David Packouz (@DavidPackouz) is an entrepreneur, musician, co-inventor of Instafloss, and CEO of Singular Sound. He’s also a former arms dealer, whose story was portrayed in the movie War Dogs with Jonah Hill, Miles Teller, Ana de Armas, and Bradley Cooper. [This is part two of a two-part episode. Catch up with part one here!]
What We Discuss with David Packouz:
- How does an Orthodox Jew with 10 siblings become an international arms dealer?
- How federal government contracts work — and why some of them almost always go over budget.
- How corruption at every level of the Russian government hamstrings its military and stifles innovation.
- How David and his partner Efraim Diveroli got hooked up with lucrative government arms deals when they were barely adults.
- The countless ways in which Efraim is not as charming as Jonah Hill made him out to be in War Dogs.
- And much more…
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Please Scroll Down for Featured Resources and Transcript!
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Miss the conversation we had with counterfeiting investigator Kris Buckner? Catch up with episode 308: Kris Buckner | Who Does Counterfeiting Really Hurt? here!
Thanks, David Packouz!
If you enjoyed this session with David Packouz, let him know by clicking on the link below and sending him a quick shout out at Instagram:
And if you want us to answer your questions on one of our upcoming weekly Feedback Friday episodes, drop us a line at firstname.lastname@example.org.
Resources from This Episode:
- War Dogs: The True Story of How Three Stoners From Miami Beach Became the Most Unlikely Gunrunners in History by Guy Lawson | Amazon
- War Dogs | Prime Video
- David Packouz | Website
- David Packouz | Instagram
- David Packouz | Facebook
- David Packouz | Twitter
- David Packouz | YouTube
- Next Generation Music Gear | Singular Sound
- Efraim Diveroli | Wikipedia
- Types of Government Contracts | Government Contracting Academy
- NATO and the Warsaw Pact | History of Western Civilization II
- Lord of War | Prime Video
839: David Packouz | The Real-Life “War Dogs” Gun-Runner Part Two
[00:00:00] Jordan Harbinger: Coming up next on The Jordan Harbinger Show.
[00:00:03] David Packouz: So literally, 15 years ago, almost to the day the New York Times published this front page article about us, they had both mine and Efraim's mugshots on the front page. We did not look good.
[00:00:19] Jordan Harbinger: Welcome to the show. I'm Jordan Harbinger. On The Jordan Harbinger Show, we decode the stories, secrets, and skills of the world's most fascinating people and turn their wisdom into practical advice that you can use to impact your own life and those around you. Our mission is to help you become a better informed, more critical thinker through long-form conversations with a variety of incredible people, from spies to CEOs, athletes, authors, thinkers, performers, even the occasional former jihadi, four-star general, or legendary actor.
[00:00:47] And if you're new to the show or you want to tell your friends about the show, the starter packs are the place to do it. We got sets of episodes like negotiation and communication, China and North Korea, disinformation and cyber warfare, crime and cults, and more. Just visit jordanharbinger.com/start or search for us in your Spotify app to get started. As I mentioned before, we got an AI chatbot on the site. It's recently been updated to GPT-4, which is cool. It's a lot more useful. You can find any info from any episode of the show, any Feedback Friday question, any sponsor promo code, jordanharbinger.com/ai is where you can find it. I would love your feedback on this thing. Sometimes it says weird stuff, but it's really, really freaking useful and cool. So definitely go ahead and check it out.
[00:01:27] Today, part two with David Packouz. If you haven't heard part one, go back and have a listen to that one if you have not done so yet. Part of the inspiration for the movie War Dogs became an arms dealer as a kid, almost went to federal prison for a really, really, really long time and avoided that, but the story is a damn good one. So here we go with part two, with David Packouz.
[00:01:51] You guys had won the contract. Tell me—
[00:01:53] David Packouz: Yeah.
[00:01:54] Jordan Harbinger: —how you find out and what that moment is like because there's got to be, it's like finding out you won the lottery.
