back then.

There were no smartphones. So that was like the first time you moved beyond film. Yeah. I realized it's one thing to buy a digital camera, but you also need to buy the SD card. And because they came with like these tiny little SD cards, I mean, SD cards that had very low capacity. And so I was, I went online to try to find like a high capacity SD card and they were like ridiculously expensive. And so I kept on searching for a better deal. And then I found people who were doing wholesale.

of SD cards, but I had to buy 100. And I realized that the price difference was big enough, I could sell the rest of the SD cards on eBay. So I bought 100, and I sold them out like that because I had a pretty good price, and then I bought a thousand, and I started selling them, you know, doing pretty well. SD cards were great business because they take up almost no room, very easy to ship. Nowadays, it's all flooded with like counterfeit stuff. So it's, it's, how do you find a wholesaler, though? Alibaba.com is a great way to find, That's how you did it back then? Yes. Well, actually back then it was made in china.com. I don't think Alibaba like existed. Yeah, I don't think it was made in china. Yeah, yeah. I think it was made in china. How do you find made in China. I just Googled it?

You just googled by bulk? Yeah, I just bought like a bias D card cheap. You know. Oh, and that just came up. After like a few pages of. Oh, so you had to do it. Yeah, yeah. I went a few pages deep. Okay. It wasn't just the top click. Right. Yeah. I mean, everyone would find that. So what were the margins like? on that. They were pretty good. They were pretty good. I think I was doing like back then, I'm sure it doesn't apply nowadays, but I think I was making something like between 30 and 40% margins. Wow. And how did you get the money for that first order? Before we go into that, as you're probably aware, we're nerds when it comes to the YouTube algorithm. Like we'll spend years analyzing everything that we do on YouTube, Instagram, Facebook, LinkedIn, Snapchat, TikTok, you name it. And when it comes to what's working right now, The key, I will say, is short-form content.

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I wasn't like making like crazy, crazy money, but I was doing pretty well. And I also went to massage school because I had like an issue in my neck. I'd been in a car crash and I had realized that I needed to learn how to fix myself and that massage therapist make like $75 an hour and all my friends were working minimum wage jobs

and I didn't want to do that. So I realized I could do one massage and make more money in an hour than my friends were making the end. entire day flipping burgers. So I was doing that part-time. I was in college studying chemistry. And that's when I bumped into Ephraim DiVroli, who got me into the whole arms thing. So a couple things. I'm curious on the SD cards, because that's like basically you're the OG drop shipper. Yeah. That's like actually just dropshipping essentially. I mean, I would actually

purchase them and be in possession of them. Oh, okay. So you would actually take them. And then you'd have to ship them out? Yeah, I would have to ship them out. So you sent out how many what Was it a thousand? Yeah, yeah. Manually. Yeah, I hired my younger brother to do the shipping. Oh, would you pay him? I think like five bucks an hour.

Five bucks an hour. That's not too bad. Okay. Eventually, I cut him in on the business and then he did decently. Why don't you just keep doing that? That sounds like that was the most profitable thing you were doing. It's very passive as well. Eventually, I got a shipment of bad SD cards that claimed to be a certain memory capacity

and they really weren't. And then I got stuck with it and the manufacturer was like too bad. I'm not giving you your money back and I'm like well I'm never buying from you again and that kind of like destroy the business why you buy it on an Amex I know yeah well they don't take that

what did you end up to wire them the money what did you end up doing with the memory cards I think we just tossed them out eventually yeah because they were like defective so you go you said back to college and that's where you met EFram so no so I was in college at the time I was doing massage on the SD cards

just to support myself while I was in college. And I met Ephraim, it was at a mutual friend's house. We were both smoking weed. And he came over, I was smoking weed with my friends, and he came over to hang out with them. And then, you know, I hadn't seen him in like a few years because he had been shipped off when he was 16 to his uncle's place. His uncle lives in L.A.

and owned a big pawn shop. So I'll give you a little bit back story about Ephraim. He got caught. So he also went to an Orthodox school. We met when we were in, I think I was, I'm actually four years older than me. And so I was 16, he was 12 when we met. We met in synagogue.

Neither of us liked to pray, so we'd sneak outside during prayers to hang out on the basketball court. I had friends who were like two years younger than me who found him entertaining, so that's kind of how he joined our friend group. He liked to play pranks and stuff like that. What were some of the pranks?

So Orthodox Jews have the men, they have to wear a kipa, right? Which is like the little hat, you know, the little cap on top. And officially you're not allowed to like walk more than four steps without it on. So he would love to sneak up behind like older guys and like steal it from them and like run off. And they would cover their heads and run after him and then beat him up and take it back. and then they would walk away and then he'd steal it again. How is that not seen as like highly disrespectful? It was seen as highly disrespectful, which is why he got beaten up,

but he was completely fearless. So he would just love to do it. You would think that the parents at that point would step in and say, Ephraim, you cannot do that. Well, his parents were busy praying in the synagogue like he was supposed to be. But how do they not see his disobedient child that's also not subscribing to the same religion? Oh, they had issues with him. Disciplinary.

Yeah, yeah. They had issues with him. we're not having. His mother tend to blame all his friends for his, you know, she thought, yeah, yeah, his mother was, that's exactly it. And I think his mother must have blamed me for his weed smoking or something at some point because, yeah, I heard some things, but it doesn't matter. Yeah, so anyway, so he went to an Orthodox Jewish school as well, and, but not mine. It was a different one in Miami, the one other one in Miami. And, um, when he, he went to a Orthodox Jewish school as well, and, and, um, was 16, he got caught smoking weed, and they kicked him out of school for that. And his parents said,

oh, well, you know, if you're not going to take the rules seriously, the rules of school seriously, we're going to show you what real life is all about. We're going to send you off to your uncle to work, right? You're going to join the workforce. And so they sent him off to L.A. His uncle owned a big pawn shop, and one of the things the pawn shop sold was guns, and he got obsessed with guns. He was just like super into it. He loved shooting guns. He loved reading about them. He loved learning. He knew everything about every gun. And started selling the guns in the store. Then he started selling the guns on the gun boards, which is like forums online. And everything under- Pond store inventory he was selling on the gun forums? Yeah, as the pawn stores inventory. And

then he, once he got a real bit of knowledge of the industry, he started finding, good deals to buy guns. And so he would, he'd realize, oh, this particular gun is being sold under market. So he'd buy it and then he'd sell it to someone else. He was 16. How could he do that at 16? He couldn't. He was doing it all under his uncle's name.

And his uncle was in full support of it? Yeah, his uncle, I made a deal with him that he would get a cut. And so. If his parents knew about this, they'd think that their entire plan, their scheme of like sending him there, it's just like, maybe, I mean, yeah, I'm sure they would. wouldn't support him doing anything illegal, but I don't think they knew that what he was doing was illegal. I think they figured, I'm not even completely sure about what the legality of that is. Everything's under his uncle's name and he's just manning the phones and stuff. His uncle's

signing all the paperwork and everything. So it might have even been legal as far as I know. I honestly don't know. But so he worked for his uncle for about two years and during this process, during this time, he, his uncle started bidding on state, local and state, police contracts. So when the government, when the police force wants to buy something, they put out a request for bid, and then whoever wants to supply them with whatever item submits their best offer to them, and then they pick, you know, who's the combination of lowest price and lowest and most reliable supplier and all that. And so he learned the government contracting system from his uncle by doing this. Worked for his uncle for about two years until he was about 18, and then he

claims his uncle screwed him out of like 70 grand. I guess the cut that he was supposed to get. His uncle didn't want to give it to him. His uncle claims that he screwed him out of 70 grand. You know, so I believe him both. His uncle has a terrible reputation in the history as well for screwing people over. So, you know, I don't know who screwed who. It doesn't really matter. But he came back, Ephraim came back to Miami when he was 18 and took over one of his dad's company's AEY, Inc. His dad had incorporated this company, I think, to use as a printing label printing business. But it had been dormant for a few years. He hadn't used it for anything.

So he took over the company structure and registered it with the federal government under his dad's name because he was actually still under 18 when he first came back to Miami. He was like 17, about to turn 18. So everything was under his dad's name. He registered it with the federal government. and started bidding on federal contracts. This was in 2004, so right after the invasion of Iraq. And the Bush administration was privatizing everything.

And so there was a huge amount of money going to support the war in Iraq in general, but a large amount of it was going to small business set-asides. So the Bush administration got in a bunch of scandals because his vice president, Dick Cheney, was the former CEO of Halliburton, which is a huge defense contractor. Halliburton got several multibillion dollar contracts on a no-bid basis, like a sole source award, meaning that they didn't compete for it. They just was given to them a few billion dollars.

And that created, obviously, a bit of a scandal. And so they increased the amount of money to try to counteract that. They increased the amount of money that was set aside for small businesses to say, hey, look, we're not just giving the big boys all the money. We're given all the small guys a piece of the pie too. And so there was a huge amount of money that was for small business set aside, which he obviously qualified because he was a one-man shop. And so he started winning.

He bit it very aggressively, and he was very knowledgeable, and particularly with guns and ammo. And so he started winning these contracts and started making a decent amount of money, worked on his own for about a year, and that's when we bumped into each other. And he asked me, you know, while we were at our mutual friend's house, he was like, hey, you know, what you're doing these days? And I told him about the SD cards. I told him about, you know, I was also actually selling bed sheets and towels at the time.

And so I told him about that, about the bed sheet business, about the SD card business. And he said, well, you know, a lot of the stuff that you're doing is very similar to what I'm doing. Finding suppliers, negotiating prices, arranging logistics, getting import licenses, all that. stuff. But I bet I'm making way more money than you. So maybe you should come work with me. I could use a partner. And you know, you're a smart guy. Trust you. We grew up together. I really could use a partner. And I said, well, how much money you made, right? And he's like, I'm going to tell you, but only to inspire you. I'm not bragging. All right? And he opens up his laptop and he logs into his Bank of America checking account. And he shows me he has $1.8 million in cash just sitting

in his bank. And I was he was 18 years old and I was like holy crap this guy knows how to make money. He knows this business really well. He's making a lot more money than me that's for sure. So I said well you know that's super impressive. I'm in let's let's do this and that's how I got into into doing the government contracting. There's something else here now. Something new.

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Start your free trial today. So that $1.8 million, he made that in one year. Yeah. And was that profit or was that still? That was profit. Wow. Yeah, that was his money. In his first year of doing this.

In his first year of doing business. Yeah. Yeah. That's insane. Yeah. No, it was incredible. Yeah, because he got a, he got someone, he got an investor to fund his contracts. So he was able to just keep the profit without having to roll his money into it.

So how does that business work? Yeah. Could you walk us through how he is able to make $1.8 million in a year doing this? Right. Right. So the way the government works, right, is whenever they want to buy something, they post, on the government website these days it's SAM.gov, Sam.gov, like Uncle Sam. And it's supposed to be a competitive system so that the government gets the best possible price, right?

So let's say they want to buy, you know, 500 M16s. They say, we want to buy 500 M16s. It needs to be delivered to this place at this time. They need to be brand new production or they'll have different requirements depending on the contract or they'll say, you know, it could be, used, but only, but it has to be, you know, this level of quality or whatever, right? And, and then whoever wants to bid on the contract submits their, their best offer, and you have to follow a whole bunch of procedures and requirements and different contracts have different requirements, depending what it is. Like, for example, if it's like under

$100,000, then usually you don't need something, what they call past performance, which is proof that you've done this business before. But if it's more than 100 grand, usually they'll require past performance, meaning you have to prove that you've done this business. So when you're brand new, you have to bid on these smaller contracts and build up a reputation, and then you could build a bid on the larger contracts. So if you win the contract, meaning that they have different criteria that they judge what's the best value to the government, right?

It's not just the price. Sometimes it's just the price, particularly on the small. contracts. They just care about the price. But sometimes it's the quality of the stuff you're offering. It's the delivery time. It's how much past performance you have, how comfortable they are with you as an entity that you're reliable to deliver what you say you're going to deliver. And then they score you, depending on all their different criteria. And they pick the best total value to the government. And once you are awarded the contract, then you have to deliver, right? And And you have to deliver within the time frame that they tell you.

And once you deliver, you get paid usually about 30 days later. They usually have net 30 terms. Different government agencies have different, sometimes have different terms. But by and large, it's net 30. What's the profit margin on like a $100,000 order? So like usually 10%, 20%. So it varies wildly. They keep all the bids a secret so you don't know who you're competing against, right?

But you will see, but they do publish the winning bid. So you can look and see what has this item sold to the government in the past. And then you can kind of get a ballpark, right? Now, depending on what you're bidding, if it's very competitive, then you'll probably want to put a very small profit margin on it in order to increase your chances of winning. But if you know the market really well and you know that there, you don't really have any competitors, then you could put on a huge profit margin. And if you win,

you get that, right? Because the government only, whoever submits a bid, right, that's their options, right? You have to submit the bid. And you have to be licensed. You have to go through all their hoops that you need to do in order to qualify to submit these bids. So there's actually many companies, if not most companies, don't bother to deal with the government because it's just such a hassle to have to jump through all these hoops. You have to get all these registrations, these licenses, follow all their rules, you know, read their like 40-page long solicitation documents and understand what they're saying and, you know, do all that stuff. So a lot of companies don't even want to deal with the government because it's just such a hassle. It's not like

in the private sector. Give me a, you know, a purchase order. I give you an invoice. You pay me. That's it. It's much more complicated. Is corruption the only reason they go and do these bids because it seems easier from the government's perspective just to have a few main suppliers negotiate a low price form that they know in advance and just work with them because then you kind of know what you're getting right so the idea here well first of all the federal government's budget is 6.7 trillion right biggest single customer in the world the defense budget is 800 billion which is larger than most countries entire budgets probably the next five combined or something but the So they're buying everything under the sun.

I mean, they are buying everything from socks to boots to food to laundry services. I mean, like, and bullets and tanks and nuclear bombs and fighter jets. And they're buying literally everything, right? So now, something like a nuclear bomb or a fighter jet, they usually do what they call a sole source contract. You know, if they want to buy an F-35, only Lockheed Martin makes F-35. So they buy it directly from Lockheed Martin. They negotiate a price. Usually it's a cost plus contract, meaning that the government will pay Lockheed Martin,

what it costs them to build it, plus like two or three percent profit margin. That's usually how they do it. Of course, that gives Lockheed Martin an incentive to increase the cost of their product because the higher the cost, the more that margin is worth. Yeah, I'm curious why they would do cost plus profit, because the cost is arbitrary and could be anything. It could tell me, hey, Graham, make me this, your cost plus that, I could just be like, all right, well, I'm going wild on this. And who's to say that they don't cut deals with other people and say, hey, charge me this and give me half back?

And then my cost just went up by double, but I'm getting kickbacks on that. So kickbacks are very, very illegal, right? I know. If you get caught, you'll go to prison. Okay. However, cost overruns are not illegal, right? If they can give a good legitimate reason of why it costs them, right? So much money to do something, then that's reasonable.

And so their incentive in a cost plus contract is to increase the cost of a contract as much as possible because they're agreed upon set percentage of profit. The dollar value will increase with that cost. So for every $100 to cost more, you will make $2 to $3 more. Exactly. Exactly. Now, the reason the government has done this and the reason they have these cost plus contracts at all is because they usually do it for things that have a unknown R&D budget. Right? So, for example, when they're developing the F-35 fighter jet, right, they want, they have all these requirements. It's got to have thrust vector control and really advanced anti-radar, you know, paint coating and really advanced avionics and all these things that have not been developed. Yeah, they need new technologies to go into this thing. And when you're developing a new technology, you have no idea how long it's going to take to develop or what the cost is going to be. So if the Air Force says, we want a plane with these characteristics, Lockheed Martin will say, okay, you know, we can build that, and we think it's going to cost this, and this is how we think we're going to do it.

But because there's so much uncertainty, they do the cost plus, because then they can run into a situation where Lockheed Martin runs out of money, and then their fighter jet is gone. It's not going to happen. Now, that's not to say it's impossible to do a fixed price contract, which is the opposite of the cost plus. SpaceX famously delivered the astronauts to the space station and cargo deliveries to the space station on a fixed price contract, which previously had was all-costs plus. Boeing Starliner is they're doing another fixed price, but they're charging twice as much as SpaceX. So they are now on a fixed price contract, but that's a new thing. Okay. That was like the first time they'd ever done that.

