The Real Story Behind the Movie War Dogs

A semicircle of balding military bureaucrats glowers across a mahogany desk at two 20-something stoners from Miami Beach.

"Frankly, we were a tad concerned with your performance history against a deal of this size," one of the bureaucrats intones.

"But after meeting you two face-to-face, we feel like we're in good hands on this one," his nearly identical partner says.

"Not to mention your bid was far too attractive for us to pass up," number one adds.

"You two boys lowballed the entire industry!"

"You guys came in $53 million lower than the nearest competition."

The two bros stare at each other, wide-eyed with shock. They've won a $300 million contract to deliver ammunition to the Afghan army. Now they just need to figure out how to pull it off.

The scene is from War Dogs, the Warner Bros. film that opens August 19 and stars Jonah Hill and Miles Teller as pot-smoking arms dealers. And it's very near the truth of what actually happened to a trio from the Beth Israel synagogue in Mid-Beach.

For a few delirious months starting in 2007, Efraim Diveroli, David Packouz, and Alex Podrizki were at the center of a massive international gunrunning enterprise. They moved Chinese ammunition through Eastern Europe to the front lines in Afghanistan. But the plan spectacularly crumbled after a military investigation, scathing international headlines, a mysterious death in Albania, and, eventually, federal charges that shattered their lives.

"Efraim's behavior was really a cry for attention from a severely disturbed young man."

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War Dogs covers that impossible-to-invent narrative in Hollywood style. But in real life, the old friends and their former arms-dealing associates are still at war. Podrizki and Packouz are firing back at Diveroli, who in a new memoir shifts much of the blame for the failed enterprise onto them.

"It's important that everyone know Efraim's book is a work of fiction," Packouz says. "It's the work of a megalomaniac, a damaged person."

In federal and Miami-Dade County courtrooms, millions of dollars are still on the line. Packouz and Ralph Merrill, the group's former chief financier, are suing Diveroli for money they say they're owed from that ill-fated $300 million contract with the U.S. government. Both say Diveroli walked away from prison with tens of millions in his bank accounts.

"He burned me for all of my principal plus all the years of interest," says Merrill, who contends he lost his life savings — $1.3 million — to Diveroli. "I'm in the poorhouse now, living off social security and whatever I can get from relatives."

Diveroli, though, says he's the one getting a raw deal. Fresh out of federal prison, he's ferociously fighting Packouz's legal claims. And he's suing Warner Bros. — he says the studio stole the idea for War Dogs from his memoir, which he self-published in June under the title Once a Gunrunner.

"I may have been a rebellious kid, but I overcame my obstacles, worked hard, built my business," writes Diveroli, who declined to comment for this story because of ongoing litigation. "Life was good, until some self-righteous New York Times reporters manipulated the facts... I love my country and I'm a proud American, but the government fucked me."

The untold story of the aftermath of the three young Miamians' arms-dealing escapades is almost as dramatic as the fictional tale that's about to hit big screens.

Efraim Diveroli always knew how to be the center of attention. At synagogue, the chubby youngster would run up to older neighbors, yank off their yarmulkes, and run away laughing hysterically. After the bigger kids inevitably chased him down — and usually pummeled him — Diveroli would wait a few minutes and then do it all over again.

Local legend has it that one Friday evening, the young rascal even snuck into Beth Israel, the storied synagogue just off Arthur Godfrey Road in Miami Beach, and flipped off the lights. Because Orthodox Jews aren't allowed to touch switches during the Sabbath, the whole congregation allegedly had to pray in the dark.

To Podrizki and Packouz, who were four years older than Diveroli, the incessant pranks were more often childish than hilarious. "I thought it was kind of stupid, honestly, but my younger friends thought it was pretty funny," Packouz says. "I pretty much just put up with him."

Podrizki, whose narrow eyes and fine hair resemble Thom Yorke's, and Packouz, who has a clean-shaven pate and intense, aquamarine eyes, bonded early as outsiders in their Jewish neighborhood ("the shtetl," as Podrizki jokingly calls it). Podrizki's parents didn't fit the mold; his dad, who was French, met his mother, a Mexican Jew, while studying medicine in her homeland. Packouz, a guitar-playing pot smoker, had never bought into the area's luxury-car, clean-cut aesthetic. By the time they were teens, the pair had adopted torn jeans and grunge music. They liked to hang by the ocean at night.