[00:01:59] David Packouz: I was just getting home. I remember this was in late January of 2007. I had just gotten home and I get a call from Efraim. He's like, "I've got good news and bad news." And I said, "What's the bad news?" And he's like, "Our first task order is only 600K." And I said, "Well, we won the f*cking contract?" He's like, "F*ck, yeah, we won."
[00:02:23] Jordan Harbinger: Oh, man.
[00:02:23] David Packouz: And he's like, "Get dressed. We're going out to celebrate." And so, what he meant by the task order, just to give you a little background, the way the contract was structured was it, it's a 300-million-dollar contract, but that's estimated to be ordered over the course of two years.
[00:02:38] Jordan Harbinger: Right. Okay.
[00:02:39] David Packouz: And what they do is they give you like mini contracts under that contract, and they call that a task order. And legally, actually, according to the contract, they only were legally required to order the first task order. And we weren't informed what the size of that first task order would be. So obviously, we bid the contract with the idea that they were going to order the full amount over the course of two years.
[00:03:02] Jordan Harbinger: Mm-hmm.
[00:03:03] David Packouz: And that's what the logistics costs we put in and the way we negotiated with the suppliers, if the government was going to drastically reduce the quantity, it would really screw us. We would not be able to deliver. And so when we saw that the first task order was only 600K, we're like, well, unless they order something additional, we're f*cked because we can't deliver 600K worth of ammo at the prices we offered them. So yeah, it turned out that that was just their way to just get the contract rolling and a few weeks later—
[00:03:38] Jordan Harbinger: Yeah.
[00:03:38] David Packouz: —they gave us like, I think it was like a 30-million-dollar task order.
[00:03:43] Jordan Harbinger: Sure. So that's like the Trader Joe's sample where it's like you can have that little light—
[00:03:46] David Packouz: Exactly. Exactly.
[00:03:47] Jordan Harbinger: And just to make sure you like it.
[00:03:49] David Packouz: Yeah.
[00:03:49] Jordan Harbinger: They probably, they wanted to see the ammo and be like, "Is this real?" Because did they audit? Were they like, "Oh, this is a legitimate company, not just dudes in their garage"?
[00:03:57] David Packouz: Yeah.
[00:03:57] Jordan Harbinger: Because they didn't know.
[00:03:58] David Packouz: Yeah. They gave us several audits before awarding the contract—
[00:04:01] Jordan Harbinger: Okay.
[00:04:02] David Packouz: —which we'd never gotten before for any other contract, even the 15 million contract, we didn't get this, but for this one, they actually asked Efraim to go meet them in person. There's a scene of us in the movie, I think this was in the trailer where we're stoned out of our minds and talking to the US, to the military contracting officers. It didn't happen like that in real life. I actually didn't even go to that meeting because Efraim wanted someone, because he was so young, he decided to take Ralph with him because Ralph is an older gentleman.
[00:04:33] Jordan Harbinger: Mm-hmm.
[00:04:34] David Packouz: He felt that Ralph would give him more credibility.
[00:04:37] Jordan Harbinger: Sure.
[00:04:37] David Packouz: And so he took Ralph with him. And as far as I know, he didn't smoke weed before that, though that wouldn't surprise me either. I mean, he was doing drugs all day, you know, regardless of the situation. So that wouldn't surprise me if he actually did that. So they wanted to meet them in person. They also sent a team of financial auditors down to our office and they asked to see our accounting system to make sure we had a good accounting system to support this contract. And the funny thing was that what wasn't so funny at the time, we didn't actually have any accounting system. Efraim never kept any records whatsoever.
[00:05:10] Jordan Harbinger: Oh my God.
[00:05:10] David Packouz: We just did everything by the seat of his pants. So he had to hire a forensic accountant to come in and build the entire accounting record for his company for the past like two or three years, I think, two and a half at that point. And so they had to like pretty much create this paper trail and make it look like it had always been there.