NASA pushed for that to happen because their programs were so infamous for ballooning out of control. But yeah, I mean, that's why I think the cost plus contract originated in World War II when they, you know, were trying to turn the entire industrial base of the country on a war footing. And, you know, they wanted to get like Ford and all the industrial powerhouses to start making military hardware. And they're like, just do it. We'll pay your costs. We'll give you an extra percentage of profit. That's how, you know, because they can, they don't know how much it's going to cost them when they're doing these things. And how does Ephraim teach you how to make money doing this?

So he taught me about how to read the solicitations, what all the terms meant. He knew a lot of kind of the tricks of the trade, so to speak, because he'd been doing it so intensely for the past year. Well, three years, if you count the time he spent with his uncle. And I just dove into it. At first, I was working, he was doing all arms. He was doing all weapons and ammo and stuff because that was a specialty. And the idea was that I would try to expand the business by doing other things. So I focused on fuel at first.

And my first contract that I won with the federal government actually was a contract for 50,000 gallons of propane, delivered to an Air Force base in Wyoming. So how did that exact contract come about? You see it on this website. Yeah. And you think to yourself, okay, this is something I think that I can. could find a supplier of. Yes.

What made that deal stand out as opposed to other deals? Or do you just put offers on every single deal and that was just the one that struck? The reason I picked that deal because it was under $100,000, so we didn't need past performance. So I knew we could qualify to bid on it. It was also propane, which is a very fungible good, right? It's a gallon, you know, propane is the same no matter where you buy it. So it wasn't something that that was hard to find. and it was just something that I thought that I could probably do because it was simple.

So what was the total cost of that? I don't remember the top line cost. I just remember it was under $100,000 and that I made $8,000 in profit from it. You made $8,000 and he made money? And he made also $8,000. We split a $50,50, yeah. So was that your agreement in the beginning? Everything was to be split $50, 50, 50.

Yeah, that was the agreement. It was that I would do all the work, and he would provide the financing as well as the expertise and in the final negotiations. And how many hours went into that one contract? That one actually was a relatively easy contract. If I had to guess, it was probably about like maybe 20, 30 hours of like research and negotiations. Because it wasn't just, I also had to find the delivery company, the logistics company that transports propane and, you know, move it from point A to point B and all that. We have to negotiate.

20 to 30 hours for $16,000 in profit. Yeah, about. It's pretty good. Yeah, it wasn't bad. What was the next deal after that? What was the next few deals generally look like? Right. So I worked on a whole bunch of deals that I didn't win.

I worked on deals. I got real close to winning. I worked on a pretty big deal for SUVs to the State Department in Pakistan. That was like a multi-million dollar deal that we got to like the final stages. So for a big deal, usually what happens is they'll, Like when you're in the final running, they'll like whittle it down to like just a few potential suppliers. And then they'll do what they call an audit, right? Where they look at your like your financial capability, your organizational capabilities,

your past performance, they look into it more deeply. And when they do that audit, you know you're in the final running, right? You're only competing as maybe like two, three other companies potentially when, depending if it's a big deal usually there's like 30, 40 companies bidding on it, depending on the product. Sometimes there's no companies and you're the only one bidding. And if you know that, then you could really make some crazy margins.

But that's why they don't tell you, right? But sometimes they let it slip. If you talk up the contracting officer the right way, sometimes they give you information they shouldn't. But so I was really close to, winning that deal, but it fell through. Worked on some food deals for meals ready to eat MREs, they call it, which is like pre-packaged food for the military that fell through.

The next deal I worked on was for a rare gun parts contract. And this was actually a contract that Ephraim had won, but he didn't want to actually work on delivering because it was for a bunch of spare parts for rare weapon systems. to go to the special forces to train them. Because special forces, they operate all over the world, and they sometimes, they train them to use the resources available in the environment they're in.

And sometimes that means learning to use old weapons, right? And so they need to train them on these old weapons systems. And so Ephraim had bid on this contract, and he bid really big margins on it, because he knew the industry, and he knew that this was going to be a huge pain in the butt to deliver, because it was like 150 different items and like really rare, hard to find stuff.

So he bit a really high margin. And then he won it and he didn't want to do all the work to deliver on it. So he gave it to me to work. And so I spent like a good like month and a half working to track down all the suppliers of these like World War II era like German pistols and Soviet era stuff. And what was the profit on that? I think we were on some part.

It varied a lot. because we'd negotiate in different parts. Some parts, we were making like five times the cost. So, yeah. So like if we were buying it for one, we'd sell it for five. How do you find these suppliers? Are you just going on Google, typing like rare gun parts and just like finding somebody? I would say it's tenaciously searching on Google.

It's not just a casual search, right? So you need to go as many pages deep into the search results as until it stops being relevant. because you're competing against people who are doing the same thing. And really, whoever works harder is going to win, right? So you can find that one supplier who's going to win you that contract, and they may be buried five pages, six pages deep in Google search results, and if you go that far back, you're going to win and your competitors are going to lose. But that's just one way.

So another way is to get references. So when you call up somebody and you ask them for a quote, and they say, oh, I can't supply this. You ask them, well, do you know anyone who can supply it? And sometimes, not always, but sometimes they'll be like, you know, actually for this thing, I think this guy, call that guy up. And sometimes you get really good sources like that that are not in the Google search results. Another way is to go to trade shows like we did with Eurository in Paris and you actually meet people in person who are in the industry. And a lot of times those people don't show up in Google search results either.

So you can get some real competitive advantage by making these connections. I saw there was a lot of posts. So we went on before you got here on the whole Fed business website. And I just typed in for fun ammunition. Yes. And there were 25 results that were posted in the last 48 hours for ammunition. Yeah. How many do you think are posted every minute?

It seems like probably every minute there's like a few postings for something that the government is looking for. As I said, $6.7 trillion. I mean, they are the single biggest customer by far in the world many times over. and they're buying everything. So it's as unlimited as it gets. What's the weirdest thing you've seen a post for? Although really quick, before we go into that, if you run a solo small business like we do,

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because the deadline to backdate your S-Corp to January 1st is coming up on March 31st. And for a limited time, Collective is waiving the onboarding fee when you go to Collective dot com slash ICH and tell them ICH sent you. That's a $199 value for free when you go to Collective.com slash ICH and tell them ICH sent you. Once again, that's collective.com slash ICH. Let them know we sent you. Thank you so much, Collective, for sponsoring this episode and back to the podcast. What's the weirdest thing you've seen a post for? I have seen posts for agricultural products, including manure, things like that. I would say that's so unusual. I would say not weird but interesting.

I've seen posts that that kind of like hint at what's going on behind the scenes that you only make it into the media months later. Like for example, I once saw a request for

security services for Army base in Chad, right? Which is country in Africa. And I never seen Chad in the news. I don't know why they were asking for that. I didn't even know we had a base And then like three months later it came out in the news that there is this whole like anti-terror operation there. And so you kind of get a hint of like the things that the government is doing that don't make it into the media by what they're looking to buy and where they, where they want it to be delivered.

Be a smart place for journalists to look. I would definitely recommend that journalists look there. So where were you at in your life when all of this was going on? You were in, were you in school still? Were you doing this full time? Were you still doing the massage therapy? Right. So while I was working with him, I was still doing my side businesses. Because I wasn't 100% sure if it was for me or if I could hack it or if I was going to succeed in this. It's when we won the big contract, that's when I quit everything. The Afghan? Yeah, the Afghan contract. That's when I quit everything because it was a $300 million contract. And I figured this is going to make me millions of dollars. And so concentrate on this.

What was the relationship that you had with Ephraim looking like at that time? Were you guys, because you were business partners. I'm sure he set very high expectations out of you. Did that ever cause conflict in the relationship? Did you guys feel like actual friends or was it strictly like, you know, business partners? It was both. He was a very demanding person, right? He was a complete and utter workaholic, but I mean like hardcore.

So when we first started working together, I mean, I realized his work schedule was like 18 hours a day. You know, he would wake up in the morning. He'd, while he's taking a shit, he's, you know, looking at contracts or making phone calls or sending emails. And he literally did nothing except for work. And he expected the same of me. And so I realized, well, hey, you know, this is what he did to be successful. I guess that's what I need to do to be successful, too.

And I'd never worked harder in my life than I did while working with that from. And there was a reason he was so successful. It's a huge part of it is the harder you work, the luckier you get, right? That's the famous phrase. But it definitely put a strain on our relationship because he, like my personality is not that I'm like 100% obsessed with money all the time. I have other aspects of my life. I'm a musician. I like to hang out with my friends.

I like to, you know, relax occasionally, right? and I like to read books, you know, like all these things. I have other interests, and he didn't have any other interests. So he would always be yelling at me, like, why are you wasting your time doing that? You should be in the office, you know?

Like he'd call me at like three in the morning. And I'm like, dude, why are you waking me up? It's like, oh, we got to do this right now, get to the office right now. I'm like, it's fucking three in the morning, man, you know? And he's like, I don't give a shit if it's three in the morning. You got to work right now. So, you know, you want to make fucking money, you know?

He was like that kind of guy. And so it was very intense, very, very, very stressful. He was, he's a very charming guy, you know, very funny. And so he, he can make a joke and get on your good side and be very charming and personable. But then when like, but then the next second he'll be like yelling at you to do this, that, or the other. So it was kind of like a Jekyll and Hyde situation. And when we did like go out and. you know, like on the town, which was very rarely.

We didn't really like party that much, to be honest. But occasionally we'd go out to South Beach and he'd get plastered. I mean, he, like, he did everything to the extreme. So, like, he worked to the extreme. He drank to the extreme. He was doing coke all day. I mean, it was like he did a lot. And he was completely fearless and kind of a total asshole, really.

He would get wasted and, like, go up to, like, a couple in a bar. Right, like that we were at. And he'd go up to the girls, he'd be like, hey, baby, why are you with this loser? You should hang out with me? And he like, take her hand and try to, like, lead her away. And like, and he'd get into fights and I'd have to, like, pull him out of these fights.

Yeah, and it would happen all the fucking time. Did that ever work? Did he do that? They never left their guy? No, of course not. They never left the guy. But why did he keep doing it if it never worked? I think it entertained him.

I think he enjoyed it. Yeah. Would you ever talk to him? Like, dude, why? Of course. Tell me, like, the psychology about what's going on? actually deep down that causes you to take such action you know like he never got that deep right i would always tell i'd be like dude i'm so sick of getting pulling you out of fights can't we just like

go out and just hang out and be normal one day and be like yeah yeah yeah next time don't worry i i got you bro you know i won't do that next time i promise i promise and then of course he do the same thing you know the one time i saw at work actually i mean not the exact same thing but um we were once in a club and he sees this girl sitting by herself and he sits down next to her and he goes to her he's like hey you do coke and she goes well not not in a long time and he's like you want to do some coke and she's like okay they go off to the bathroom and he dated that girl for two years are you serious and it was the most dysfunctional horrible relationship I'd ever seen in my life I mean they were like oh he's yelling at each other

screaming at each other and like you know she would break out crying in front of like everyone you know like at restaurants in public I mean it was really really terrible. Yeah. And like she would break into tears and run to the bathroom and he'd yell at, run after. Baby, baby, baby, I'm so sorry. I swear I didn't mean it. You know, I love you.

I'm going to buy you a diamond. We're going to go on a cruise. It's just like blah, blah, blah. It sounds like Florida. Yeah, yeah. Gosh, that does sound like Florida. Where was the benefit or the value in that relationship? I'm so curious because he seems like such a hard person to deal with.

He was terrible. How was he in a relationship and how could he maintain a relationship for two years? It always blew my mind that she stayed with him, honestly. Did she feed on that, do you think? Because some people, they like the toxicity of relationships. Because it's what they maybe grew up with, so it's comforting to them. I mean, she stayed with him. I don't know exactly her thoughts of why she stayed with him.

I got to be pretty friendly with her. She was actually a really sweet girl. And I don't think she'd ever been in that type of relationship before. And I hope she hasn't been since. I'm not going to mention her name because she wants this to be well behind her. But, yeah, I mean, I honestly don't know why she stayed with him. Where did Ephron learn this behavior from? Was it his uncle?

Was it his parents? I feel like he's maybe modeling off of what he was around. Yeah, I don't, I mean, I couldn't speak to his parents' relationship. His parents did get divorced. I, you know, I wouldn't never presume to know why they got divorced. His dad was actually a super sweet guy, very, very mild-mannered. His mother was a bit more feisty. the one that blamed me for all his problems.

So, but yeah, I don't know how he, like where he got his relationship modeling. Maybe it came from his parents, but I don't know that. And his grandpa was a billionaire, right? Yeah, so his grandfather was, I guess you could say, a bit of a toxic person. His grandfather was a real estate billionaire. He owned a huge amount of, like, the slums in South Central L.A. He was like a slum lord. and his grandfather got famous because it's after about like 40 years of marriage

I think his grandfather had like eight kids with his grandmother and after 40 years of marriage they got divorced and it turned out that they had never been legally married like they just got religiously married and so there was no legal documents about their marriage and so she asked for alimony and he said, I'll give you zero. Like after, he was a billionaire. Yeah, he was a billionaire and he didn't want to give her a penny. And so she sued him for, I think, $700 million. Yeah.

And it was the largest alimony suit in his story. How much did she win? I honestly don't know how it ended. Yeah. Yeah. I don't know if she won anything. Did he find like a young wife after that, do you think? I don't think.

I mean, he was pretty old when they got divorced. I don't know. I don't know. honestly. I just heard this in passing. I never really dug into it. You wouldn't want to talk to Ephraim about it? I never talked to him about it actually. I feel like that's a hard thing to not discuss. It's like, you know, your grandpa's a billionaire.

There are not many billionaires out there. That's a pretty remarkable thing. He did, the only thing he'd mentioned about his grandfather was that he claims, Ephraim claims that his grandfather propped up his uncle's business. That his uncle, Ephraim always talked shit about his uncle, the one who talked. him the government contracting trade. And he always said that his uncle was terrible in business and was losing money every year and was constantly having to get bailed out by his grandfather.

So that's like pretty much the extent of what he discussed about that. So his grandfather was kind to his nephew? No, it was his son, it was his son. But just to his son. And not to his grandchildren? Did Ephraim ever see a penny from his? Never a penny. No, no.

His grandfather never gave him any. So it appears as though there's this like gene or something that was in his family then and it kind of like skipped a couple of beats and then just hit Ephraim with like Max Velocity where he just had this very aggressive negotiating like negotiating type personality. For sure. For sure. From what I've not, I've never met his grandfather. But from what I've heard that he takes that his personality is very similar to his grandfathers. Do you think Ephraim was happy? Happiness is a funny thing, right?

I think that he was constantly under stress, and I think he had moments of victory where he would win, but it wouldn't last because he'd always have something else to go after. So, yeah, I wouldn't want to be him. I'll say that. What was his day-to-day schedule like? Was it truly seven days a week, 18 hours a day, doing nothing but work? when I worked with him, yes.

That's what it was. Later on in life, I heard he, after we had already separated, he got a lot more into partying and having a good time. That's when he gained a lot of weight. But I think he was like the few years before he went to prison. He was, I guess, living it up. Got it. And what was your schedule like at the time?

At the time, I had the same schedule as him. It was very, very draining. And what would happen if you didn't stick to his schedule? if you wanted to take a day off. He would call me constantly and harass me. Really? Yeah, get back to the office. We got to do this, that, and the other.

And, you know, you got to fucking sit on your ass. You think you're just going to make money sitting on your ass. He's constantly yelling at me on the phone, yeah. And the operating agreement that you guys had was the deals that you worked on. You got 50% of them? So, yeah, that was the original agreement we had, was that I would get 50% of the deals that we worked on.