By then, Diveroli had grown up a bit and joined the clique. He also came from an eclectic background. His father and one of his uncles sold weapons to police departments. Another uncle was Shmuley Boteach, a celebrity rabbi who palled around with Oprah, penned the bestselling book Kosher Sex, and these days backs Donald Trump's campaign.

"Efraim was a smart guy and a very funny guy," Podrizki says. "He had a very cynical sense of humor."

In his memoir, Diveroli says he started chugging wine on the sly as a 12-year-old. He smoked weed by the time he was 15. "I loved it and went strong on the good herb for the next ten-plus years," he writes. (In court, a psychiatrist would later testify that his drug use was tied to mental illness. "Efraim's severe acting-out behavior was really a cry for help and attention from a severely disturbed young man due to untreated mental health and developmental problems," Dr. Steven Strumwasser testified in a 2011 hearing. Diveroli slams Strumwasser's analysis in his book, writing, "I hated the guy.")

Diveroli was kicked out of private Hebrew school at the age of 14. Packouz and Podrizki went to different high schools. After they graduated, Packouz moved to Israel for two years while Podrizki studied political science at Florida International University and then moved to France, where he taught English to the military. The teenaged Diveroli went to Los Angeles to join his uncle's gun-dealing business — an introduction to the industry that would make him infamous.

By the time he returned to Miami in 2004, the 19-year-old Diveroli was ready to strike out on his own in the weapons business. And he wanted Packouz, who had left college to work as a South Beach massage therapist, to join him. "He said, 'I always thought you were a smart, organized guy, and I need a guy like you in my corner,'?" says Packouz, who agreed to work for Diveroli's company, which was named AEY — the initials of Efraim and his siblings, Aaron, Avigail, Avrohom, and Yeshaya — in November 2005.

The duo's insane exploits over the next three years form the backbone of Arms and the Dudes, a 2015 book by Rolling Stone writer Guy Lawson, which inspired War Dogs.

"I should never have gotten involved with anything to do with arms, with war."

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So how did a dropout and a South Beach masseur get into the global weapons industry? In short, Diveroli learned how to game the Department of Defense's online bidding system at a time when the military was desperate for cheap munitions in Iraq and Afghanistan. The pair ran a bare-bones operation — AEY was literally just Diveroli and Packouz in a 300-square-foot office. They sourced aging weapons and ammo from Eastern Europe and Asia. It allowed them to regularly outbid respected defense firms. The orders were small at first: Kevlar helmets from Korea, 50,000 gallons of jet fuel sent to Wyoming. In those days, it was great, Packouz says.

"[Efraim] really is a good negotiator because he's a master bullshit artist," Packouz says. "He could look you right in the eye and say the sky is pink and say it with such conviction that it looks like he believes it."

But as AEY won ever bigger deals, his old friends say, Diveroli changed. "As he became more financially successful, he became more megalomaniacal. He had this mobster fantasy, that he was this big gangster," Podrizki says. "He started treating everyone like crap, trying to intimidate everyone."

By 2007, Packouz was fed up. But then, in January, AEY made its biggest score — the contract that could let Packouz walk away from the business wealthy enough to focus on his true love, playing music. In War Dogs, that moment is depicted with smirking Pentagon bureaucrats handing the young dudes the nearly $300 million ammo contract. In reality, the pair was back in Miami, celebrating with cocaine and bottles of Cristal.

Their plan to deliver ammo to the Afghans was deviously simple: They'd buy old bullets on the cheap in Albania and then ship them to the frontlines of the war against the Taliban. To finance the operation, Diveroli brought on Ralph Merrill, a retired Mormon gun manufacturer in Utah whom he'd met while working in Los Angeles. Merrill eventually put up $1.5 million.