[00:05:31] Jordan Harbinger: Oh my God.
[00:05:32] David Packouz: Yeah.
[00:05:32] Jordan Harbinger: Man, wow, stressful.
[00:05:34] David Packouz: Yeah. It took several weeks to do that. Several weeks to create an entire paper trail for that whole thing. So they had to hold for like a whole accounting audit to make sure the accounting system was in place, which we put together at the last second. They also had a sources audit. They actually wanted to know where we were getting all the stuff.
[00:05:56] Jordan Harbinger: Okay, good. I'm glad to hear that actually.
[00:05:58] David Packouz: Yeah.
[00:05:58] Jordan Harbinger: That inspires a little bit more confidence.
[00:06:01] David Packouz: They wanted us to list everyone we were getting it from, however, with that being said, there was nothing stopping us from changing our sources afterwards.
[00:06:09] Jordan Harbinger: Okay.
[00:06:10] David Packouz: We were not legally required to use the sources that we told the government we were going to use. They just wanted to know that we had contacts with sources that had the capability of supplying us.
[00:06:21] Jordan Harbinger: That's almost like a plausible deniability thing.
[00:06:23] David Packouz: Yeah.
[00:06:23] Jordan Harbinger: They told us they were getting it from this South Korean arms company.
[00:06:27] David Packouz: Right.
[00:06:27] Jordan Harbinger: And then, they couldn't get it from there. So they went to this warlord in Albania.
[00:06:31] David Packouz: In their defense, there is some logic to it because you don't want to limit your suppliers capabilities.
[00:06:38] Jordan Harbinger: Mm-hmm.
[00:06:38] David Packouz: You know, like if a new source, sources sometimes drop off, they end up selling it to somebody else before you or someone who you thought was a good connection in the government gets arrested for corruption, surprise, surprise, you know?
[00:06:51] Jordan Harbinger: Mm-hmm.
[00:06:52] David Packouz: So sources can dry up and sometimes news sources arise and you want to be able to have the flexibility to do that. So with that in mind, they did not limit our capabilities of choosing our sources, but they did want to see that we had real sources that they believed could supply it, lined up and so that we had a real plan that we weren't just blowing smoke and pretending and doing everything by the seat of our pants, even though we were doing about half of it by the seat of our pants.
[00:07:24] Jordan Harbinger: But it sounds like you were backstopping it a little bit.
[00:07:26] David Packouz: Yeah.
[00:07:27] Jordan Harbinger: Some people might have questions about why the Albanian ammo was Chinese. So I'm going to do like a two-second aside here and feel free to jump in, but basically—
[00:07:34] David Packouz: Sure.
[00:07:34] Jordan Harbinger: —Albania was crazy during the Cold War.
[00:07:38] David Packouz: Yeah.
[00:07:38] Jordan Harbinger: The dictator Enver Hoxha, I'm probably butchering the name, he kind of just said like, "I don't trust the Soviets."
[00:07:44] David Packouz: Yeah.
[00:07:45] Jordan Harbinger: "But I'm a communist, so I don't trust the West either. And I'm near Yugoslavia, which is kind of also in between the Soviets and the United States and playing both sides."
[00:07:53] David Packouz: Mm-hmm.
[00:07:54] Jordan Harbinger: So he was a paranoid, kooky dictator, and he built, I think 800,000 bunkers all over the country. And so when you go to Albania today, there's still tons and tons and tons of these little gun turrets that stick out of the ground on farmland, near the highway, at every bridge, in the middle of towns. There'll be like a garbage-filled gun in placement.
[00:08:14] David Packouz: Yeah.
[00:08:14] Jordan Harbinger: 800,000 of them. Each one cost about as much as an apartment. They had a housing shortage. Surprise, surprise.
[00:08:18] David Packouz: Wow. Yeah. Yeah.