When it came to the Afghan contract, we made a different agreement. because it was, as he said, it was his bread and butter. It was the industry that he was very familiar with, but he needed a lot of help to win this contract. So for that, we agreed on 25%. Now, I'm curious, were there any initial red flags when I came to Ephraim that maybe gave you some hesitation

about working with him? Huge amount of red flags. And what were those? So the first red flag that I, that I remember thinking, you know, that this guy is not like a normal guy, was we were driving back from a gun show in Orlando and coming back to Miami. And we were driving on the highway at night. It was pitch black and there were no street lights.

And it was like one of those highways that's super straight and it's just like one lane going in each direction. And he had his brights on and there are cars coming in the other direction. I told him, hey, Ephraim, you know, when a car comes close. us, you have to turn your brights down. So you don't blind the other driver. And he's like, well, I mean, but I need to see the road. And I'm like, well, I mean, if you blind the other driver, they can crash. And he's like, well, I mean, who gives a shit?

Like, I need to see the road. And I'm like, yeah, idiot, but they can crash into us. And he's like, oh, yeah, yeah, good point. And then he turns this. No way. Yeah, I was like, oh, my God. This guy is like, speak his language. He's like physically incapable about caring about other people.

And I was like, this guy's really. really like a sociopaths. It sounds like a narcissistic. Yeah, it sounds like there's something in his brain, though, that's wired different because that's not like normal behavior, that there's something about it that's like. Yeah. It's just a complete lack of empathy is really what it was.

And it seems like a lot of CEOs have like score high levels of psychopathy. And it seems like there's a lot of similarities between that and like serial killers who can't understand another person's perspective or how they feel. And it either goes in the path of, crime or like really good at like business. Right. And it seems like for him it kind of went to business. Right. And it blurred into crime as well. Yeah. Did you ever see expressions of empathy from him? Would you ever see him do like nice things? Like treated animal well. Or let's say like if he goes out to dinner and maybe he like really bonds with the server like writing them a big old tip or something like that? Never seen him write a big old tip ever. Was he very skimpy with his tips? Extremely skimpy with everything. Everything. So one thing. when I first started working with him I saw him get on the phone with AT&T and he spent like 45 minutes

like insisting on speaking to the manager and going up the chain of command and because he felt like he was overcharged like five bucks on his bill and I told him like dude why are you like spending so much time on this five just let it go you know you're gonna make more money

spending your time doing something else and he's like it's the principle of the matter nobody fucks me It was like bother him on a personal level that, you know, but yeah, I mean, he was super, super cheap with everything. What about going out to drink and party and stuff like that? So he would do that. In the beginning, he was really, really cheap with that.

So I think it was when he started dating the girl. Then he started getting used to going to nicer restaurants because, you know, she kind of didn't like it when he'd take her to cheap-ass restaurants. So he started getting a taste for higher-end restaurants. But yeah, but I mean, he was like very, very cheap. Like compared to how much money he had, he lived very, very frugally. He didn't want to, like, we didn't get an office until we won the $300 million contract. Until then we were working out of his apartment.

And we had already won like, I think maybe like $30 million worth of contracts at that point. So it wasn't, he was already making millions of dollars. But he just didn't want to spend. a few thousand a month on an office. And it was only after we won a $300 million contract. He's like, okay, we can spend a few thousand. So what was he spending his money on? Nothing.

I mean, he wasn't spending it. He was, he was using it to roll into certain, so certain contracts he would fund himself because he had the money and he didn't want to give his investor a cut. So he would use it just to roll. Did he expect you to roll your money into the deals too? Yes. So, and that's kind of how I got screwed over.

So when I first started winning contracts, he'd be like, okay, great, we're working on this other contract. We're going to need financing on it. So I'll just roll your winnings into financing this. It's only fair. I'm using my money to finance the contracts that you should use your money to finance the contracts too. And eventually, he decided he didn't want to pay me. And then there went all the money that I'd won for all the other ones.

Did you ever tell him that you want to take distributions from that and not roll the money into the next deal? He convinced me. He convinced me that fair was fair and that he was financing it. so I should finance it too. Would he take distributions? I mean, he paid, he did, he was using money, right? So, but like his finances, I should say his accounting was non-existent. Like he didn't really do any sort of formal accounting until we were forced into it by the, by the government after we won the $300 million contract.

Then they wanted to see a whole accounting system and proof that we had an accounting system. So he created that from scratch. If you were to ask him why he was working so hard and why he wanted to make so much money and basically sacrifice all other things that life can provide, what do you think his answer to that would be? I think that he most of all just wanted to win. That was like his driving force. He wanted to win.

And for him, the money was like proof that he was winning and he was beating everyone else. And to him, life was a zero-sum game. There's no like win-win situation. There's like if there's a winner, there's a loser. And I saw him like do some shady stuff where he screwed over someone out of like all the guys like money and like pretty much destroyed this guy's business so he could increase his profit margin by 3%. How did that happen? I don't know the details of it. I just remember him like talking on the phone and the guy crying.

Oh, you're serious. Because he would love to take phone calls on speakers. I like hear the conversation. I wasn't, like, I wasn't involved in that deal. And so I didn't really know the details, but the guy was like, but you said that blah, blah, blah. And he's like, whoa, the situation has changed. And now we have to do it this way.

He's like, but you're going to ruin me. I'm going to go bankrupt. He's like, well, you know, this is business. This is not something that I'm so sorry, but this is, you know, I can't do it. This is the only way we can do this deal is this way. And the guy's, but I'm going to be ruined. And then like he gets off the phone. He's like, well, you know, my profit margins are 3%.

So that's worth it. No way. Just like that. So it seems as though he really, changes his attitude and his personality to fit the person who he's talking to. When did you first notice that? Well, I mean, he's very, as I said, he was very, very personable, right? So very, very friendly.

He's funny. He's actually very funny. He's a funny guy. I would see him, like, you know, get on people's, like, good side, and then, you know, like some new business partner, get on their good side, become real, you know, buddy, buddy with them and then like a month or two later just screw them over and like throw him under the bus so it was like I realized that it was like an act that he was just doing he was just saying what people wanted to hear what would benefit him the most and outright lies too yeah I mean he would but he would do it he was very smart I mean he is very smart he'd do it in a way also very stupid but you know he's kind of an idiot savant in a way but um he would do

things in a way that that would give him kind of like an out. Like you would say, yeah, we're going to do it on this deal, but you know, this, this, where I'm going to pay this minus the cost of shipping, right?

And then like he'll find some way to, you know, balloon the cost of shipping to, you know, to like shift the money into his camp. And of course he wouldn't pay that cost of shipping behind the scenes. He was doing something else. But he would tell the guy that, you know, oh, you know, the shipping costs to this. And sometimes he would actually create fake documents to prove his point.

So like when he would negotiate with someone, he'd be like, oh, well, you better give me a better price because your competitor just gave me this price. And look, I've got their quote right here. And of course, it's a fake document. So he would use that as a negotiating tactic. So it was reported by Rolling Stone Mag that, quote unquote, when he was trying to get a deal, he was totally convincing. But if he was about to lose a deal, his voice would start shaking.

He would say that he was running a very small business, even though he had to millions in the bank. He would say that if the deal fell through, he was going to be ruined. He was going to lose his house. His wife and kids were going to go hungry. He would literally cry. He would. I didn't know if that was psychosis or acting, but he absolutely believed what he was saying. Yeah. No, he, it was incredible. I saw that incident. It was with a contracting officer. And he was like, he's like, sir, I'm going to be ruined. My son's in the hospital. The medical bills are ruining us.

We're barely scraping by. And he would, like, his voice would shake. And he would like, I'd see him cry. Like, the guy didn't see him, but like, like, you could hear it in the voice. Like, I could see him actual cry. Like, you'd have tears on his face as if it was real. And the second he hung up the phone, boom, he was a different person just like that. Now, I'm thinking when he said he ruined the other guy's life over the 3%.

Could it be that the other guy was faking it on the phone as well? It could be, but I knew who that guy was, and he was like this really conservative Korean guy. And I'd done deals with him, and he seemed like a real straight shooter. So I doubt it. Then you lose him as a resource. Which is why he's an idiot savant. Yes. So, okay, so there's a guy named Matt Cox, right, who was Ephraim's cellmate, or one of his fellow inmates in, well, he was in prison.

He wrote Ephraim's memoir. and Matt told me that while he was writing Ephraim's memoir, that Ephraim was telling him all the stories about how he screwed over this guy and that guy and, you know, he just told him the whole thing. And Matt told Ephraim, he's like, he's like, Ephraim, you know, you can't just keep on burning all your bridges.

And Matt told me that Ephraim told him, he's like, Matt, there's a lot of bridges out there. That was his response. Yeah, yeah, a lot of bridges out. out there. He just didn't care. It was, it was not, everything was transactional. There was nothing built for the future. That's just how he ran. And he said that while he was in federal prison. While he was in federal prison. So that doesn't really, that, I feel like that in and of itself would counteract his claim, but there are plenty of bridges. It was also, yeah,

the irony is palpable. Well, he, one bridge got caught up with him. Right. But he's, he's still burning bridges. He's still getting into lawsuits. So there's people suing him to this day. Yeah. It was also. quoted, Ephraim was a Republican because they started more wars. When the United States invaded Iraq, he was thrilled. He said to me, do I think George Bush did the right thing for the country by evading Iraq? No, but am I happy about it? Apsa fucking Luli.

He hoped we would invade more countries because it was good for business. All that mattered was the bottom line, really. It didn't matter who got in the way, who he trampled over, who got screwed, who, you know, it really didn't matter. It's interesting to me that does, as I found out personally. There doesn't appear to be depth to the equations because like everything that I do, I'm always asking myself, why am I doing this? Okay, I find myself chasing money. I look at the past three months of my life. Oh, this has been continually a very important thing for me is increasing my income. It's like, well, okay, why do I want to increase my income? How is actually changing my life? But it seems like he never asked himself why it was just like, I just have to win. Which is interesting because a lot of the times people that are just so focused on winning, sacrificing every other part of their life, they're usually they have like some sort of infeaseless. superiority complex. They need to prove themselves to somebody or something. Right.

That could be the case. I think he did feel that he needed to prove, you know, because his uncle was like, when he left, he was like, you'll never amount to anything. You're nothing without me. And he's like, oh, fuck you. I'll show you. You know, so I think that had a bit to do with it. And his parents also were obviously on his case as a teenager growing up.

if you're going to continue down this path of smoking weed and you know you're going to be a bum on the street because in that community I mean it's different now because there's I think more education but especially back then they didn't see a difference between like weed and heroin it was the same thing to them if you're smoking weed you're like a junkie on the street and like about to join a gang that's how they saw it so yeah did most of your deals go smoothly that you were doing on this government website most of them did go smoothly we I mean there were a few that he would try to pull things where to increase profit margins like a big thing he loved to do was was to do a or equal substitution right so they have the government will sometimes allow you to not deliver the thing that you contracted for if you give them a good reason why it's not available

or you can't do it and they'll allow you to do a substitution right so So his playbook would be like he would underbid an item and knowing that there's like a less expensive version of that item. And then he would make up a whole story to the government about why that particular is not his fault, that it's not available. And that he, you know, but that he can give them even a small discount if they would accept this other item. And once in a while, they would actually agree to that because his story was so good. And then his margins would be enormous because that item is like half the price and it's going from like a 2% margin. He's going to like a 50% margin. So when he would do that, oftentimes the government contracting officers would push back and say, no, you can't do that.

And then he'd have to scramble and have to like find the item that he underbid at a lower price than was available in the market. And occasionally we lost some contracts due to that. I think either five or seven contracts got canceled because of that. what's interesting is it sounds like he liked screwing over other people more than he liked benefiting from something like he would go to such far lengths to make sure the other person just gets a little bit worse of a deal rather than just okay let's seal it up let's get this done I can focus my efforts here and let's say we make more profit on a month to month basis yeah that's exactly and I think the the phone call with AT&T is a great example of that I mean it was just

it was more of an ego thing than an actual money thing. I mean, it makes sense. Yeah. And where he screwed over the Korean guy, I mean, to get an extra 3%, I realized at the time, I'm like, this is going to make zero difference to him, right? Like his bank account is the percentage difference is going to be very, very small. It's not going to change his lifestyle in any way. It's not going to really make any difference to his life.

It's going to make a big difference to the guy is screwing over, right? So I think he was more, as I said, it was about winning. It wasn't about really the money in the bank, because he barely spent the money at the time anyway. He barely spent the money. So it was really just like a game of winning. Let's talk about the Afghan deal. This is the $300 million deal that you guys got with the U.S. government to supply. It was mostly munitions, right?

So it was like it was rockets as well as AK-47 ammo and stuff like that. How did that come to be? At the time, this was in 2006. George Bush was super unpopular. and it was that towards the end of his second term and the Bush administration figured that the next president was probably going to be a Democrat and which they were right. Obama was elected in 08, but they also thought that the Democrats would pull out of Afghanistan immediately, which they were wrong about, took until 2020, right?

And so they planned to arm the Afghans for like the next 30 years because after we invaded Afghanistan and bombed the Taliban and took over, we tried to build up a democratically functional government. Hamid Karzai was the president. And part of the things that any functional government needs, they need an army and they need a police, and the army and the police need weapons and ammunition. And so the federal government wanted to make sure that the Afghans wouldn't run out of ammo once we pulled out. And so they figured they were going to supply them with a massive amount of ammo,

like good for the next 30 years. So they put out this solicitation and they tried to buy it all from the Russians and they were planning on buying it all from the Russians, but then the Russians supplied Iran with nuclear technology and got put on the band list. So they got put on the blacklist and it became illegal for the U.S. government

to buy from the Russians. So because of that, they realized, that the only way they're going to get this is from like a million different suppliers all over Eastern Europe, because the Afghans, they use, they're used to Warsaw Pact weapons, right? So there's two main different types of weapons in the world. There's Warsaw Pact, which is former Soviet Union, and there's NATO standard, which is the West. The West uses M16s, the Soviet Union used AK-47, and the Afghans from the 80s, they're used to using AK-47s. You also need a lot less training to use an AK-47. It takes a lot less, you need to do a lot less maintenance on it. It's a much

more robust gun. It's not as functional, not as accurate as an M-16. It's kind of like the difference between a Toyota Corolla and a Ferrari. The Ferrari will drive faster, but it's a lot more finicky, a lot more, you need a lot more maintenance. So they needed to supply Warsaw-packed munitions to the Afghans, but there's no one in the West that manufactures this stuff, at least not at scale. So they knew that they would have to get it from former Soviet countries. And because the Russians were out, they realized that there's no single supplier that could supply everything. So they didn't want to deal with like a million suppliers. So they put it out for bid. They're saying all the middlemen of the world, right? Give us your best combined bid for all these items. And we bid on it

because it was a lot of stuff that we'd already been supplying to Iraq in much, much smaller scale. So we had a lot of past performance on it. We had proof that we'd done this business with these items before. So we knew we technically qualified. We didn't actually expect to win because it was just so massive. We bid it in the summer of 2006

and we were eventually awarded it in early 2007. And how do you bid on a contract? How much work goes in on the back end to determine how much you're going to price everything out with? Right. So it was a lot of work. So the way we structured the deal with between us,

because he had like five main suppliers that he was already used to doing business with for these types of things. And he told me, you know, for us to win this contract, we can't just use my normal suppliers. We really have to pretty much get a quote from everybody on the planet

who has any supply. So you leave these five guys to me and then you go out there and get all the rest of them. So I spent like a good like about two months of 18 hour days, you know, just Google searching, making lists, spreadsheets. A lot of the suppliers were Eastern European. They didn't have email addresses. You have to call them up.

And then they don't speak English and you have to get a fax number. And then they only did things by fax. And oftentimes the fax number was down. It was busy and it wouldn't go through and say there was a lot of like a lot of grind to get to get all those. quotes. But after about two months of really hard grind, we had like a really good, we thought we got like a price from pretty much everyone in their mother. And we thought we were pretty competitive. And now you have an option of like how much to bid it, right? And so at the time, of course, Erem always did everything at the last second. So, so we had a deadline. This particular contract

we needed to submit in paper form. Like most of the contracts you just submit online. with an email. But maybe because of the size of the contract, they wanted this particular contract to be in paper form. So we had to print it all out. And it was like 50 pages. We had to print out and mail it. And we were at the day of the deadline where we had to mail it.