But the pair soon realized they also needed someone on the ground in Albania. That's where Podrizki came in. He was multilingual, had spent time with the French military, and knew his way around Europe. However, when they offered him the job, Podrizki says, he hesitated. He opposed the war in Iraq. But he'd also always dreamed of becoming a foreign-aid worker. This seemed like one way in. He agreed, on one condition: that he'd deal with only Packouz — not Diveroli.

In Albania, Podrizki soon found a big problem: The ammo was all labeled in Chinese. The U.S. military has a ban on buying munitions from communist China. But Diveroli wasn't fazed: They wouldn't be breaking the rules, because technically the ammo came from Albania. That meant a new job for Podrizki: repackaging everything so that the bullets' Chinese origin was less obvious.

"I looked at the rules in front of me, and I saw it possibly, at worst, as a civil infraction," Podrizki says. "It was definitely bending the rules, but I figured [the government] didn't want to know."

For months, the operation went mostly according to plan — minus a clash with corrupt government officials and the Albanian Mafia. Thousands of crates of the repackaged ammo flew on Ukrainian jets to the Afghan battlefront.

The young Miamians anticipated their big payday. Diveroli and Packouz both moved into South Beach's bayfront Flamingo condo and bought luxury cars. As Podrizki worked in Tirana, Packouz and Diveroli spent long nights snorting coke at SoBe clubs.

And then, disaster struck. AEY botched a local deal, freezing a guy named Kosta Trebicka out of the repacking contract. The furious businessman then turned snitch, recording conversations about the repackaged Chinese ammo and blowing the whistle to authorities. He later met with a New York Times reporter as well.

On August 23, 2007, federal agents raided AEY's offices. By then, Diveroli and Packouz had already split, driven apart by the stress of managing the gargantuan deal. Podrizki, meanwhile, was stranded in Albania and panicked about the raid. Even worse, when he called Diveroli, he says, he heard his associate tell another employee in the background to lie — saying the office had been cleared out by a bomb threat. "Why is he not telling the truth?" Podrizki worried. "Is he going to try to have the whole thing fall on me?"

So Podrizki fled Albania — taking a boat to Italy to avoid the airport — and hired a lawyer to meet with the feds. Packouz, who was already fighting Diveroli for his share of the Afghan profits, also quickly decided to cooperate.

"David flipped on him because he stole his money," Podrizki says. "I flipped on him because he left me out hanging in Albania."

Then, in May 2008, the New York Times investigation into AEY splashed on the front page. The Times painted the young men's firm as a glaring example of everything wrong with the Bush administration's wars in Iraq and Afghanistan. How had these strung-out slackers, the three reporters who wrote the story wondered, possibly have secured a massive $300 million arms contract?

Podrizki and Packouz had hoped to avoid indictments by helping the feds go after Diveroli. But amid the uproar over the Times report, prosecutors in July 2008 charged the Miamians with 71 counts of fraud and conspiracy. Merrill was accused of similar charges.

Three months later, they got a heady reminder of the dangers ahead: Trebicka, the whistleblower, was found dead on an Albanian roadside. Authorities ruled his death accidental — the result of a one-car crash. But the arms dealers all believe corrupt government officials or the mob ordered the killing to shut him up. ("No one believed it was an accident," Diveroli writes in his book.)

Faced with hundreds of years in potential sentences and growing fears for their safety, Diveroli, Packouz, and Podrizki pleaded guilty. Merrill alone chose to go to trial.

All three felt they were being railroaded. Despite accusations about the Chinese ammo being shoddy, they point out, the Army never found evidence that the munitions didn't work. At worst, they say, they bent an outdated bureaucratic rule.

"I take responsibility for it," Podrizki says. "I should never have gotten involved with anything to do with arms, with war. But I don't think I did anything dishonest — certainly not criminally dishonest."

Efraim Diveroli's angry voice rises over a bugged, static-choked prison phone line. "The issue is, are you ready to get your hands a little dirty?" he demands of his father, Michael.