[00:08:19] Jordan Harbinger: His thing was, "When I get invaded by either the US or the Soviet Union, I'm going to pull every man, woman, and child into one of these bunkers and we're going to shoot them until there's nobody left. And I'm going to stay in power."
[00:08:31] David Packouz: Total war, he called it.
[00:08:32] Jordan Harbinger: Total war. Yeah.
[00:08:33] David Packouz: Yeah.
[00:08:33] Jordan Harbinger: And so in order to get the ammo, this is a little hazy, but basically he just said, "Hmm, who's communist and isn't Russia and isn't—"
[00:08:40] David Packouz: Yeah.
[00:08:41] Jordan Harbinger: But of course, a capitalist. "Oh, China, let me get some help from China." And China was like, "Great. We have an ally that's not Tibet."
[00:08:48] David Packouz: Yeah.
[00:08:48] Jordan Harbinger: "Or somebody we've invaded."
[00:08:49] David Packouz: And they gave them a foothold in the Mediterranean.
[00:08:52] Jordan Harbinger: Mm-hmm.
[00:08:52] David Packouz: So they were thrilled to get the Albanians as their ally. And it was actually Chairman Mao who made that alliance with the Albanians and supplied them with massive amounts of Chinese military equipment. He even gave them whole factories that they were able to set up an Albania, which was—
[00:09:10] Jordan Harbinger: Wow.
[00:09:10] David Packouz: —actually came out in court later, that, how do you even know that this was made in China when the factories were shipped over to Albania and they could have made what looked like Chinese ammunition in Albania. So that became a matter of legal debate later on.
[00:09:27] Jordan Harbinger: Interesting.
[00:09:27] David Packouz: Yeah. There's not even really any way to prove that the ammunition was originally from China at all.
[00:09:34] Jordan Harbinger: How much ammo was this again, the total amount?
[00:09:36] David Packouz: So the AK-47 ammo was about 150 million rounds.
[00:09:42] Jordan Harbinger: That is so much.
[00:09:44] David Packouz: Yeah.
[00:09:44] Jordan Harbinger: And how much fits in like one plane load or whatever?
[00:09:48] David Packouz: If I recall correctly, it was about 2.7 million rounds was in 45-ton Il-76.
[00:09:55] Jordan Harbinger: I'm not great at math, but you need like 50 planes.
[00:09:59] David Packouz: Yeah. Just for the AK-47 ammo. Yeah.
[00:10:01] Jordan Harbinger: These are massive freight planes.
[00:10:03] David Packouz: Yeah. 45 tons each year.
[00:10:04] Jordan Harbinger: Wow, okay.
[00:10:05] David Packouz: Yeah.
[00:10:05] Jordan Harbinger: That's a lot of freight cost.
[00:10:07] David Packouz: Yeah. It's about like two-container loads, you know, like one of those 40-foot containers that you see on ships.
[00:10:14] Jordan Harbinger: Mm-hmm.
[00:10:15] David Packouz: It's like two tractor-trailers about—
[00:10:17] Jordan Harbinger: Wow.
[00:10:17] David Packouz: It's 45 times a little more.
[00:10:18] Jordan Harbinger: Okay.
[00:10:19] David Packouz: We ended up delivering, before the contract was canceled, about 70, I believe it was 71 aircraft loads of ammunition.
[00:10:28] Jordan Harbinger: So there's one or more every single day. It's just landing.
[00:10:31] David Packouz: Yeah. We were unloading three to four a week at one point.
[00:10:35] Jordan Harbinger: Oh my God. And so repackaging it, that saved you guys a bunch of money and somehow you ended up—
[00:10:40] David Packouz: Yeah.
[00:10:40] Jordan Harbinger: —with a margin on each one of those.
[00:10:42] David Packouz: It actually saved us a lot of money. So the repackaging, I think we spent like a hundred thousand dollars to get it repackaged, and that saved us around three or four million in air freight costs.
[00:10:54] Jordan Harbinger: Oh yeah. That's a really good return then.