And he just couldn't decide what percentage to put on it. So at first he was like, we're going to put 9% profit margin on it because probably everyone's bidding 10. Right? And he's like, but what if someone else is thinking that everyone's bidding 10? so they're going to put nine. So maybe I should put eight. But are people really doing that? If I put eight, you know, one percent of this contract, that's $30 million.

So that's a huge amount of money. And that's 10%. That's $3 million. One percent. And, you know, that's like millions of dollars, every percentage. So he was like going back and forth, back and forth. And I'm like, Ephraim, if we don't bid on this soon, we're going to get zero. So just make a decision.

Eventually, at the last second, of course, he decides on 9%. We print out everything, like the printer jammed. We had to, like, quickly change the cartridge. And we were like, you know, sweat and bullets. And then he's, like, going, like, 60, 70 miles an hour down, like, residential roads to get it, to get to the post office. And we, like, run up to the post office. And they were about to lock the door. And he's like, no, no, no, no, no.

And they opened. They're like, fine, fine. we'll let you in and he managed to get it in time. And then we didn't hear anything from them for like a few months. And we're like, okay, we probably lost that. They probably just aren't contacting us because, you know, they went with someone else. And then we got a message that they wanted to do an audit. And we're like, oh, my God, they're actually considering us for this.

And it was like a few different audits. It was like financial, logistics, supply, and like past performance. and they wanted to have a huge amount of documents. And it took us like a good month and a half. They even sent, they even sent like a team of government officials to our office to like inspect our operation. Wow. And we were super nervous because it was just like, you know, we didn't expect anyone to actually visit us. And so that was when he hired a forensic accountant to go and create the financial records going back to the beginning of the business, which he didn't have.

And so he had to like make it look like we had done all these financial record keeping in the past and And it was just like a huge operation for us to make it look like we were legitimate and But the it was like I think three like three older ladies who came by there were suit ended up super sweet very very nice And they all they gave us glowing remarks glowing glowing marks Did he charm them I imagine he came in? Of course he did. He was so good at it. He would be like, he's like, wow.

He would like meet them. He's like, oh wow, over the phone. I couldn't tell you. We're so beautiful. He's like, you know, if it wasn't completely illegal, I'd be buying you diamonds right now. Yeah, he would say things like that. Oh my gosh. Yeah, he was funny.

He was really funny. It was very charming. Yeah. Which is why he, you know, I think was a big element of his success. Yeah, he was very good at it. Okay. And so they loved him. Yeah.

They loved him. They gave him great marks on their, on their report. And then in January of 07, I was at home and he calls me up. And he's like, hey, I got like good news and bad news. And I'm like, well, what's the bad news? He's like, our first task order is only 600K. And I'm like, we won the fucking contract. He's like, fuck yeah, motherfucker.

You know, he's like, I'm picking you up. We're going to celebrate. And so the way, what a task order for people don't know. They give you a $300 million contract. but that's just like an estimate, right? They're not actually legally required to give you $300 million in orders. They're only legally required to give you

the first order against that, and that could be any amount that they want, right? Now, we bid the contract on the assumption that we were going to get $300 million in orders with the logistics and everything based, priced, based on that quantity. So at the time, we were thinking, well, you know, if they don't order $300 million,

dollars, we're going to be screwed. We're not going to be able to, we're going to be underwater on this. We're going to lose money because the logistics is going to be so much more expensive. So we were nervous whether they were really serious about giving us $300 million in orders. So when they awarded the contract and there was only $600,000 on the first order, which is not even enough to fill up one aircraft load, we were like, are we screwed? Are they going to give us another task order or is this it? Are they testing us on this? Maybe we need to deliver this at a loss to prove to them. but like two weeks later they gave us like a $50 million task order so it was really just what they had available and how difficult was that order to source so we already had all the sources for because we when we bid the contract we got all the sources but a standard operating procedure was once we'd win the contract we'd renegotiate everything right so because there's um once once they once you win the contract all your suppliers are know that if they want this business, they have to go through you, right? So, Ephraim would say, hey, you know, I got the contract. I'd love to give you this business, but I have these other

offers from these other guys and, you know, you have to at least match them. I mean, I'm not trying to screw you here. I'll, you know, I'll tell you what, I'll pull my pants down. I'll show you their quotes. And then he shows the quotes, which he doctored. And then he would like, and then he would like really, you know, knock him down in price. And that's how he managed to turn a 9% margin at first into a 20% margin. Wow. Yeah. To 20% on 300 million.

Yeah. Yeah, that was the average that we were making. Yeah. And this was a bunch of different suppliers that. Yeah, it was a whole bunch of different suppliers. We were getting grenades out of Bulgaria. We were getting the AK-47 ammo famously out of Albania. and some ammo from the Czech Republic, some from Ukraine.

But they wish they never sold us that ammo now. But yeah, we were getting from all over Eastern Europe. Yeah, we were looking for sources in Kazakhstan and really everywhere. So where was this like ammo coming from? Was it just extra ammo that wasn't being used by the government at the time? Yes. So what most militaries do is they stockpile ammo, right, just in case, right? You don't want to.

If you need that ammo, it better be there, right? You don't want to have to start production if something happens and you need that ammo. So the militaries tend to stock the ammo. But most militaries have a policy that they only are comfortable with ammo that's like maybe 20 years old. And then they want to replenish that ammo. So then they're willing to get rid of the old ammo for whatever they're able to get for it because they're going to have to pay for it to be destroyed. So Albania at the time was one of the most armed places on earth because they had, during the Cold War, their dictator was a fervent communist.

And he believed that the Soviet Union Politburo were a bunch of corrupt assholes, which he was right about, and that they weren't true communists, that they were only in it for themselves. And so he pulled out of the Soviet Union, and he thought the Soviet Union tends to take a dim view of that. And so he thought that the Soviet Union would invade him. And he thought because he was such a fervent communist that NATO would invade him too, now that he didn't have protection from the Soviet Union. So he thought the world's two superpowers would go into invade a tiny little country. And so he allied himself with the Chinese who he believed were true communists. and the Chinese gave him

where they were thrilled to have an ally in Europe and so they gave him massive amounts of arms and munitions which he built a huge network of bunkers all over the country so that it would be safe from bombardment and he filled those bunkers, those underground bunkers with all the munitions and weapons that he bought and his plan was what he called total war that if he gets invaded the entire population

and every man, woman, and child becomes a soldier, and everyone fights to the death. That was his plan. The war never happened. So after the Cold War ended, and by 2007, Albania was trying to join NATO. And NATO uses a completely different standard of ammunition. And so one of their requirements

was that they get rid of all their old munitions. So they were actually paying to get this stuff dismantled. And so they were willing to sell it for pretty much anything. So this is a, Albania was an extreme case because most countries aren't that stockpiled up, except maybe the Russians. But this is a common occurrence in militaries all over the world that they stockpiled ammo for a certain amount of time and then they get rid of it. They usually try to sell it on the open market. There's more to life than finding the perfect car.

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Habaniero? More like habanier, yes. Save the everyday with Amazon. Do you think other companies were getting bids from the Albanians as well? Like the same exact thing? the solicitation said that no Chinese ammunition was allowed to be delivered under this contract. So probably the other companies knew that the ammo from Albania was originally from China, and therefore they didn't bid that. We didn't know it at the time, so we bid it, and we were like, oh, what a great deal. This is really cheap ammo.

And the Albanians knew. Well, of course the Albanians knew. Anyone who knows the history of Albania knew it, but we didn't know the history of Albania. But they knew that you were in violation of the contract. So I'm not 100% sure what they knew. I guess if they knew the, because it technically didn't violate the embargo, right? So the reason it's illegal to buy Chinese ammunition is because in 1989, there was the Tiananmen Square massacre where a bunch of thousands of university students in China and Beijing

were protesting for democracy in Tiananmen Square, which is the main square in Beijing. and the government, the Chinese government, brutally repressed them. They like brought in tanks into the square and they killed lots of them. And it was on national TV and it was a huge international TV and it was a huge scandal. And because of that, the federal government, the U.S. government put the Chinese on an arms embargo. So it's illegal for American companies and citizens to do military business with China. So, however, the, the ammo that was given. to Albania was given to them in the 70s. So it was before it was illegal, while it was legal,

it was given to Albania. If you buy a Chinese AK-47, for example, or Chinese ammo in 1988, while it's legal, and you import it into the United States, in 1990, you could still sell that gun because it was imported legally. It's a legal gun, right? Never violated any embargo. So the ammo was kind of in the same camp. It was in the same category because it was a given to the Albanians in the 70s well before the arms embargo existed. So technically it didn't, legally, it didn't violate the embargo. However, the solicitation document in our contract said no Chinese ammunition can be delivered under this contract directly or indirectly, period. So it was obviously a reference to the embargo, but the way it was written, it was we were not

allowed to deliver this ammunition from Albania under the contract because it violated the terms of our commercial contract. So when we discovered it, we went to go inspect it to, we actually originally went to inspect it because we, at the time, there was a huge spike in oil prices. And we realized because we had to fly everything into, into Afghanistan by air, because it's a landlocked country surrounded by unstable countries like Pakistan.

And going through there would be very, very dangerous. because it's controlled by real warlords, right, who would love to hijack a delivery of ammunition, right? So we realized the only safe way was to fly it in, and air freight is like 80% of the cost is fuel. So there was a large spike in fuel prices at the time, and we realized we were going to lose money on this unless we were able to reduce the weight.

And we realized that the ammo was packed in these heavy wooden crates, and we could just take the tins, the metal sardine cans, they call them, out of the wooden crates, we would save a large amount of weight and money and shipping. So we went over there to inspect it, and we saw that there is Chinese lettering all over the crates. And this was the first time we realized, oh, crap, this is probably originally from China. And we realized this violates our contract. Now, at the time, we could have done one of two things. we could have said, well, we could have gone to the federal government to the army and said,

hey, you know, this ammo doesn't violate the embargo, but the way you wrote the contract, we can't deliver it. So can you just give us a waiver? Because we know you meant it just to reference to the embargo. And they could have said, yeah, we really need the ammo. Here's a waiver. Because they were really pressuring us to deliver. At the time, it was like March, April of 2007.

And Afghanistan has a fighting season. because they can't fight during the winter. They have these tall mountains and a lot of snow. And so they only fight during the spring and summer. So if fighting season was starting and our Afghan allies who were fighting the Taliban were running out of ammo and the army was yelling at us to hurry up and deliver.

And we had a whole bunch of delays because we were trying to get, you need to get overflight permits to fly any military hardware over every country you fly over. You need to get their permission. And there are some countries who were refusing to give us permission.

like Uzbekistan was refusing to give us permission. And eventually I realized, well, you know, if we get hired the Uzbekian national airline, they might give us permission then. And that's when they gave us permission when we offered them the transportation contract. Suddenly we got the license, the flyover permit. They were the last one. But it took us like a good two months, two and a half months to get all those licenses. And the entire time, the army's like, you guys got to deliver.

You got to deliver. This is super important. people are dying. You deliver now, now, now. And so they were really pressuring us to deliver as quickly as possible. And so we thought, well, they need it so badly. They'll probably write us a waiver.

But then we thought, well, on the other hand, they could also say something along the lines of, well, it's not really fair to your competitors in the market because they bid ammo that was not originally Chinese sourced according to the rules of the solicitation. So in the interests of commercial fairness, we're going to take away this $300 million contract from you

and put it out for open bid again. You guys are welcome to bid on it again and good luck. And we were like, take the risk of losing a $300 million contract. I don't think they would do that though, because it sounds like based on how stringent they were and the whole vetting process, that would set them back months. It would set them back months.

So it seems as though they have no other choice. Also, your bid, if I remember correctly, it was like $60 million cheaper than the second bid. 52 million, but yes. 52 million. Still stings. Oh, so much. To think about it.

Yeah, yeah. We were. And I found out about that because they're not allowed to tell you that. I was talking to the contracting officer on the phone. And he was like, I was discussing various issues with him. And he's like, yeah, you know, I'm happy to help you guys out. You guys were just so competitive. You know, we really love to see you guys succeed.

And I'm like, really, we're really competitive. And he's like, oh, yeah, you beat the next guy by a lot. lot and I'm like oh how much he's like well I'm not really allowed to tell you this but you guys were like 52 million under the next guy and I was like holy shit I told Ephraim he was pissed he was so pissed what percentage is 52 million dollars is like your 10% off 20% off I think that comes out to about 15 yeah 17% so how that conversation with yeah oh he was just like screaming and like kicking the wall yeah he was really pissed he was really really pissed yeah he's

like fuck I should have bit it higher should have been higher why did I only do 9% I'm like well at least you didn't do 8% yeah so then so then what happened to the Chinese ammunition at that point like what was that discussion like right so we were discussing you know like should we ask the government for a waiver and and Ephraim was like he's like nah we're not going to risk it we're just not going to tell them what they don't know is not going to hurt them right we're just going to repackage this and they they won't know they're never going to find out and what he did was he message, he emailed the receiving officer in Kabul, the one who would be signing off on the ammo

deliveries. And he told him, he's like, hey, you know, due to the ammo's age, we want to make sure that everything's high quality and that there's no rust. So we're going to inspect every crate of ammo. We're going to take it out of its tins just to make sure that it's okay and repackage it in these cardboard boxes. Is that okay? And you showed him a picture in the cardboard boxes. And the receiving officer in couple was like, yeah, that's a good idea. You guys, we're really happy that you guys are going the extra mile to do the inspections and that you really care about the quality. Sure, go ahead.

And so that gave us the green light to change the packaging. And so we found a cardboard box manufacturer in Albania and asked him to do the repackaging operation, a guy named Costa Tribischka. and he hired, he had, you know, a factory, so he had a bunch of workers, and we started repackaging the ammo. And then we started delivering it into Afghanistan, into Kabul. And we were starting to do about like three aircraft loads a week. Wow. Yeah.

And it was starting to go like clockwork. We had all the licenses. We had all the logistics. The repackaging operation was going smooth. And, and then. Then Ephraim was like, you know, I talk to the box guy, this Costa. And he has a friend in the Ministry of Defense. So I'm going to ask him, you know, what are the Ministry of Defense getting paid for this animal?

Because we were buying it through a guy named Henry Tomey. He was a Swiss arms dealer. And he had arranged this deal because Henry had connections with the Albanian politicians. He claimed to be really good friends at the prime minister's son. And so he had arranged this deal. And we'd done business with Henry for a long time on other deals. So he wanted to know what Henry was making. And so he finds out from the box guy that the Ministry of Defense is getting paid two cents around.

And we were paying Henry four cents around. And that really pissed Ephraim off. He's like doubling the price. And I'm like, dude, we're settling it to the government for 10.5 cents around. I mean, we did have to pay five cents around in shipping. So we were making one and a half cent. Or is it one and a half, two and a half cents in profit. So he was like, yeah, but like, fuck that guy.

He's fucking a sober. He's doubling it. And I was like, dude, we already have a contract. We're delivering. Just like leave it alone. We're making money. Anyway, this isn't even the biggest moneymaker in our contract. We were making way more money on the grenades.

which was totally legit. It was like, uh, it was brand new production right off the, right out of the factory, no repackaging or anything like that. Nothing shady going on. We were making way more money on the grenades and on the rockets and,

and all the other stuff. The, the AK-47 ammo was actually the, it was the biggest volume, but it was the smallest profit in the deal. Yeah. And so I said, just fucking let it go.

Why are you, it's like, I don't care. We got, you know, it's all money. It all counts. We got to,

you know, I can get this guy out of the deal. We're going to go direct with the MOD. And I'm like, I don't think that's a good idea. He's like, he's like, he's like, you just leave this to me. And he flies over to, before he goes to Albania, he goes to me. He goes to me, he's like, okay, this is what I want you to do. I want you to take those quotes that you got from Kazakhstan and from the Czech Republic, and I want you to change the numbers.

So it looks like it's less than what they're selling to us. So I can use it as negotiating leverage. And so, I mean, I edited the PDFs. It was relatively simple, and I gave him the printouts. And so he showed it to Yili Panari, who's the head of the, of the, of Meko, which is the government arms export company. And Yili takes one look at it. He's like, this is all fake. Get the sad.