It's February 6, 2011, and Diveroli is just one month into a four-year prison term. He's still awaiting a second sentencing hearing thanks to his unstoppable need to wheel and deal. While he was out on bond the previous August, undercover federal agents had busted him for illegally possessing firearms while trying to sell leftover ammo.

But now he's sure he's found a way to get out of the slammer early. He wants to set up a local businessman in a sting operation. And he's requesting his dad's help, though he's wary of spelling his plan out too explicitly on the recorded line.

"This is a big game," he shouts at his dad, who seems confused by his son's words. "The only way for one chicken to leave the farm is for another chicken to come in... If [this guy] has to go to prison for life so that I can get one year off my sentence... that is what is going to happen!"


To Packouz and Podrizki, the exchange — which was later entered into the court record — contrasts with Diveroli's portrayal of himself in his new memoir. Along with other court testimony, the moment shows Diveroli bent over backwards to help authorities in hopes of lessening his own sentence, they contend. "In terms of trying to save his own skin, he went far beyond anyone else in this case," Podrizki says.

Long after AEY crumbled, Diveroli is battling in court on numerous fronts — over his memoir, over the movie about his notorious enterprise, and over the millions in profits from that fateful munitions deal.

Those conflicts all trace back to his time in prison. Although Podrizki, Packouz, and Diveroli all pleaded guilty to fraud charges, U.S. District Judge Joan Lenard allowed the former two to avoid prison. In September 2009, Podrizki was sentenced to five months of house arrest and ten months of probation; Packouz got seven months' house arrest and 14 months' probation.

Diveroli, though, faced a longer term as AEY's ringleader. And there was also that arrest for trying to sell munitions while out on bond. In January 2011, Judge Lenard gave him close to the max: four years in prison. "It's a sad day when anyone values their own self-worth by a dollar sign," she said at his hearing. Eight months later, U.S. District Judge Gregory A. Presnell added two years for the weapons violation while out on bond.

In his memoir, Diveroli contends Podrizki and Packouz sank their company by flipping. He wrote that Podrizki was "scared shitless" and that Packouz "brown-nosed" the feds and "blabbed about the Chinese ammunition." He writes that he ran into Packouz at a karaoke bar and screamed at him: "You got us all fucked up by running to the U.S. Attorney!"

But unsealed transcripts show Diveroli worked hard to help the feds. During an October 2011 hearing, Kevin McCann, an ATF agent, testified that Diveroli had personally met with agents twice to help them in other cases and that Diveroli's attorney had called multiple times to help his client snitch on fellow inmates.

In one case, Diveroli tried to turn in another prisoner for dealing drugs. (The guy told cops he was playing along only to try to appease Diveroli.) In two other cases, he tried to turn in inmates for offering to kill his enemies. "He want[ed] to set up a little scheme to do a murder-for-hire cooperation situation," McCann testified. That attempt also failed, when an inmate got spooked and told the feds that Diveroli had approached him about setting up a hit.

Diveroli's own attorney testified about his cooperation. "He made hundreds of hours of phone calls on behalf of federal agents to investigate possible violations of federal criminal law," his lawyer, Cynthia Hawkins, told the court.

None of those attempts went anywhere. But they get to the heart of Diveroli's character, Packouz and Podrizki say. "When he was negotiating, Efraim had one phrase that he loved: 'If the other guy is happy, there's still money on the table,'?" Packouz recalls. "That's the type of guy he is."

And that's a big reason Diveroli is entangled in three high-profile lawsuits, his former associates say.

The split with Packouz, his first partner at AEY, surrounds Packouz's role in building the company and landing the Afghanistan contract. Packouz says the charismatic but young and disorganized Diveroli could never have gotten AEY off the ground without him. "With contract work, the requirements are intense," Packouz says. "I was good at that. I'd been through Yeshiva, and I'm into studying very arcane documents for hours at a time."

In his lawsuit, which he filed in Miami-Dade Civil Court in July 2011, Packouz argues that he and Diveroli had agreed he'd receive 8 percent of all profits from the Afghan deal. In all, that amounts to about $1.2 million, Packouz argues. And despite the criminal case, he believes Diveroli has plenty of cash on hand. Before the feds shut them down, AEY delivered nearly its full order to the war zone, grossing tens of millions, Packouz contends. In the end, Efraim and AEY had to pay the feds only a little more than $1 million in fines and penalties.