[00:10:55] David Packouz: Yeah.
[00:10:56] Jordan Harbinger: Wow. And you're getting the ammo through Heinrich or Henri?
[00:10:59] David Packouz: Yeah.
[00:10:59] Jordan Harbinger: There's a part of me that's like, Efraim didn't try to screw over Henri. Like there's the one guy—
[00:11:04] David Packouz: Oh no, he did, he did.
[00:11:05] Jordan Harbinger: Okay, all right then. And how did that go?
[00:11:09] David Packouz: Not well actually, which actually had led eventually to the downfall of a contract.
[00:11:16] Jordan Harbinger: Oh.
[00:11:16] David Packouz: Yeah. So what happened was is that once we made the deal with the Albanians, I mean with Henri and we made the deal to repackage it and things were starting to get repackaged and were starting to go and starting to get delivered, of course, you know, as Efraim's natural tendency to be, he was looking for a way to squeeze more profit out of it. And so the guy who was doing the repackaging for us is, Kosta Trebicka was his name. Alex found him because he owned a cardboard box factory in Albania. And so we were looking for a massive amount of cardboard boxes. So we found him to supply the boxes, and then we're like, "Hey, you have a bunch of workers in your factory. Would you be willing to do this job for us?" And he agreed to do it. Efraim went over to Albania to try to convince the Albanians to give us a better price. The way he did it was, before leaving, he, he tells me, he's like, "Hey listen, I got to convince the Albanians to give us a better price. So the only way they're going to give us better price is if they think that we have better options than them. So why don't you take all the quotes that we got from like the Kazakhstanis and from Ukrainians and just, you know, doctor those documents? So it looks like the prices are much better than they are."
[00:12:31] Jordan Harbinger: Okay.
[00:12:31] David Packouz: They're better than the Albanians. And I'm like, "Okay, yeah, that's what you want me to do. I'll do it." So I edited some PDF documents, made it look real and gave him copies of it. Alex told me he met him at the airport. Alex goes with Efraim to meet Yili Pinari, who was the head of the export company in Albania, who was in charge of selling this ammunition. And Efraim shows him the papers, and Yili takes one look at it and he is like, "That's all fake." He didn't even look at it. He's like, "Don't bother me with your fake documents."
[00:13:08] Jordan Harbinger: Wow.
[00:13:09] David Packouz: Yeah. And so Efraim was begging and crying and saying, "Ah, you know, the freight, it is going to kill me. I can't do this. I can't deliver profitably, you know, you need to do me a favor. So we can do more business in the future." You know, every excuse you could think of.
[00:13:22] Jordan Harbinger: Sure.
[00:13:22] David Packouz: And Yili Pinari was like, "Look, you know, you, and I both know that this is the best deal that you can get."
[00:13:28] Jordan Harbinger: Mm-hmm.
[00:13:29] David Packouz: "There's no one else in the market that's going to sell you this cheap." And it was true because Albania at the time, was trying to join nato. And one of the requirements NATO has is that they get rid of all their old Warsaw Pact ammunition. So the Albanians actually hired someone to start destroying the ammunition. They actually hired an American company to do this. And later, this is months after us, that turned into a huge political fiasco, tragic disaster actually. There was a huge explosion at the plant that they were dissembling this ammo and it killed, I forgot the exact number, but like something like 30 people.
[00:14:07] Jordan Harbinger: Oh God.
[00:14:08] David Packouz: Yeah. Like men, women and children, you know civilians from the surrounding town. It was an enormous explosion. Nothing to do with us. People think that has to do with us because it was Pinari and some of the other people who we were doing business with were also involved in this other contract. So the Albanians often, you know, they combine our stories. They think that we had something to do with that. I've gotten a lot of hate on YouTube for that reason, but—
[00:14:32] Jordan Harbinger: Mm-hmm.