Get your fake documents out of my face. He didn't even take a second look at it. He's like, yeah, he's like, I know that's all fake. I'm not going to look at it. You refuse to give him a better price. He kept unbuging him. He's like, I'm telling you if you don't give me a better price, we're going to go bankrupt. And there goes your contract.

So you've got to give me a better price just to, you know, I got this other deal that's coming up ahead. You're going to make so much more money on that. So give me a good deal on this. You know, he's using every trick in the book. And Yeli's finally, he's like, fine, fine, fine. I'll tell you what, I'll make an introduction with, you know, the man who could decide this. So the next day takes Ephraim into a, like a construction zone, right? So this big high-rise building that's being constructed.

It's walking into this, like, building that's under construction. and walks up these stairs and opens a door, and he's in this beautiful, like, office, like all perfectly furnished, like a Wall Street-style office and inside this, like, weird, under-construction high-rise. And there's this guy, you know, at the table, and the second Ephraim walks in,

usually he's a very loud, brash talker. He realized that he couldn't fuck with this guy, a guy named Deliorgie, who turned out he was part of Albanians' organized crime. But Ephraim could tell this guy. You know, you're not going to fuck with this guy. And so Deleurgy says, like, well, you know, I know that you want a better price. We can't give you a better price.

But I know that you're repackaging the ammunition. So, and you're spending some money on that. So why don't you give us that repackaging contract? And we'll make money on the repackaging contract. And then we could give you a little discount off the ammo. And DeVroli's like, well, sounds like a good deal. That guy's fired. You're hired.

And so the box guy calls me up and he's like, hey, you know, I know that you guys are getting someone else to do the repackaging. I understand. It's business. No hard feelings. But I do have $20,000 worth of boxes. You guys are going to need this anyway. So why don't you just buy these boxes from me? And so I tell Ephraim, I'm like, hey, you know, we need these boxes.

Let's just buy it. And Ephraim's like, yeah, yeah, that's a good idea. I'll pay him. I'll pay him. Don't worry about it. I get like a week later, he's like, hey, he still hasn't sent me the money for the boxes. Can you talk to him about him? Like, Ephraim, pay the guy for the boxes.

Ephraim's like, ah, you know, the new guys, they don't even want to deal with them. They already got the boxes. I don't want to deal with this. And like, Ephraim, he knows about everything. Just fucking pay him 20 grand. It's like, ah, fuck that guy. He's not going to do anything. And that guy did do something.

He got really pissed, and he called up the New York Times. and he told them everything we were doing and he called up the FBI and told him everything we were doing and his big mistake is that he called his biggest mistake I would say is that he called up the local Albanian press and he told them that the Albanian politicians

were getting kickbacks from this deal and then a few weeks later he ended up dead. He was in a car, a very mysterious car crash in an open field with no other cars around like a dirt road and he was like thrown 30 feet from his vehicle and they just found him deadline lying face down in a field

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It's exceptional but effortless. Like actually effortless. Simply press, brew, and explore. Nispresso. What else? Keep exploring at nespresso.com. Why don't you think he paid the guy? Like, even just to keep quiet. Like, why was he so against paying this guy?

So, as I said before, he's a bit of an idiot savant, right? So he is with an enormous tolerance for risk. So obviously the smart thing to do would be to pay the guy, considering the stakes and considering the amounts of money involved, $20,000. I mean, compared to a $300 million contract is just stupid, right? It's worth the insurance. But I think in his mind, he just, he was willing to take that risk. And he just, I guess it was just another way for him to win.

He's like, I'm going to screw this guy over, man. There's nothing he could do about it. Did any part of you want to pay the money, yourself? I mean, I didn't have any money at the time because he kept unrolling my money into the next deal. And the Afghan contract needed a lot of financing. So all my money was in there. Just to promise this guy and be like, hey, listen, Ephraim's not paying you. But you have my word. When I get this money, I will pay you in here as like a thousand dollars just for my word. I'll pay you. Well, the problem was that shortly after that is he screwed me over. And

Ephraim screwed me over. And then I left the company. And I was like, how did he screw you? So after the flights started landing in Kabul on a regular basis, there were like three to four aircraft a week coming in. I think it was like three aircraft of the Albanian ammo and like one aircraft of grenades was coming in a week and various other things. He comes in, we had like a decent office at that point. And some like 15 employees. He was going after all these other deals.

I told him, let's focus on this $300 million contract. He's like, no, we're on a roll. We're going to go for everything. He's like, you can handle this. I'm just going to start getting new business. And he hired a bunch of people off of Craigslist and started putting them to work in like a, like a, what do they call that? Boiler room. That was the phrase.

I was like, yeah, a boiler room. He had a boiler room going. And so he, I was, I had like, you know, in my own office in the complex. And he walks into my office. Everyone else had been gone for the day. I was staying late. and he goes to me, he's like, you know, a lot of guys around the office are telling me that you're not pulling your weight. And I'm like, what are you talking about? I'm not pulling my weight.

The Afghan deal's going. He's like, yeah, yeah, the Afghan deal's going. But, you know, we've got a lot of problems with one of our Iraq contracts, and you're not helping out with that. And I said, yeah, I know, because I'm not getting paid on that. I'm like on a commission-only basis. I'm not getting paid a salary. I get paid on the deals I work on. You want to, you know, give me a cut of the of the Iraq contract and he's like oh don't be ridiculous I mean come on I mean you didn't help us win that contract so of course not I'm not going to give you a cut on the Iraq contract but if you don't help us with that Iraq contract then the whole company can go down and there goes your Afghan contract right so you need to help save the company and I'm and I said well

why don't you give me a piece of the company then he's like oh well well you know I've thought a lot about this and you know you're my best friend and you're the only guy I would ever do this for. I own 100% of AEY and I meant to keep it that way, but I'll tell you what, only because you help me, you know, build this up and I trust you and you're my best friend and I want, you know, I really want to do right by you. I'll tell you what, I'll give you 1% of AEY. And I said, well, you know, 80% of AEY's profits are going to be the Afghan contract for this year. And I get 25% of that. So I'd rather get 25% of that. So I'd rather get 25, percent of the Afghan contract, then 1% of the company. And he's like, well, take it or leave it. You know, you can either get that or nothing. And I said, well, I'll see you in court, motherfucker. And I walked out. And that was, and then I got ready to sue him. And that, that was probably one of the hardest times in my life because my daughter had just been born. She was, like four months old at the time. And all of my money was rolled into the Afghan contract. So he was holding all my money.

except for like 20 grand I had left that I was living off. And I was running out of that quick. And so I was thinking, well, I'm like screwed. I've got a kid to support. I've got no, now I'm going to get into this, who knows how long the lawsuit is going to take until I see any money from this guy. And so it was a really, really, I was probably more depressed

in that time that I'd ever been in my life. Because I saw like years of work that I put in just like, because he kept on rolling my money into the next deal. Like all that work that I work on zero salary put the last like two years of my life into would just crumble right before my eyes. And I had no idea what I was going to do. So yeah, it was really, really hard.

What was that like having a child in the middle of all of this? Was it hard to balance? It was very difficult because he was very demanding and had competing demands from, you know, the family and business. Like I would try to spend time with my daughter and he'd be yelling at me to get to the office. And he's like, and I'm like, dude, I'm like here with my girlfriend and my kid. And he's like, he's like, yeah, you know, let me tell you something.

When you're making millions of dollars, she's going to be happy you did this. You know, you got to think the long term, bro. You know, I'm like, we already made plans. We're out going out to dinner. He's like, fuck that. You got to get to the office. You got to work right now. We got this and this and this and this to do.

So I was like, yeah, I didn't always listen to him. I never did, like never, unless it was a real emergency that I thought was really going to matter. But he was great at manufacturing emergencies. Everything was an emergency, even like things that were stupid. So, yeah, I think he just lived off the adrenaline. Everything had, like, when things started going smoothly, he had to find things that were wrong. Like, he would walk into the office and start yelling at all the other. He's like, what are you guys doing?

Just chatting. I don't pay you to fucking talk. Get on the fucking computer. make me some fucking money you know he was like that no he was like very very stressful it sounds like that afghan deal was going so smoothly that he had to find something in that exactly because otherwise he wasn't getting a deal if it went smoothly it means that like someone wasn't getting screwed exactly yeah yeah he needed something he needed he just lived off it what percentage of that do you think is who he was versus just the cocaine and drugs that he was on i think it was mostly who he was because

he would act the same when he wasn't on anything. I mean, not that I knew everything he did, but like, yeah, I mean, he was, he would be sober and he'd act the same way. He actually had a surprising tolerance for drugs. Like, I would see him. Like, cocaine barely affected him. Alcohol would make him, like, sloppy and stuff, but, like, he could function. The thing that I saw him mess him, that I saw him mess him up the most was, was sleeping pills.

Why would you, why would he take? sleeping pills? Was it like to sleep? So he would like rail coke and then do sleeping pills to get him to sleep. And he, but he was such a workaholic that he would stay on the phone when the sleeping pills started to hit him. And anyone who's taking sleeping pills and if you try to stay up, it kind of makes your mind start working in a dream state. So you stop making, you can like start talk, you're talking, but you don't make sense. Like your logic circuits aren't functioning. And he would be like talking to like a government contracting officer and start babbling. things that were like crazy and I'd have to take the phone away from him and it'd be like

you know good just he'll get right back to you he's was uh you know he's a bit a bit tired he's been working really hard on this contract so he really needs to get to sleep I'd have to like save his ass from just like spouting nonsense yeah that that affected him the most of sleeping bills I would love to see Ephraim and Jordan Belfort in person do a podcast together that would be insane it'd be interesting Ephraim has not done any interviews and I think he wants to keep a low profile he doesn't want to be recognized in public

I imagine he's screwed over a lot of people like a lot of people and probably some people he shouldn't have screwed over so like to be honest I mean I don't like at this point in my life

it's been so long ago I wish him the best I honestly hope he becomes like a better person I don't count on it but but I do hope that he turns his life around and become stop screwing people over left and right and becomes a productive member of society that that's my hope for him i really don't you know hate him or anything anymore

i wouldn't say that i never hated him but um but uh it's always surprised me that no one that he didn't end up that to be completely honest because he's screwed over people that you really shouldn't have screwed over you know there's it's always he's fearless he really is he's like fearless and he screws over everyone and in the arms business. So it's always, it's always surprised me that he's still around and kicking. It wouldn't surprise me at all if I, if something mysterious were to happen to him or if he ends up back in prison. I'm always kind of like waiting to see that newspaper article. So let's talk about how we ended up in prison in the first place. Yeah. So when this deal started to turn south, yeah. What were some of the first signs? After he

informed me that he didn't want to pay me anything. I left the company and I was getting ready to sue him and I my lawyers were negotiating with him and he agreed to pay me like a severance which was a few hundred K. Which was, I mean he owed me millions and millions. At the time he owed me about five million. If we had delivered all the way until the end he would have owed me probably about 15 million. Wow. But I agreed to take like a few hundred K. because I just wanted to, I had nothing, and I was running out of money real quick, and I had a kid to feed,

and I figured, you know, a few hundred K will at least give me cushion and let me to start something else, start something new. And so I didn't want to fight him in years in court. I just wanted to move on with my life. And so I agreed to that. And we were literally getting ready to sign the paperwork to finalize the agreement. And the day we were supposed to,

sign it. I get a call from one of the secretaries at the office, at his office. And she tells me, she's like, hey, you know, I thought you should know, but the feds just raided the office. And I'm like, the feds. I'm like, what are they doing? They're like, well, they told us to step away from our computers and to go outside and they're boxing up all the documents and taking the file cabinets and they took everybody's computer. So I thought you should know. And I'm like, holy crap, they know about the Chinese, right? They know about everything. And who else, and who knows what else he's doing, you know, that I don't know about. And so I called up Alex, who was the guy who was overseeing the repackaging operation in Albania at the time.

And I told him, who was also my best friend. We grew up together. And that's how I got him involved because I thought we needed someone who was reliable to do this, to manage the packaging operation. And I told him, like, hey, you know, the feds just raided the office. I mean, Alex knew that it was Chinese, but he didn't think it was a big deal. He thought it was just like a commercial thing. It wasn't like a criminal thing, right? And so he calls up Ephraim and he says, he decided he's going to, like, feel him out, right?

So he calls up Ephraim and a guy named Danny answers the phone. Danny is the guy he Ephraim replaced me with after I left. So Danny answers and Alex says, hey, you know, I need these documents for the aircraft that's coming in today. can you get me these documents? And because he, like I told him that they had, that the feds asked everyone to leave the office. So he wanted to see what they would say. And so Alex told me that he hears Danny cover the mouthpiece on the phone

and whispered Ephraim, hey, it's Alex. He wants to meet some documents from the office. What should I tell him? And he hears Ephraim say, uh, tell him that, uh, tell him there was a bomb threat. Yeah, yeah, there's a bomb threat. So we all had to leave it. And we'll get it to him later. And that's why we can't get it to him now because there's a bomb threat.

And Danny gets back and there was a bomb threat. So we had to leave and we'll have to get you those documents later. And Alex is thinking, well, why are they lying to me? You know, why don't they tell me the truth? And maybe it's because Ephraim's planning on pinning the whole thing on him. He's the guy on the ground. Ephraim's going to claim, I had no idea about any of this. This guy, Alex, you know, I was just trying to keep his job and, you know,

and did the whole thing without my knowledge. And so Alex takes the next plane back to America and he's like, I'm not going down for this shit. He wasn't even getting a piece of the deal. He was just getting like a salary. And he comes back, and both him and I contact lawyers, and we tell the lawyers what the issues are. And the first thing the lawyers tell us is,

look in your emails and your text messages. Is there anything incriminating there? We did a search for Chinese ammunition in our emails, and there was a lot of incriminating stuff. At first, we tried to do everything on the phone, but because there were all these different time zones and things were very short on time that you had to get this license to the logistics company

by the time before the aircraft landed and you had to catch the end of the workday in the U.S. to get things signed by the government. So there was like very little time and I was like running on like 20 hours of work and very little sleep. And I was like, I need to go to sleep. I'm just going to write an email.

And so that's how it got into email. and there was very incriminating emails, like specific stuff, like make sure that you remove all the Chinese documentation from the boxes when you repackage it, right? It's very obvious stuff. And so our lawyers told us, well, if there's such incriminating evidence, they probably already have all your emails. They don't usually do a search warrant

until they've already locked down the emails in advance. and so they probably already have all this. If they have all this, you guys are screwed, right? I mean, you could try to fight it. Maybe you can get off on technicality, but you'll need a few hundred K to fight it. Do you have a few hundred K? No.

Well, in that case, you're probably best off not trying to fight it because the federal government has a 98.5 conviction rate, a percent conviction rate. They win almost all of their cases. And so our lawyers contacted the, so the feds contacted our lawyer. Well, they were trying to get through to our lawyers. And they were talking to some of the secretaries,

and the secretaries told them about us, and then they found us. And so our lawyers said, well, you know, these guys aren't getting paid. They got screwed over by this guy. They have no loyalty to him. And so the feds, they interviewed us, and I told them what I knew.

Because the way it works is, if you cooperate, right, you have to tell them everything, you know. And if you omit one little thing, you get zero credit for cooperating. Yeah. Like if they say, you knew this and you didn't tell us that,

or you changed this, right? Now, what if you forget about something? Is there like some wiggle room there? It's like, there's so much going on. I just didn't think of everything. You better hope that they believe it. Okay. If they think that you purposefully forgot,

then they, then they are not required, legally not required, to give you any credit at all for cooperating. They could tell the judge, throw the book at this guy. He was just pretending to cooperate, right? And we knew we had no chance of winning this case. I mean, Ephraim wasn't going to pay our legal bills, and we didn't have the money to fight it.

So, and anyway, we were guilty. I mean, we knew we were guilty, and there was rock-solid evidence that we were guilty. So we told them what we knew. And then they were like, you know, the federal agents, they were like, you guys aren't even really a target for the investigation. And we knew about the Chinese ammo.