But he says Efraim has never paid him a cent from that windfall. "I don't think he planned from the start to screw us all over, but that's how he operates," Packouz says. "It bothers him when other people are making money."

Diveroli has fought hard against Packouz's claims. In court, he disputes they ever had a written agreement on profit-sharing. In his memoir, he allows that he and Packouz concurred on an 8 percent cut and says he later offered him $275,000 to drop his lawsuit, though he didn't think it was deserved.

"You were a part-time employee... who only closed one very small deal, with my help, and dropped the ball on a dozen others," Diveroli claims he told him. Diveroli says he never paid up because his attorneys later told him not to give Packouz anything while the criminal case was active lest it look like "hush money."

"Diveroli was even willing to screw over his childhood buddies from his local synagogue."

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Merrill, the Utah-based investor, says his deal was worse. His agreement with Diveroli was clear, he says in an amended complaint filed in the U.S. Southern District of Florida in June: He put in $1.5 million to fund the ammo deal, and Diveroli promised to pay him half the profit plus Merrill's principal. But as money flowed in from the Afghan deal, he says, Diveroli schemed to cut him out. The young gunrunner claimed that the money wasn't actually enough to pay for all the ammo and that he'd had to bring in a mysterious second investor under onerous terms: a wealthy Ukrainian named "Danny," who demanded 70 percent of the profits. That would leave just 30 percent to split between AEY and Merrill.

Merrill agreed to those terms. But when the feds moved in and the deal fell apart, Merrill says, he learned the truth: "Danny" was made up, and Merrill's initial investment had, in fact, covered all the costs. (In federal court testimony, Packouz has confirmed knowing about the ruse.) Diveroli has paid neither the principal nor the profit Merrill deserved from the Afghan deal, he says.

He needs the money. Merrill's decision to go to trial on fraud charges didn't work out for the investor. His first trial ended in a hung jury in September 2010. But three months later, he was convicted on multiple counts of fraud and conspiracy to defraud the government. He got 48 months in prison and lost everything.

"Diveroli was even willing to screw over his childhood buddies from his local synagogue," Merrill says. "He reneged on what he promised Packouz, and he totally messed me over. He scammed me out of everything I had."

Diveroli has yet to file a response to Merrill's complaint. In his book, though, he praises Merrill as a "true soldier" for going to trial instead of helping the feds.

As he defends himself from the accusations that he ripped off his former partners, Diveroli is also suing Warner Bros. over War Dogs. In a 55-page complaint filed this past April in Tampa's federal courthouse under the name of his publishing company, Incarcerated Entertainment, Diveroli lays out a labyrinthine tale of duplicity.

The former gunrunner says by January 2012, as he served his sentence at Federal Correctional Institution Coleman — a low-security facility in Central Florida — he'd already finished his manuscript. Around that time, Diveroli says, Lawson — the Rolling Stone writer — began asking him for jailhouse interviews. Diveroli eventually agreed and shared his manuscript, with the understanding that it would remain confidential and the belief that Lawson would co-author a book with him about the case. Instead, Diveroli claims, Lawson used the material in his own book and then shared the manuscript with Warner Bros.

Later, Diveroli says, he was tricked into leaking the manuscript a second time, to the studio. Two producers — Shimon Spira and Elliot Khan — approached him in 2014 about adapting his still-unpublished manuscript into a film, he claims. But Spira failed to divulge that his father was a high-ranking Warner Bros. exec. Diveroli claims the pair gave the book to the studio despite signing a nondisclosure agreement.

Warner Bros. has declined to talk about Diveroli's lawsuit. But in June, the studio filed a motion to dismiss the case. Its lawyers dispute that Lawson improperly used the memoir, and they note Diveroli didn't point to any facts contained only in it. Indeed, reams of public court documents and news reports could have been used to shape the movie.

A judge has yet to rule on the motion or set a hearing date in the case.