[00:14:33] David Packouz: —it's what is. So Efraim asked Kosta who was doing those, the box guy, if he had any connections with the Albanians to get him like, you know, information about what the Albanians are actually getting paid for the ammo. So Kosta actually had some connections in the Ministry of Defense, and he found out that the Albanians were getting paid two cents a round for the AK-47 round of ammo. And we were paying Henri four cents a round.
[00:15:04] Jordan Harbinger: Oh, okay.
[00:15:05] David Packouz: So Efraim lost his sh*t, right?
[00:15:07] Jordan Harbinger: Yeah.
[00:15:07] David Packouz: Because he's like, "Henri is making so much money on us. F*ck that guy. He's screwing us. He's screwing us."
[00:15:14] Jordan Harbinger: Yeah. And I told Efraim, I'm like, "Actually, I mean, we're making around the same amount of money as Henri is. We're making about same."
[00:15:20] David Packouz: Yeah. Same margin around too.
[00:15:21] Jordan Harbinger: More or less the same. I mean, the margin is different, but you know, the total amount of money is the same.
[00:15:25] David Packouz: Right, right.
[00:15:26] Jordan Harbinger: And, you know, because we had to pay for air freight and he's like, yeah, but it's our contract. "F*ck him. I want to make more money. I'm going to buy it directly from the Albania." And that's when he flew to Albania. And tried to do this deal directly with Pinari and Pinari was like, you know, he actually had brought him into a meeting with another guy whose name was Delijorgji, who it turned we found out later, was part of the organized crime element of Albania. He was like the mafia boss.
[00:15:55] David Packouz: Surprise, surprise.
[00:15:56] Jordan Harbinger: Yeah.
[00:15:56] David Packouz: And as soon as Efraim enters the room, this is what Alex told me, because he was there. As soon as Efraim enters the room with Delijorgji, you know, Efraim is the kind of character, he's always talking sh*t, like no matter who it is. And I've seen him talk sh*t to some tough-looking characters. We've gone out to clubs in Miami and he'll like go up to this big buff guy and grab the girl's hand who's with him, say, "Hey bro, I think she's better off with me."
[00:16:24] Jordan Harbinger: Oh my God.
[00:16:24] David Packouz: Stuff like things that are just insane that a normal person would just not do, you know? And like he's gotten to many fights that I've had to like, pull him out of. Got to a point where I only went out with him because I felt like almost obligated as part of our business relationship to do that, to keep him out of trouble.
[00:16:41] Jordan Harbinger: He's dead. We'll probably not be able to do any more deals. And so, all right.
[00:16:45] David Packouz: It was very, very frustrating to go out with him. Anyway, so he's a big talker, but like the second he stepped into this office and Delijorgji was there, he got really quiet because he could tell right away that it, it was like this building, this highrise that was still under construction. But they like go through this under construction, dusty area and suddenly they entered this office and it looks like a Wall Street boardroom.
[00:17:10] Jordan Harbinger: Mmm.
[00:17:11] David Packouz: Like super shady, like what's this doing here?
[00:17:15] Jordan Harbinger: Yeah. Like this office doesn't exist, but it's also like, well equipped.
[00:17:19] David Packouz: Exactly. Yeah. Like, definitely, there's movers and shakers here and he gets into the office and suddenly Efraim, who's usually a big talker, suddenly is real quiet and doesn't say anything.
[00:17:29] Jordan Harbinger: Mm-hmm.
[00:17:30] David Packouz: And Delijorgji tells him, he's like, "Look, you know, I hear you want a better price." And Efraim's like, "Yeah, yeah, we need a better price." He's like, "Well, we can't give you a better price, but we know that you're hiring this other guy, this Kosta Trebicka guy to do the repackaging, and you're paying him money for this. So why don't you give us that contract to do the repackaging, we'll make some money on that. Then we give you a little better price on the ammo. So that way everybody wins, wins, right?" And Efraim's like, "Yeah, f*ck Kosta, you've got the contract. Let's do this."
[00:18:03] Jordan Harbinger: Mm-hmm.
