How War Dogs Should Have Ended
Two guys in their early twenties managed to scam a $300 million contract with the Pentagon during the Iraq and Afghan wars. This might sound like the plot of a Hollywood movie—and it was, in the film War Dogs—but the real story behind it is even more astounding.
Over the next few sections, we’ll break it down. We’ll look at who these guys were, the environment they were operating in, and in what loopholes and oversights they managed to squeeze them through.
It’s a wild ride, but I’ll keep it simple, just like the game these two gunrunners figured out how to play.
Meet the Dudes
Our protagonists, known as the “two dudes” by Guy Lawson, the author who chronicled their story, had known each other since childhood. Both belonged to an Orthodox Jewish community but frequently skipped religious practices in favor of smoking pot and enjoying life’s distractions.
Efraim Diveroli was a high-school dropout and the brains behind the operation. Despite his rebellious persona, he was an exceptionally sharp businessman, spending his days browsing FedBizOpps—the U.S. government site for defense contracts related to the Iraq war.
David Packouz studied science at the university, did the masseur for rich LA people to raise some money. His ambitions were different; he was dreaming of being a rockstar, playing with his guitar and going to karaoke bars to practice his best performances.
Their bond was rooted in a shared goal: making money.
Diveroli’s pitch to Packouz was straightforward:
George Bush opened the money floodgates. I’m perfectly positioned to capture a lot of that money. I’m selling weapons and ammo to the government for the Iraq war.
When asked what kind of weapons, Diveroli replied casually: “You name it—AK-47s, RPGs, light machine guns, grenades, ammo.” Packouz was wary, noting the risks involved, but Diveroli brushed it off: “That’s what keeps the softies and cowards out.”
The Perfect Storm: War and Opportunity
Two inexperienced young men didn’t simply stumble into a massive Pentagon contract by chance. The Bush administration had decided to outsource significant military tasks to private companies, believing it would boost efficiency and reduce political issues. Instead, this approach opened the floodgates to massive government spending and widespread misuse of taxpayer funds.
Early examples revealed just how flawed this strategy was. The American corporation Vinnell, hired to train nine battalions at $48 million each, only managed to train one—and half its members deserted shortly after. Vinnell was still paid $24 million for the incomplete job. Similarly, Custer Battles, a small startup tasked with guarding Baghdad Airport, was caught drastically inflating invoices, charging over double the actual costs.
Even more shocking, a former used-car salesman was handed responsibility for a $600 million budget within the Iraqi interim government. He promptly wasted it on overpriced weapons that never arrived, Russian helicopters incapable of flight, and vehicles so inadequate they couldn’t navigate basic terrain.
Amid this chaos, the Pentagon decided to open the bidding process through FedBizOpps, aiming to increase transparency and competition. Suddenly, the door was open wide—even to someone as inexperienced as Diveroli. From his tiny Miami Beach apartment, Diveroli obsessively monitored FedBizOpps day and night, determined to seize any opportunity to enter the lucrative defense contracting game.
Let the Kids Play
But how did someone like Diveroli, with zero infrastructure and no prior experience, manage to get these massive government contracts?
Surely, there’s a system in place to prevent and control, right?
Well, not exactly.
Exploiting Loopholes and Blacklists
Brace yourself; we are going legal (or rather illegal), but I will try to make it easy.
Diveroli got his big break through because he was having really good prices, inferior to the competitors thanks to a certain “Henri Thomet,” a shady, blacklisted arms dealer flagged by the Directorate of Defense Trade Control, a watchlist with around 80,000 names of people involved in black-market arms deals. The list was enormous, and being on it meant extra scrutiny for the officials at the Pentagon.
Managing the huge volume of flagged entities was a nightmare.
With Alphaguard’s advanced monitoring technology, this is exactly where the War Dogs’ story should have ended—caught early and stopped cold. But, of course, that’s not how it went.
This kind of oversight was a headache of monumental proportions.
So, the Pentagon was indirectly sourcing weapons from illegal arms dealers?
Yes, the Army was fighting a war and needed the arms. No matter what. it had no time to spend in controlling contractors, and so it created a subtle legal exception:
Instead of tightening the rules, the Army relaxed them, setting the ruling system for equipping the Iraqi forces. They started with a preamble statement: “Notwitshstanding any other provision of law”.
Translation? The Army could ignore every other law, human rights laws, international treaties, and even restrictions of the Directorate of Defense Trade Control with flagged individuals.
This little loophole allowed the Pentagon to deal indirectly with even the most corrupt warlords.
When no one checks the playground
Creating a “Wild West” of contractors had its downsides. Sure, the Army managed to cut costs on materials, but it also opened the door for people like Diveroli and Packouz to play at being gunrunners.
To break into the game, the two didn’t hesitate to fake documents, bribe suppliers for low-quality products, and consistently fail to deliver on their services.
The result? more profit for them and a messy and tangled bureaucratic system failing to control.
This lack of oversight became obvious with the infamous $300 million contract awarded their company, AEY Inc.
Despite an Army audit, they failed to check Diveroli’s criminal history, the company’s repeated failures to deliver functional materials, and their shady supplier, Thomet.
Poor communication and low accountability within the Army meant critical red flags went completely unnoticed.
Easy Targets
Unluckily for the kids, their playing days were coming to an end.
The whispers of the competitors, complaining that no one could offer such low bids without doing something illegal, caught the attention of the Defense Criminal Investigation Service.
At the time, the DCIS was already overwhelmed with complaints of supposed frauds, extortion of warlords, and leaks of weapons ending up in the hands of the talibans.
Yet, they decided to focus all their efforts on the investigations of our two young dudes.
Why? They were the easy prey.
No one had to face the massive legal teams of big defense corporations like Boeing or General Dynamics or risk traveling to a war zone to uncover the truth. And, of course, no one wanted to upset the lobbyists or congressmen who received donations from these defense giants.
The war was raging, and the Defense Criminal Investigation had to do its part. Two twenty-year-olds looked like the best targets!
Final Thoughts
In the end, Diveroli received a four-year prison sentence, while Packouz was placed under house arrest after cooperating with investigators.
Yet their story wasn’t an isolated incident. In the years following this scandal, extensive investigations uncovered widespread corruption and mismanagement in defense contracting. Estimates suggest that between $31 billion and $60 billion were lost due to waste, fraud, and poor oversight during the wars in Iraq and Afghanistan.
This should serve as a wake-up call, especially as defense spending continues to rise globally, including within the EU. The War Dogs saga isn’t just an entertaining cautionary tale—it’s a vivid reminder of what can happen when critical oversight fails.
NB: The title is a reference to the excellent How It Should Have Ended (HISHE) Youtube channel that parodies popular films by creating alternative endings and highlight plot oversights.