Alex Podrizki and David Packouz pick at plates of falafel and French fries at a humid outdoor café facing the boardwalk in Mid-Beach. Just a few feet away, they had spent hours as teenagers smoking weed and joking around with Efraim Diveroli on the sand. They've pieced their lives back together after the federal indictments, and both say they're happier today than they ever were in the high-flying days of gunrunning.

That's not to say they're ready to let Diveroli off the hook, though. "He cheated me out of millions of dollars," Packouz says, shaking his head. "He cheated Ralph [Merrill] out of his life savings. I just believe he should pay me the money he owes me and pay Ralph what he owes him."

Their problems with Diveroli's memoir go beyond the description of the federal case and its aftermath. Podrizki says he's offended at how Diveroli uses gay slurs, calls a black employee "ghetto fabulous," and describes one black woman he slept with as tasting like "2,000 years of oppression" in the book. It also repeatedly describes Packouz as gay in an insulting way. "The book is quite racist and homophobic," Podrizki says.

Packouz adds, "I'm not gay, but I don't feel there's anything wrong with that. I've been a massage therapist in Miami Beach. I've had plenty of gay clients and plenty of transsexual clients. I've done that work for years, and he tried to turn it into this thing to demean me... It's really offensive."

"I told him: 'Don't expect an apology from me. I don't owe you anything."

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Soon the fictionalized account of their story will hit the big screen. Packouz and Podrizki have been condensed into a single character played by Mile Teller, while Jonah Hill plays Diveroli. Hangover director Todd Phillips co-wrote and directed the movie, which also stars Bradley Cooper.

Merrill, who isn't portrayed in the film, served 48 months and is now living back in Utah. He has filed an appeal in federal court seeking to vacate his guilty verdict. He says his defense attorney ignored key evidence that would have proven selling the ammo from Albania violated no federal laws.

"Our arguments were totally correct that AEY did not get the ammo from a Chinese communist military company and that the ammo was totally legal," Merrill says. "The whole premise of the government's case is false."

Podrizki and Packouz have both felt the sting of their convictions. Podrizki says he struggled for years to find work while dealing with legal costs. But he recently paid back his parents, who loaned him thousands of dollars. And he has found a new career as a commercial real-estate broker. "I'm putting together my life and trying to move forward," he says. "It could have turned out a lot worse for me. That's how I try to look at it."

Packouz, meanwhile, has made a remarkable comeback. While on house arrest, the lifelong musician became frustrated trying to record songs with drum machines. So he invented his own, combining a guitar pedal with a beat-maker.

After he raised $350,000 on Indiegogo, he began selling the machine — called the BeatBuddy — as a full-time job. "I'm at such a great part of my life right now. I want to leave this whole case behind," Packouz says. "I'm so much happier, being able to work in a business where I get to be creative and improve people's lives."

Podrizki and Packouz plan to fly to Hollywood for the premiere of War Dogs. Packouz even worked as a consultant on the film. (Merrill, who plans to catch the film at his local cinema, is moderately excited. "I just plan to take it with a grain of salt. It's entertainment," he says.)

Despite all the conflict, the two friends also hope Diveroli can move on with his life. The kid who started AEY was released to a halfway house in December 2014 and then moved into his own place late last year. Podrizki says Diveroli called him once after leaving prison. "I told him: 'Don't expect an apology from me,' he says. "I don't owe you anything."

Packouz says he has no desire to see Diveroli ever again. "I kinda feel bad for him," he says. "He based his whole self-image and self-worth on being successful at this one thing, and now he can never do that again... It seems like he's going to be sad forever unless he manages to grow as a person. And reading his book, he hasn't done that yet."

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Tim Elfrink is an award-winning investigative reporter, the managing editor of the Miami New Times and the co-author of "Blood Sport: Alex Rodriguez and the Quest to End Baseball's Steroid Era." Since 2008, he's written in-depth pieces on police corruption, fatal shootings and social justice issues across South Florida. He's won the George Polk Award and has been a finalist for the Goldsmith Prize for Investigative Reporting.
Contact: Tim Elfrink