[00:18:03] David Packouz: And Kosta got stuck with $20,000 worth of cardboard boxes that now he had nothing to do with. And he called me up, Kosta called me up, and he's like, "Hey, listen, you know, I understand business is business, but can you at least make arrangements to buy these boxes?" And I said, "Yeah, yeah. I'll talk to Efraim. I'll make sure that you—"
[00:18:21] Jordan Harbinger: Like, we'll cover you.
[00:18:22] David Packouz: "Yeah, we'll cover you." And I told Efraim, "Hey, you know, like, make sure that you buy these boxes from Kosta," and Efraim is like, "Yeah, yeah, yeah. I'll take care of that. I'll take care of that." Of course, he never did anything. He just didn't give a sh*t. And that really pissed off Kosta and Kosta, we found out later, decided to go to the New York Times. And tell them what we were doing. And he went to the FBI and told them what we were doing. And his biggest mistake was that he went to the Albanian press and told them what was happening and that ended up getting him killed.
[00:18:57] Jordan Harbinger: Oh, wow.
[00:18:58] David Packouz: Yeah, because of like a few weeks later after that, he died in very mysterious circumstances in a car crash, where there was no one. He was driving down this road that was like a flat road in this open field. There was no other cars around, but somehow he crashed, I don't know into what, and he got thrown from the car like 30 feet and he ended up dead.
[00:19:19] Jordan Harbinger: Yeah. That's pretty sketchy.
[00:19:21] David Packouz: Yeah.
[00:19:21] Jordan Harbinger: Oh, man.
[00:19:22] David Packouz: So, yeah. So that, unfortunately, it was what happened to Kosta.
[00:19:26] Jordan Harbinger: I wonder why they killed him for that. Probably because where the ammo came from was not supposed to be selling ammunition, right?
[00:19:32] David Packouz: Well, no, but the main issue was that he told the Albanian press that the Albanian politicians were getting kickbacks.
[00:19:40] Jordan Harbinger: Oh, yeah. And they gave the contract to the mob, which it's like—
[00:19:44] David Packouz: Exactly.
[00:19:45] Jordan Harbinger: These guys knew about, oh man, what?
[00:19:46] David Packouz: Because Albania—
[00:19:47] Jordan Harbinger: Yikes.
[00:19:47] David Packouz: Like many country, like third world countries, they have like a big problem with corruption.
[00:19:52] Jordan Harbinger: Mm-hmm.
[00:19:52] David Packouz: It's one of their major problems. And so he said, "Hey, you know, the government is selling this ammo. They're pocketing all the profits. The politicians are in the league with the organized mob. They're going through this Swiss arms dealer." He told them everything.
[00:20:08] Jordan Harbinger: Yeah.
[00:20:09] David Packouz: And then, he ended up dead.
[00:20:10] Jordan Harbinger: That's kind of sad because he really like ended up dead because of—
[00:20:15] David Packouz: Yeah.
[00:20:15] Jordan Harbinger: Well, because of you guys in a way, because Efraim screwed him over.
[00:20:17] David Packouz: Yeah. Well, because Efraim screwed him over and then, he felt it was, I guess, his moral duty to blow the lid off this.
[00:20:26] Jordan Harbinger: Yeah. I mean, he's still involved, so there's that.
[00:20:28] David Packouz: Yeah.
[00:20:28] Jordan Harbinger: But it's also like, well, he wasn't going to die.
[00:20:31] David Packouz: Yeah.
[00:20:32] Jordan Harbinger: Yuck. That sucks.
[00:20:33] David Packouz: And Henri was never cut out in a deal. I mean, when Efraim made that deal with the Albanians, they still had everything go through Henri. And I assume, I don't know for sure, but I assume it was because Henri was doing the payoffs to the various politicians because that's how they managed to shield the money trail.
[00:20:51] Jordan Harbinger: Yeah. And other deals, you know, who knows? I mean, it's really hard to cut somebody like that out when they're better connected than you because—
[00:20:58] David Packouz: Right.