I mean, we found one of the, we knew most of the stuff that you told us, because when we raided the office, we found a to-do list on Ephraim's desk and his handwriting. And one of the items was repackaged Chinese ammo. So, yeah, they knew about it. And they're like, you guys aren't really a target for the investigation. You never made any money from it. You're not working on it currently. Ephraim is the guy who's making all the money and who's making all the decisions.

He's really our target. So we're going to do our best not to charge you at all. And you guys will just be witnesses. And so we said, okay, great, because I can't afford to get charged here. I can't afford a defense lawyer. And then nothing happened for like six months. And Ephraim kept on delivering. He kept on delivering the Chinese ammo.

Even when he knew. Yeah, yeah, even afterwards. After the raids. And you were still suing him? This was after the seven minutes. So after, no, so we were about to sign the settlement, and then as soon as the feds rated the office, my lawyer told me, you can't take a penny from this guy right now because he's under federal investigation. Right. And it looks like if you get payments from him, it looks like he's paying you off.

And so therefore you can't, everything got put on hold. Would it have been worse for your case had you signed that agreement like a week prior and he paid you? And then it's like, well, technically now you made money from this deal knowingly? Possibly. Okay. Possibly. but I will say that Ephraim got to keep most of the money in the end. Yeah.

Well, let's get to that. Almost all of it. So I think it probably would have been better off if I had gotten paid. But why was he still delivering if under investigation, wouldn't that make him like a worse for his case? Right. So. And why wouldn't the government just stop?

Right. Good question. It came out in court later that the Justice Department emailed the U.S. Army and told. them, hey, this is Chinese ammo. It might be illegal. It might violate U.S. law. You should stop taking delivery on it. The U.S. Army replied to them, these emails all came out in court. The U.S. Army replied to them, the mission, this ammo is critical to the mission in Afghanistan. If you want us to stop taking delivery of it, we need a letter from the Attorney General of

the United States, who's the head of the Justice Department. And that letter never came. why it never came I don't know maybe they made a decision that it's better to keep on taking delivery of the ammo maybe it got lost and you know the request got lost

I don't know but the attorney general never sent the U.S. Army a letter asking to stop taking delivery so the U.S. Army kept on taking delivery so in hindsight it would have been better initially to say hey this was Chinese ammo you still want us to

take it like in hindsight that would have been the better option in hindsight we should have told them. Yes. And if I had to guess, they probably would have given us a waiver. Yeah. So what was the raid about if it wasn't about the Chinese ammo? Right.

So the raid actually was instigated by one of Ephraim's competitors saying a bunch of lies about him, that he was like doing, like trying to sell like Chinese AK-47s and rebranding it as something else, which wasn't true. And but it was enough to trigger the race. raid. And then they found out it wasn't true, but then they discovered the Chinese ammo and everything else that he was doing. And to be honest, I'm kind of surprised they only charged him with the Chinese ammo because he falsified a whole bunch of documents and things like that. Let's say during a raid, if they go in saying like he's faking, let's say he's faking AK-47s. Yeah. But they go and they do the

raid and they find something else. Can they then just charge him with something else? Oh, yeah. Found during a raid. Yeah. Okay. Everything is a fair game. Once they get a search warrant, anything they find they can use, even if it had nothing to do with the search warrant. Why was the Chinese ammunition an issue when the army was continually accepting it?

Wouldn't they bear responsibility for that? Wouldn't that just nullify the whole thing? So what happened was they kept on taking delivery of the Chinese ammo. And then in March of 2008, the New York Times published a front page article about us. And it had our mugshots on the front page. And it was next to a picture of really rusty-looking ammunition.

And they said that all the ammo we were delivering was low-quality, defective, rusty ammo and that we were putting our Afghan allies in danger, and that we were just delivering junk and that we were a couple of kids. And it was very irresponsible of the government to give us this enormous contract, relying a pivotal component of the war on terror on a couple of 20-year-old stoner arms dealers. So that became a huge scandal. Congress held hearings about it. Congress wanted us to subpoena us to come testify in front of Congress.

And our lawyers told them, well, we're just going to plead the fifth the whole time because there's an open criminal investigation. And I guess they decided not to go through that whole show. So they withdrew their subpoena. but a week after that New York Times article came out, the Army said, we had no idea about any of this, and this is,

we're shocked and appalled, and we're canceling this contract, and they canceled the contract. A week after that, the Justice Department, the federal agents called us up, me and Alex, and they're like, hey, you know, because of all this political pressure, we're going to have to charge you guys.

even though we said that we wouldn't charge you, but we just can't charge Ephraim without charging you guys since you were such a critical component of the operation. And so we're sorry, but we're going to have to charge you. And what they charged us with was, the way they put it was, with every aircraft delivery of this Chinese ammo, we supplied a document, right?

It was called a certificate of conformance. and on the certificate of conformance we had to list the type of ammo that was on the plane the quantity of ammo, the year of manufacture, and the place of origin. And in the place of origin, we put Albania. And they said, well, you guys knew that the real place of origin was China.

And not only did you know, you had a whole operation to disguise the fact. So the fact that you were submitting this document that you knew was fraudulent to the government, this is an act of fraud. And you guys delivered seven, 71 aircraft loads of this stuff. So that's 71 acts of fraud.

And each act can get you up to five years in prison. So you're facing 355 years in prison. But if you plead guilty, we'll combine it all into one. So the max you can get is five years in prison. And because you're pleading guilty, we'll tell the judge, hey, you know, they feel really bad about this. They're going to be good citizens from now on and give them on the low end of the guideline.

So maybe you'll do a year, maybe nothing. Who knows, you know? So that was the choice, right? It's like, plead guilty and maybe get nothing or fight them in court and spend hundreds of thousands of dollars and maybe get the rest of your life in prison. And I didn't have hundreds of thousands of dollars anyway, so I didn't really have a choice. So Alex and I both pled guilty. And Ephraim fought them for like a year or something.

And then he realized he was going to lose. And eventually he pled guilty as well. Who wrote the article? So it was written by a guy named C.J. Shivers. It was not just him. It was like a team of people at the New York Times. When it's time to scale your business, it's time for Shopify. Get everything you need to grow the way you want.

Like all the way. Stack more sales with the best converting checkout on the planet. Track your cha-chings from every channel, right in one spot, and turn real-time reporting into big-time opportunities. Take your business to a whole new level. Switch to Shopify. your free trial today. I think that the point of the article was that they were trying to expose the Bush administration

as incompetent and that they were mismanaging the war. There was a lot of similar types of scandals, you know, like the Halliburton no-bid billion dollar contracts and things of that nature. So I think that they were trying to, the reason, so the reason there was a picture of rusty ammo on the New York Times, on the front page of the New York Times, is because we had delivered about 30,000 rounds of ammo sight unseen from Bulgaria because it was offered to us at like a super, super low cost. And it wasn't worth to fly. It was such a small amount, 30,000 rounds that it wasn't worth to fly over there to inspect it. So Ephraim said, hey, this stuff is so cheap. If they take it, great, we make a huge margin.

If they don't take it, it's not, and we had room on the plane because there was, it was from Bulgaria. And the grenades were being loaded on the plane. We had some extra room on the plane. And so he said, well, you know, it doesn't, We already have the extra room on the plane. If they accept it, great will make huge margins. If they don't, no big deal. It's costing us very little anyway. Turned out the stuff, not surprisingly, was total crap and rusted. And it was from Bulgaria.

It wasn't even the Chinese ammo. But when it got to Kabul, the receiving contracting officer, the receiving officer, he looked at it and he's like, I'm not accepting this crap. This is garbage. And so he refused to sign off on it. And we didn't get paid for it. but they had no ammunition recycling facilities in Afghanistan. They didn't know what to do with this stuff.

They weren't going to pay to ship it out. So they just stuck it to the side of the airport and just let it sit there. And so when the New York Times went to Afghanistan to investigate and they started asking around about AEY Inc. And then we see some of the stuff that they delivered. Someone pointed them, oh yeah, that's some stuff they delivered right there. And so the rest of the stuff had been issued to soldiers in the field. And so the stuff that the New York Times reporter saw

was the stuff that was rejected and that we weren't paid for. But why did they start looking into it to begin with? What prompted that? It was the box guy told them. Yeah, because he was very upset about not getting paid that $20,000. They almost thought that was the Chinese ammunition that you were sending, right? I assume that they thought that that was the Chinese ammo. Yeah, yeah.

And when did you first hear about the article being written? So like a week or two before it got published, I actually got called up by C.J. Shivers, the journalist, and he asked me to comment on, he's like, oh, you know, we're doing some investigating, and I'd like you to get your, if you have any comments about the Chinese origin of the ammunition. And I just hung up on him, and I told my lawyer, and my lawyer's like, don't answer this guy's calls. Don't talk to any journalists. The last thing you want to do when you are under federal investigation is talk to journalists, you're just going to get yourself in trouble.

But isn't that like misinformation pairing, like I guess old photos is fine, but also they're kind of making it seem like that is the actual status of what's happening when it was old photos of stoner, you guys paired with, you know, ammunition that wasn't actually what they were talking about. That is true. So wouldn't there be something there or are they just allowed to do that? Unfortunately, there's no one policing journalists, right? up other journalists. And there's no agency that is, that is in charge of making sure that

journalists don't lie or mislead. And to be clear, I was like, I was a fan of the New York Times until this point. And then when I saw this thing that was written about me, I'm like, well, this is misleading. This is completely wrong. This is, you know, there is a whole bunch of things in the article that was not true and was very damaging. And that really made me a lot more skeptical, a lot more jaded, I guess you could say about journalists. And one thing I noticed is that after the New York Times published the article, I had a Google alert out from my name. I started seeing my name pop up in this article all over the world because it got fed to the Associated Press and every major newspaper in the world, like 300 newspapers reprinted this article. And once 300

newspapers print up an article, that's the facts. It doesn't matter what comes out later. Any any journalist who writes a follow-up article refers to that original article as fact, right? So nobody does investigation to see whether what the New York Times published was true. They just assume it was true because the New York Times published it.

And you can't say anything because you're under an investigation if you did, then... Yeah, I'd get in a lot of trouble with my lawyer, yeah. And possibly the federal agents, yeah. You know, it's a shame is that the Afghan army, they could have used the ammunition that was still going to be delivered, but because of this, they were actually completely

cut off. So there were like real world consequences of the New York Times like falsifying this information. Yeah. No, they were. Luckily for the Afghan army at that point, we had delivered quite a lot of ammo. So they weren't in such a dire situation anymore. 71 aircraft loads. What happened in your personal life when that article came out? Oh, it was horrible. My, well, my phone started ringing off the hook because every journalist in the world wanted to get comments from me. I had to like turn my phone off for a few days. My dad was like Crestfall and he was like, oh, you know, I have all my friends calling me asking me if, because we have a very unique last name, Pachau's. I never met anyone with the same last name. I knew who wasn't related to me. And so

he had his friends calling him up asking like people from all over the world that he knew, asking if this David Pachau's guy is related to him. If he, you know, if you know, he's like, yeah, that's my son. They're like, oh, I'm so sorry. you know, that's your son. And so, yeah, I mean, his, he was really, really crestfallen. And, yeah, I mean, I realize that I might be facing, like, a lifetime in prison. So it was, it was another one of the darkest periods of my life. My daughter was just a year old.

And I realized, man, like, I can go to prison for decades. I can miss my kids whole life. So no amount of money is worth that. How did you cope with that at the time? Because I'm sure there's so much unknown in the beginning. Like how do you sleep? How do you function? How do you think of anything other than that situation?

Not well. Yeah. It was extremely hard, extremely hard. I barely slept. I was extremely unhealthy. And yeah, it was, I was under. constant stress. It took probably a few weeks to get used to it. Wow. Yeah, it took a few weeks of like just being under constant stress and like thinking, oh my God, I'm going to, I might go to the

rest of my life in prison. And I was like, should I run? Should I go hide out in like Latin America and change my name and be on the run? Like then I'm going to be stressed out for the rest of my life and be on the run for the rest of my life. But maybe that's better than going for decades in prison. And so what ended up happening after all of that in terms of a sentencing and how that was structured? So Ephraim, Alex and I pled guilty. And Ralph decided, Ralph was our investor. He decided to fight it in court because he thought he could show that he wasn't really involved, even though he was. And there was email evidence of it.

So eventually he lost that trial. But he decided to take it to trial because he took it to trial. it delayed everything for three years. Wow. Yeah, because first they had to prepare for the first trial, and then there was a mistrial. There was one juror who refused to convict them, and then they did it again,

and then eventually they got a conviction. So this is sitting on your shoulders for three years. Three years, I'm just like if you're locked. How do you, I'm curious, how do you stay motivated during that time of just thinking, like, anything I do now might be, I don't want to say pointless, but like how do I not live it up now?

Because if I could be in jail for the rest of my life, I have three years now, shouldn't you travel and live it up? Well, I couldn't leave South Florida. Okay. That was part of our bond agreement. Got it. We were not allowed to leave South Florida.

So my lawyer suggested, hey, you should probably do, like, get a job not in the arms business, right? That makes you look good, right? So you want to do everything you can to make yourself look good to the judge because the judge is going to decide your life. So I got a job working for a nonprofit at a food bank. I thought that was a nice and wholesome. and, you know, good citizen kind of job. I also went back to school because I had quit college to do the arms thing. And I went back to school to study.

I switched from chemistry to mechanical engineering. I started doing massages again because I needed to make money. And that period lasted for three years. Wow. Yeah. In the meantime, Ephraim was just being Ephraim. And he kept undoing the arms business. They told him not to as part of it because he pled guilty too.

And so they told him not to stop doing the arms business, but he kept on doing the arms business. And he did it, the way he did it was he incorporated a new company under like his new best friend's name, because he already screwed over Danny, the guy he replaced me with. And so he got a new guy to replace Danny with. And a lot of bridges, you know. And he, the new guy, he put, incorporated a company,

under his name and got him to start doing these, tried to make these deals happen. But Ephraim was a real control freak. So when it got time to negotiate, and he was a very talented negotiator. So like when it got time to negotiate a deal, he insisted on getting on the phone himself and saying, oh, just tell him he, I'm an outside consultant. But then like the way he talked, it was obvious like he's negotiating, you know, like this is guy, this is the real guy behind the business. And through the conversations, one of like a gun, dealer in like central Florida realized who he was. I assume the guy did a Google search and realized that this guy's already pled guilty to these to these offenses. And he probably thought

that Ephraim is trying to entrap him into something in order to get a reduction on his sentence. And he probably thought, well, I'm not going to let myself be entrapped. So he went to the ATF, the Alcohol, Tobacco Firearms Administration, the federal agency in charge of regulating arms. And he told him, hey, I got this convicted arms dealer who's trying to do an arms deal with me. What should I do? And the ATF said, oh, that's real interesting. Why don't you introduce one of our undercover agents as your business partner? And so he introduces him over the phone, and the undercover agent tells him,

well, you know, I'm the kind of guy who only closes deals face to face. So why don't you come up to Central Florida and we could shake on this? and do this deal. And Ephraim's like, oh yeah, I totally respect that. You know, I'm that kind of guy too.

You know, nothing like a good firm handshake to close a deal. And so Ephraim gets in his car, drives up to Central Florida, which he was not allowed to do, he wasn't allowed to leave South Florida, meets the federal agent.

The federal agent has like a brand new, like handgun. He knew Ephraim loved guns. So he has a brand new handgun, and he's like, hey, check this out. I got the latest handgun on the market. And Ephraim, you know, takes the gun. He's like,

oh, let me see that thing. I've been, reading about it, that looks so cool. He takes the gun from the federal agent. It's like, let's go off to the range. Because what can I say, you know, once a gun runner, always a gun runner, am I right? The federal agent

slaps cuffs on him. Wow. And he's like, you're under arrest, you're felon in possession of a firearm. And you can get, because he had already pled guilty, he was already officially a felon. You can get up to 10 years in prison if you're a felon in possession of a firearm. So he could have gotten

And because he violated his bond in South Florida, they didn't give him a new bond in central Florida. So he had to spend like a year in jail in county jail, which is pretty bad, waiting to get sentenced. And he could have gotten sentenced to 15 years total, five for the original fraud. And because he pled guilty, so they reduced it from 71 to one. Five for the original fraud and 10 for the gun charge. but he hired the best lawyers in Miami. He spent literally like $2 million on Roy Black's firm, who's the best lawyer in Miami.

And they negotiated it down to four years. And I think he got out in like three and a half years. Wow. And what about for your sentencing? So for my sentencing, I did everything right. I didn't go back into the arms business, did not get caught in a sting operation. I worked at my good citizen job at the food bank.

and the judge sentenced me to seven months of house arrest. So I got zero jail time. And what was that like for you hearing that just house arrest? It was like I heard the angel sing. Like, hallelujah. Yeah, like that. It was like, my entire life is different now. Because I was thinking, I mean, yeah, the federal agents, the prosecutor,

they say they're going to go to bat for you, but they were always stressing, oh, it's not up to us. It's up to the judge, right? The judge makes the sentence. decisions. So we're going to say that you cooperated and that you pled guilty and all this stuff and you should get it on the low end of the sentencing guidelines. But the judge makes the ultimate decisions. So, you know, like I've read horror stories where the judge is just having a bad day. And they're like, yeah, I know you told me to give him a lighter sentence, but I think

he deserved something more. So I could have gotten a max of five years. That was, at least there was the limit. I wasn't going to spend decades in prison. So there was that, which is a huge relief. I mean, It's very different to do five years than 20. But even five years is no joke. I mean, five years of your life is a good chunk of your life. I was in my late 20s at the time. And my daughter was almost four years old at the time. So it's like formative years.

And so when she finally said seven months' house arrest, which is what the prosecutors asked for. that's what they uh so my lawyer so the way it works is your your lawyer negotiates with the prosecutor on the propose what the prosecutor is going to recommend to the judge and my lawyer was like well you know we're going to try to get you zero jail time but we probably have to give them something right so let's recommend like seven months house arrest and he he said yeah they just accepted it didn't even negotiate it's like oh we probably could have gotten more it sounds like they didn't really care they really did it but they just had to do something

thing. So anything you've tried him, they're like, yeah, that's fine. We got to make some formalities here and give the media something to say we did a job here. That's, they weren't even planning on charging me in the first place. At least that's what they told me. But then they felt that they just couldn't charge Ephraim without charging. And Alex and me and Ralph.

What was it like under house arrest? House arrest? Well, I'll tell you, it beats prison. You get your own shower, right? Doesn't matter if you drop the soap, right? but yeah I mean it's it's a night and it's a totally different world you have you have your own fridge and you can just chill on your couch and see your family and friends can visit you it's not kind of nice I feel like Graham would love house arrest if you're a home buddy every day is house arrest

I barely leave the house as it is yeah well so when you're under house arrest you have like an ankle tracking device like they put like a thing on your ankle that tracks where you are and you can't like you can't if you come it, it'll send a signal to inform them that you've cut it and removed it. You have a probation officer who's in charge of monitoring you. I once went outside. I was living in an apartment at the time, and I went outside my apartment to, like, throw out the trash, and I get an angry phone call from my probation.

What are you doing outside of your residence? I'm like, I'm just throwing out the trash. You can't do that. You got to get someone else to throw out the trash. I'm like, okay. Wait, so is it that you literally can't leave the house, or is it like a radius around? your house. So there, I mean, it does have, I don't know exactly how much of the, how sensitive it is, like how much it knows once you leave, but apparently me walk into the garbage shoot.

That apartment building had a garbage shoot. It, it was enough for him to know that I had left my apartment. And then what happens if you need to leave for a fire or like an emergency? Yeah, I know, but like just. You know, you have to stay in there. Or like, you know, let's say you have to, you have to move and they tell you, you're a apartment says, hey, we're not renewing your lease. Right, right, right. Move and... So you could actually leave your house as long as you clear it with the probation

officer in advance. Okay. So you could actually have a job and you could leave for work. So I was, at the time, I was working as a massage therapist and I was going to school. So I just had to give him everything in advance, like a week in advance of when I was going to leave, and then I could leave the house. But I'd better be back exactly at the time I say.

And what happens if you hit traffic or something like that? Like if you then you get a very angry phone call and if it happens more than once then you are at risk of getting so So theoretically you could say I'm going to the grocery store next week for 30 minutes. Yeah I will be back within an hour. Yeah and that's okay. That's okay as long as you keep to that time got it. Yeah we went to the gym Equinox remember this and some dude had an ankle monitor on and I was curious like if you could go to the gym or do these things and it seems like yeah yeah I mean it's not so bad really It's just the biggest stress is just dealing with the probation officer. They tend to be dicks, but that's kind of their job. Did you wear pants all the time?

Yeah, to cover the thing, yeah. And a long sock going the other way. Can you shower with it on like no issues with water anything? It's completely waterproof, yeah, yeah. And how's it powered? Do you have to plug it in every down and then charge it? I think it had, you know, to be honest, I don't exactly remember. This is like 15 years ago.

But, yeah. I don't actually remember how it was powered. It might have been just like a built-in battery or something. Okay, yeah. Got it. Yeah, it wasn't like a high-power device. And it's just, it's literally just doing a GPS signal, which is relatively low power. And then what was it like for you on the last day?

Like the day you're done with house arrest. Oh, it was so nice. It was so nice. It just felt like, you know, I'm finally getting a new start at life. I was out of the legal system. I really wish the, I, I, I, I, I wish the justice system on nobody. It's just a nightmare to deal with.

It's just like it dehumanizes you. And it's just, it's soul-crushing experience. I mean, like even small things. Like, like, I mean, being on house arrest is a completely different world than being incarcerated. I'm not even making the comparison. Being incarcerated is a thousand times worse.

But even just being on house arrest and having to deal with the justice system is a soul-sucking experience. I mean, you have to go, you have to deal with the guy. always always where you are. You can't have anything that's out of your schedule. You have to go in and get drug tested every week. And like they always make you wait for everything.

So like you have to be at the thing to, at the, at the courthouse or whatever to see your probation officer. But they'll make you wait two hours, even though they say, be at this time, but then, okay, now wait for two hours. And they're like, okay, I'm just waiting on my ass, doing nothing. You know, it's just like, it feels like it's just sucking away your life. And what part did the movie start to come into play with this? So the way the movie happened was after the New York Times published their article,

I was getting phone calls from all the journalists, as I said. And my lawyer told me, don't speak to any journalists. But then I got a phone call from Rolling Stone. He left me a voicemail. I was like, hey, this is Guy Lawson. I'm a journalist from Rolling Stone. I'd love to talk to you. This is a perfect article for Rolling Stone.

my editors are really interested in me writing this article. And I told him like, hey, look, I'm a musician. I've always, I've played guitar. I'm a singer-songwriter. I've written music. I've always dreamt of being in Rolling Stone, but just not for this. And he said, well, you know, maybe this will help you, you know? Like, I'm happy to write this article about the story.

And I said, well, my lawyer says I can't really talk to any journalist. And he said, well, let me speak to your lawyer. I actually used to be a lawyer. maybe I can work out a deal with him. So he talked to my lawyer, and he committed to my lawyer that he wouldn't have the article published until all legal jeopardy was passed. And my lawyer said, well, you know, as long as he commits to that and follows that, which I think he will because he's a journalist for Rolling Stone, then it's fine,

as long as he doesn't publish anything before all legal jeopardy is passed. And what he meant by that is I'm out of the justice system. So it took three years until he was able to publish that article. So he interviewed me. He interviewed Ephraim briefly, like I think one or two interviews, and then Ephraim decided that he wanted to do his own thing and he didn't want to talk to any journalist. So he based most of the article on his interviews with me,

and he also interviewed people who worked in the government and got their side of things. And he dug through a lot of the court documents from Ralph Merrill's trial because a lot of discovery brought a lot of internal documents to light, and that's how we discovered that the Army knew about the Chinese ammo the whole time because those emails came out. And so he did a lot of digging. And in 2011, he published this article in Rolling Stone,

it was one of the longest articles of Rolling Stone had ever published, because he kept them reworking the article over the years, and it kept them getting longer and longer as he discovered new things. And the article got the, attention of Todd Phillips, who was the director of the Hangover movies. And he saw the article and he was like, this is a great story. I could really make a cool movie out of this. But then he decided that Hangover 3 was a surefire moneymaker. So he decided to do Hangover 3 first. And then in 2015, started filming War Dogs. And that's how the movie War Dogs came. What was it like when the Rolling

Stone article came out that paint you in a different light? Do you feel like that article was fairly written? I thought it was mostly fairly written. I thought it was by and large accurate. I think he exaggerated a little bit of our stoner mannerisms because he thought it would be cooler. He's like, yeah, bro, pass the joint, you know? Like, he uses some, like, slang. I forgot what it was exactly.

He uses some slang that is not, like, native to South Florida. Like, nobody says, like, refers to weed in that way. And, like, he used, like, some of his own slang. So, like, he did a few, like, ed. that's to like with the dialogue and stuff. But I thought by and large it was mostly true. Got it. Yeah.

And how do they approach you with a movie? Because my understanding is, as you said, they don't need to pay you anything to use your likeness, which I find insane. Yeah, it's crazy. Yeah. So the way it works in the United States is that because you have the First Amendment freedom of speech,

as long as you are a public figure, which they consider to be anyone who's been written about in the newspapers. So you are a public figure. Which they can write about you without. Yeah. I mean, as long as it's in the public interest, right? So, yeah, and journalists can write any story he wants, right? About you for any reason.

And so as long as you're in the public record, you are considered a public figure. And because you're a public figure, your name can be used in any fiction in any way without, with zero compensation. But how is that not defamation if they don't take your name and they paint you to be like, They say you're selling heroin and mistreating women and children and puppies. Yeah, they could do that. You know, worship the devil. But let's say that damages you.

And now all of a sudden they paint you in this light that you were this horrible person. Isn't that defamation to some degree if now all of a sudden that impacts your life and they've painted you to be a character that you're not? It would definitely damage your life, that's for sure. There's got to be repercussions on that. But in the United States, there's very strong protections for freedom of speech, and the freedom of speech protection extends to art. And art is fiction.

Fiction can say anything they want. In the UK, they have much stronger libel laws, much stronger defamation laws. So if you're a UK citizen, you can probably sue. But in the United States, you've got nothing. Yeah, they don't owe you any. They can say anything they want about you. They don't have to give you a penny. They could use your real name in any movie in any way they want.

As long as you're considered a public figure, that's really the only requirement. Did you get paid anything to be a part of the movie? I did. Were you involved in the writing aspect and creation? So the way it happened was they optioned Guy Lawson's Rolling Stone article. So they said they were going to base the movie based on that article. And then they offered me a deal where they would buy my life rights, they call it, the rights to my life story. They didn't need to do that.

They didn't have to pay me anything or buy my life rights. They still could have used my real name, as they did with Ephraim. But they wanted my cooperation because they figured that it would be a lot, it would be a better movie if they had some insight from the inside. And so the writer, Stephen Chin, the screenwriter, flew down to Miami and said, stayed there for like a week, a week and a half. And we met every day. And he would like record our conversations and interviewed me. And I gave him a huge amount of stories and information. And he based the script on those interviews. How accurate was the movie to real life? I would say it's about 70% accurate. It's mostly accurate. But there's big chunks of it that are not accurate.

One thing everyone asks me is was the scene going through the triangle of death. Was that real? Right? Because it's like so crazy. And the truth is that it is real. However, it didn't happen to us. It happened to the writer, Stephen Chin, the guy who wrote the screenplay. When in, I think it was in 2003 or 2004, he wanted to write a screenplay.

The reason he got the contract to write the Ward Dog screenplay, screenplay, it's because he had written another screenplay called Iraq Iraq about another two federal contractors who were actually in Iraq, doing business in Iraq. And he wanted to go interview them in Iraq. And so, of course, there were no commercial flights going to Iraq. So he flew into Jordan, and he hired a Jordanian driver to drive him to Baghdad from Jordan. And his driver stopped in Fallujah to get gas because no one was manning the gas stations. So he was able to get free gas. And then he got chased by insurgents and got shot at and got saved by the U.S. Army. That whole scene is real.

But it happened to Stephen Chin. It happened to the screenwriter of the War Dog's screenplay. So when he was writing the screenplay, Todd, the director, he was saying, you know, these guys are just sitting behind a desk too much. We need more action. This is Hollywood. So why don't you put your story in there, the one where you got shot at by insurgents in Iraq?

And so he put his own story in that. Yeah. How do you sell your life rights? What does that entail? So there are agents who specialize in this kind of thing. Generally, there are people who are like literary agents. They'll try to sell like the story to a like an article or a book. And Gie Lawson, the writer of the Rolling Stone article had an agent who shopped the article around.

And that's how it got to Todd Phillips desk. and once they decided to option his story, they decided they wanted my involvement, and that's when they offered me a deal for my life rights. Have you noticed a lot of external or like tangential benefits from the movie that have occurred? Like, for example, have more doors opened up for you since the movie did paint you in a different light? Well, I'm here on a podcast with you guys, so that's pretty good, right? Sure.

You know, that's opened up a door here. I mean, I've had a few negative effects from it. Mostly, like, I've had a few people. So in my current, my current main business is, and we can get into how we got into that. But I create products for musicians. I run a company called Singular Sound that we make tech products, high-tech guitar pedals. And I had one particularly famous artist who, who was very, who loved our pedals.

I mean, he was really into, I mean, we make very innovative pedals, if I do say so myself, you know, but it's very unique stuff all patented and high tech. And, and so he really loved our pedals, and he really wanted to be an endorsing artist. And he had not, no, he didn't know. I thought he knew,

but, like, apparently he was getting ready to do the review and the endorsement. And then he found out about Wardogs, and he was like, well, you know, my fan base is like leans on the real anti-war hippie side so I can't really associate my brand with you was this an artist that you looked up to yeah no he was a fantastic artist someone I admired a lot and I'm not going to say his name you know but but he was a very well known in the music very well respected in the musician community and he's like one of these musician musicians

that people who are musicians really look up to. And yeah, no, that definitely hurt. Now, when that happened throughout the entire process, did you have a moral objection to selling war-related objects? So I had, there were definitely times when I was like, as far as my relationship with Ephraim goes, I was like, what am I doing with this? with this, you know, involved with this guy, right? Because there were some things he did that were

extremely concerning, to say at least, to me. One example, I mean, business-wise, obviously, personal-wise, there was a whole bunch. But like, but business-wise, early on when I first started working with him, he, through one of his contacts, while I was working on, like, the propane contract, he got a request to arm the king of Nepal. The king of, right? The king. of Nepal at the time was facing a he had a lot of protests in the streets pro-democracy protests anti-king anti-monarchy protests

and the king was shopping for attack helicopters riot gear heavy machine guns and Ephraim was just so thrilled he was like we're gonna put together a save the king package and I told him I'm like are you sure that's legal because it sounds like the state department would not approve of you saving the king

and helping him mow down pro-demon democracy protesters. And even if it is legal, it's kind of fucked up, you know, that you shouldn't be doing that. And he goes and he's like, just keep up working on your fuel contracts, bro. You leave this to me. And I was like, whoa, I'm like doing, I'm like living with this guy practically and doing business with him. I'm like, you know, as connected as I can be, you know, business wise and even personally

at that point. And this is what he's doing. And I was like, should I be doing this? because, you know, do I want to be dealing with somebody who is so cool with doing that? And so I really questioned myself there, and that was like a real moment of uncertainty and self-reflection. And I told myself, well, he's doing what he's doing. You're not going to be involved with that. I'm not going to be involved with that.

So I don't have responsibility. I'm not doing that deal. And anyways, I'm just going to put my head down. I'm going to work for maybe a year or two. Make a few million dollars. I'll be out. And I'm not going to deal with this guy anymore. And so if I could just get through just like this bit of hard time,

then I'll just make some money. And then I could, I'll be set. I'll be set for life. And I could pursue my dreams. And I wanted to be like a rock star. I'd be able to like start a music career and all that. And of course, these days, I think, about it and I'm like well what if I had made

$15 million on that deal would I have just walked away from that? Maybe I wanted to make 50 million or 100 million. Like when do you walk away from something like that? So to be honest I'm pretty glad that it ended up the way it did and I can say I didn't make a penny from that business

not for lack of trying right I'll take responsibility for that but all the things and maybe this comes off as me making excuses for myself, but the deals I did, yes, I know my association with him is not exactly something that I should have done,

but the deals that I worked on were all direct to the federal government. And I do believe that the federal government was doing the right thing at the time. So the people we were supplying arms to were fighting the Taliban. And I don't feel bad about that. I don't feel bad about arming Afghans

to fight off the Taliban. of that, which is a brutal theocracy who forbids women from getting education and kills people for getting out of line and wearing the wrong head scarf and stuff. I'm like, yeah, fuck those guys. You know? Has your view on war changed since then? People ask me, oh, do you feel like that you were, that it was the morally wrong thing to do to be in the arms business? And my philosophy on it is a gun could be used to kill somebody. It could also be used to defend yourself from getting killed. So it really depends. It's a tool. It's not a indicator of moral culpability. So it really depends on what the guns and the weapons and the ammo is being used for.

If it's used to defend people from someone who's trying to oppress them, I think that's a good thing. It's not only a neutral thing. It's a good thing. If it's used for bad things, then it's a very bad thing. We all would love for there not to be war, right? I mean, not all of us, right? Maybe Ephraim probably. He did love war because he made him a lot of money. I think in general, most people would agree that war is a bad thing and that we should not have war. Unfortunately, human nature, various reasons, there are wars, and you have to defend yourself when someone attacks you, and you need weapons to do that. because you can't defend yourself without it.

Also, how bad is government waste when it comes to spending? It could be pretty bad. It could be pretty bad. The issue with the government, and the reason they have all these complex rules, right, about federal contracting, and it's actually one of the reasons that a lot of companies are put off from doing federal contracting is that the government has a lot of hoops and loopholes, not loopholes, hoops that you have to jump through.

there are some loopholes and that's that's a something you learn while doing the business it's a big pain in the butt right to deal with the government and the reason for that is because they have a million and one regulations uh and they do that in order to reduce government waste because the people working in the government they're not spending their own money right it's not like you know you own your company and you want to get the best deal because it's your money and if you don't spend that. If you get a bad deal, that's money out of your pocket, right? If you're a government official, then if you spend more than you should have on that thing, it's not your money, right? If there is a situation where the government needs a particular thing, right?

Like, let's say laundry services or something, right? And they really need it badly. and so they're going to be willing to pay a lot of money in order to get it done in the time frame that they want. But that's not, it's, so people will see it as waste, right, because the government paid twice as much as they should have. But to them at the time, the timing was more important than the price. Yeah. Right. So there are, so people will be like, oh, you know, the government spent $600 on a roll of toilet paper or like NASA spent $2 million. to develop a pen that works in zero gravity while the Russians used a pencil, right?

That's a famous story. There are sometimes good reasons for that with the pencil, by the way, thing. What's the reason for that? Is that pencil shavings are horrible in zero gravity. It gets into all the filtration systems and ruins your spacecraft. So you can't have... Don't you have those little sharpeners to just kind of trap it? I had those in...

Yes, but there's... but little flakes in zero G can flake off and get into the system. You can breathe it in and it could be a real nightmare. Got it. So, yeah, I mean. I didn't know that. Yeah. I still feel like there's other ways around it, but.

I mean, maybe, but and maybe there is, but they made that decision that we need this. So therefore they, they, they, it turns into like, okay, these are the requirements. How much money is required to get to those requirements? and that's where you have situations where you have what appears to be gross overpayment and occasionally it is gross over payment

but sometimes there are other factors like maybe there's only one bidder there's only one there's a huge supply shortage and this is the only guy who has it and he knows it and because the system is that they'll take the best value he knows he's the only bidder he could bid whatever he wants right

and the government has to take it because he's the only game in town so the government's don't needs it and they have unlimited money practically right they print the money so they're willing to pay whatever it takes to get that thing yeah we've heard stories about just the government giving budgets and if you don't use all of it you're not going to get the budget in the next quarter so it's like you want to use all of it yeah and then say oh we need a little more yeah more money the next one that is a big element of it that is a big element of it because if you don't lose if you don't use your

budget they reduce your budget the next year so yeah there is an incentive for the government officials to use of their budget. But they do still have to do it within the guidelines and the rules of the contracting system, which is why those rules were set up. How do you think the government is flawed? And what changes would you recommend they make to operate more efficiently? They could definitely simplify things a lot. It's actually quite complicated right now. And I think that it's so complicated because there's layers of rules that get built on top of layers of rules that get built in top of layers of rules. And there's a lot of different competing interests, right? So, for example, there's something called the Jones Act.

Any stuff that is delivered to the government within like the United States has to use a U.S. built and operated vessel. Right? Now, the United States doesn't really build that many ships anymore, right? So that law significantly increases the cost of things and complexity of that operation. But that law was put in, I don't know, like that early 1900s, but they just never got rid of it. So it's like a law that has just been on the books and that everyone has to follow and is just a huge pain in the butt and significantly increases costs. And there's another law that a certain percentage of clothing that you deliver to the government,

the cotton needs to be grown in the United States, and the labor needs to be done in the United States. And now a lot of this clothing isn't even manufactured in the United States anymore. So that stuff also increases the cost of the government because they have all these rules that you need to follow. And it's because you have all these layers and layers of rules that have been built up over centuries, it's pretty complex to deal with the government, which scares off a lot of businesses. And that's why a lot of businesses don't, they don't want to deal with the government. And that is actually a big reason why there's a huge opportunity for middlemen like us, right? Because the government wants to buy X, Y, and Z. And some of those items,

the companies that make them, don't want to do business with the federal government. They don't want to deal with it, right? So it opens up the opportunity for a middleman to make them a better offer and, you know, jump through those loopholes. So what's changed since the whole Expozaa on that article that came out in you. Has the government changed the way they do contracts? So I've been banned from doing government contracts for about 15 years. Recently got off the banned list. I think it was in 2022.

But I haven't gone back into government contracting. But from the people who I talk to who are in government contracting, some of my new business partners, say that there's not much change. It's pretty much the same thing. They changed the website, mainly made it worse. But it's almost the same exact system. If someone wants to copy what you were doing, how do you learn how to do that?

What do you look for? The best thing to do is to specialize in something that you know really well, right? But you have to learn the government system, which is why I started a new online course called War Dogs Academy. I partnered up with two guys who were actually inspired by the War Dogg. movie to start their own government contracting business. And they contacted me because I have a lot of people who contact me. They're like, oh, you know, I'd love to do what you did.

Teach me what you did. I'll give you 90% of the profits. Just teach me everything. And I'm already, I'm doing other businesses. I don't have time to teach every guy who contacts me. I have literally hundreds of people contacting me. So a guy named Logan contacted me out of the blue and said, you know, I watched my partner James and I, we watched the movie War Dogs when we were 21 years old

and we were super inspired by it and we figured if these guys could do it, why can't we do it? And so, you know, I just wanted to let you know that we were, you know, you were very inspirational to us and we now have a multi-million dollar government contracting business. And they wanted to expand their business into areas that I was familiar with like the arms business. And I said to them, well, you know, you guys are up to date. You know all the government contracting system. I haven't done this in 15 years. But why don't we start something to teach people how to do this? Because I have a lot of people who want to learn how to do government contracting. There's $6.7 trillion that the government spends. So there's an enormous opportunity. One of the

biggest challenges in government contracting is finance because you need to pay your supplier for the items that you want to supply to the government. You need to pay the shipping company and then you need to wait 30 days, right? So it's a big stumbling block about that people fail when they, even when they win the contract, oftentimes they can't deliver. So we have a network of investors who want to fund government contracts. So not only are we going to teach people how to do government contracting, we're going to support them to actually build the business and be successful at it and build it for the long term in the right way, in the complete legal way, so that it actually lasts. What's the ROI for investors? So like, what's the investment look like?

Logan and James, when they won their first contract, they got loan sharked hard. For two months of financing, they borrowed $90,000 and they had to pay $37,000 in interest. So that, I mean, that's loan shark rates. You know what I would love to see is, you know how there's a website where you could bid on contracts, a website where investors could bid on investments like that. That's a great idea. You know? Yeah.

I think I don't, I've got to make it, great. Dude, imagine that because I'm thinking to myself, if they're getting pitched at like 40%, I'm like, hey, I would take a risk at this for 30%. Right. And then maybe Jack is like, you know what, I like this. I'll do 27. And then you bid it down, but the investor's going to be happy with it. And they're going to be happy because they get a better rate.

Right. No, that's true. That's true. And we will probably implement some element of that into our War Dogs Academy community. When's it launching? When's it launching? Yeah. Just put the money in.

So our current goal is to launch in mid-February. Mid-February? Yeah. We're planning on launching in mid-February. people can sign up to the mailing list now to get informed of when we're going to launch. But yeah, we're almost finished with all the course materials. We're just polishing it at this point. Cool.

We'll put any links down below. Yeah. When is the last time you spoke with Ephraim? Maybe in 2015, 16, something like that. We had a deposition. And he walked in and he's like, hey, great to see you. I'm like, fuck you. You know?

Like you owe me millions of dollars. Now you're pretending to be my friend. You know, go fuck yourself. So, you know, that was pretty much it. How was he able to keep his money? Do you know how much money he kept by the end of it all? So I estimate, because I know how much he delivered, right? I know he delivered around $67 million on that contract.

And he got paid for it. And he was making on average like a 20% margin. So he probably made, you know, what is that? like $15-ish million. But part of his pleading guilty, he wouldn't have to relinquish any profits. When you are convicted of fraud, right? They base the penalty on how much money you defrauded people out of.

Now, the government didn't get defrauded out of any money, right? In fact, they saved $52 million. They would have saved $52 million if they had kept going the whole contract. So the only claim of financial loss that the government had Was the cost to cancel his contract And put it out for bid again And they estimated that to be I think it was like like about 300 something thousand dollars

That's what they estimated at So he had to pay that back to the government It's about like 300 something But he got to keep everything else And how did Ephraim respond to you When you kind of gave him the cold shoulder When he was trying to be warm to you He was like oh

And you don't have any desire whatsoever to see what he's up to or to contact him. I mean to like hang out with him and talk to him? Not even not to hang out, but just to contact him and just like still. I mean, I've, I've no desire to be in contact with him in any way. If he came to me and said, hey, David, I feel really bad about what happened. Here's all the money I owe you, right? I hope we can put this behind us. I would give him a hug and I'd say all this forgiven.

How much would that be? If he's watching this right now and he's like, okay, he's taking notes. Yeah, about $5 million. Okay, so we round up to $5 million and an apology. Yeah. And a hug. Then we'll be best friends again. You'd hang out of them, smoke some weed maybe.

Absolutely. Absolutely. I don't think it's ever going to happen. You know, everything I know about him is he's not that kind of guy. But if he has changed that drastically as a person that he would be willing to actually apologize and to make amends, including financially, obviously, because that's what really counts, because he's willing to say anything, you know, then yeah, absolutely. I don't, I really don't have, like, hatred for him or anything. I used to. I'm not saying that I'm, like, some sort of saint or anything. I used to hate his guts. There was time when I seriously thought about killing him, you know? I'm not that kind of guy. But, like, I hated him that much. You know, when someone steals, you know, all the money that you've been working for for two years and you thought was going to set you for life and you're like, you know, about to go broke and got a kid to feed, you're pretty fucking pissed, you know? You know, you have some pretty bad feelings towards that guy, right? But, you know, 15 years have passed. Sure. And I'm in a pretty good situation in life now. I'm very happy with, you know, where I am in life now and my businesses are going great. I've got new businesses. like Ward Dogs Academy coming up. And yeah, so I'm doing great in life.

I don't really harbor like resentment towards him. I, you know, I don't have, I don't think about him really, except when I'm telling the story. But if he wanted to make amends, that's what he has to do. He has to pay me the money he owes me and apologize and admit he was wrong. And then we'll be best friends again. Would you ever go to business with him again? No, never.

But he apologized, gave you the money back and say, hey, listen, I got this new business idea. You're the guy for it. I changed. Here's proof. Would you do it? That would be a tough call. I mean, I will say that if he actually apologized and paid me the money he owed me,

I would be so incredibly shocked that something seriously changed. Yeah, that he's like a really different person now, which would completely blow my mind, right? I would be so incredibly shocked that I would actually consider it. I don't know if I would, but I would very strongly consider it. And he's going to follow it up. with we just need a five million dollar loan you're gonna you're gonna no no I'll tell you if I did that I would lawyer that deal out the ass I mean my I would probably hire two different law firms you're gonna just check each other's work to make sure

I'm covered in every angle gonna roll it in though fund this five million yeah and then it's gonna turn it to 20 no I would never do that I would never throw my money in there but I would I would consider going back into business with him if he apologized paid me the money I had and of course I had the best lawyers in the business to analyze that deal broker this and like Bring Ephraimon and to see if we could make something happen. It would take $5 million. Yes.

I know, but I'm just saying if we could convince him. Why do you think he'd? Oh, because he pissed people off and he doesn't want the danger of going on a show. Yeah, he doesn't want to be. He doesn't want people to know what he looks like, you know, I imagine. Did he change his name? No, I don't think so. Imagine it's a pretty.

Yeah, it's not a common name. But he, I believe he never rents an apartment under his own. name. And I know that because Ralph, our investor, tried to sue him because he screwed Ralph, like he screwed everyone else. He literally stole millions of dollars of Ralph's money. Ralph invested, I think, $1.5 million

into AEY. Not only did he not give Ralph the profits that he owed him, he never even gave him the principal investment back. Yes, he literally stole all of Ralph's money. Ralph was destitute. Like, he's an older guy. He really destroyed his life. And so Ralph was

trying to sue him, but he just couldn't find, he couldn't serve him because he just couldn't find where he lived. Like he hired a private investigator. That's insane. Yeah. So he, I think he like rents. He could have moved somewhere. No, no, he was living in Miami.

We knew that he was around. So yeah. You have to go to such extreme lengths like no social media. Oh, no, he has no social media. Wow, yeah. He has an Instagram account that, I think, hasn't been active since like 2017. Yeah, but like not anything in your name, nothing registered to you. Yeah.

Electric bills. car insurer like everything has to be. Is he still doing the contract business, do you think? So the last I heard, and I just heard from people who, you know, friends of friends, is that his main business now is funding lawsuits. No way. Yeah, because he's been sued so many times and he sued people so many times that he knows the lawsuit industry really well.

And so he funds lawsuits. And I'm sure he takes all the money. So I would never want him to fund my lawsuits. Wow. against him that's a creative business because lawsuits are very expensive a lot of people have claims

that they just can't afford to pursue you know I mean that makes sense yeah no it's a good business it could be a very good business as long as you know what you're doing right if you know the legal system really well and you know the merits of a lawsuit

and how strong it is which I'm sure if he gave the lawsuits the same attention as he did the arms government business I'm sure he could sniff out this is a good case 80% win rate I'll fund this yeah I'm and he's probably

gonna take 90% of the money or more yeah because otherwise they get nothing exactly you know it's like would you rather 10% of something or 100% of nothing and then he'll probably take the last 10% at the end somehow you know so I'm sure he does yeah no I'm sure he's very successful

I've no doubt that he's making a lot of money and some of that money's mine but he's sitting on it you know what can you do. I'll tell you, my, I would have a, a total head explode emoji type of situation if he actually apologize and paid me the money. If anyone knows Ephraim, this is what it takes and we would love to help. I know people who know him. I mean, I, the people who who still see him once in a while, by all accounts, he's the same guy. So I could be wrong. I hope I'm wrong. I honestly hope that he's grown as a person and become a better person and a less damaging person to be around

and stop screwing over everybody and burning all his bridges. I really hope. And that would be a great thing for everybody, not just him. I mean, it would be particularly good for all the people he would have screwed over. But I really hope that's the case. I just highly, highly doubt it. All right. Thank you so much, David, for coming on the show.

I really appreciate it. Yeah, my pleasure. It's such a pleasure. Likewise. Thank you guys for watching. Check out the links down below in the description. our lovely sponsors and also all of David's links. Thank you so much.

Until next time.