[00:20:58] Jordan Harbinger: If someone's playing the long game, they see that it's not worth it. It's that they know they're going to play again. They need to not piss off that person.
[00:21:05] David Packouz: True.
[00:21:06] Jordan Harbinger: Versus like some dudebro from Brooklyn or wherever you guys were based at the time.
[00:21:10] David Packouz: We were from Miami, but yeah.
[00:21:11] Jordan Harbinger: Miami. Yeah.
[00:21:12] David Packouz: So Efraim had a different philosophy than that. He felt everyone was expendable.
[00:21:17] Jordan Harbinger: Mm-hmm.
[00:21:18] David Packouz: So actually I got this story from Matt Cox. Matthew Cox was in prison with Efraim and became Efraim's ghostwriter.
[00:21:26] Jordan Harbinger: Oh, that might have been who I was talking to earlier.
[00:21:29] David Packouz: Yeah, it must have been Matthew Cox. Yeah, Matt Cox. So he was Efraim's ghostwriter in prison. And he told me that, uh, when he was writing Efraim's story and Efraim was telling him the whole story, he realized Efraim like screws, pretty much everybody he's done business with, literally, everybody he's done business with. And Matt tells him, Matt told me that he told him, he's like, "I told him Efraim, you can't keep on burning all your bridges, man." And Efraim said, "There's a lot of bridges out there, bro."
[00:21:59] Jordan Harbinger: Ooh. Yeah. That's the complete opposite of how I do anything in my life. And most people who are successful. Yeah.
[00:22:07] David Packouz: Yeah.
[00:22:07] Jordan Harbinger: That's very cringey and gross to hear because it's like, "I know, but I don't care." That's really what it's—
[00:22:13] David Packouz: Yeah.
[00:22:13] Jordan Harbinger: Like sociopathic sort of level of empathy.
[00:22:16] David Packouz: That's exactly it. Yeah.
[00:22:17] Jordan Harbinger: Was shipping the ammo mostly smooth sailing or is it like, "Oh, now the Russians are stopping this," or, "This country is trying to not let it happen"?
[00:22:25] David Packouz: So in the beginning, it was a real challenge. Like we didn't ship anything for the first like three months. And because it was, to ship ammo over internationally, it's a lot harder than shipping, like just any random commodity.
[00:22:40] Jordan Harbinger: Mm-hmm.
[00:22:40] David Packouz: You need a bunch of documentation. You need an end-user certificate from the buyer, right? That's a document saying that, you know, "This ammo is going to the government of Afghanistan, to the military of Afghanistan. And we, the military of Afghanistan, promises not to re-export this to any other party without the supplier's permission." That's the first thing you need. And each document takes time because every bureaucracy has to go through its procedures and oftentimes various people hold things up and it's always a headache. So you need to get your end-user certificate or EUC, as they call it. And once you have your EUC, you take that and then you get the export permit from the supplying country. They have to go through their government and their procedures to get that. And once you have both of those documents, then you need to get a flyover permit. If you're shipping this by air, for every country that the plane flies over, you need to get their permission to transport these goods over their airspace.
[00:23:41] Jordan Harbinger: Okay.
[00:23:42] David Packouz: So the flyover permits turned out to be a real nightmare to get for this.
[00:23:47] Jordan Harbinger: I bet.
[00:23:48] David Packouz: Because, yeah, we are flying over Central Asia and a lot of those countries are very much aligned with Russia. As we found out later, the Russians were pressuring them to not approve these permits because they wanted us to fail in supplying the US Army. And it took several months, but eventually, we got every flyover permit. So the way we would do it was when a country would not want to give us a flyover permit, what we would do is we would contact the military attaché, the US military attaché—
[00:24:19] Jordan Harbinger: Yeah. Okay.
[00:24:19] David Packouz: —within that government. And when the United States has an embassy in a country, they have a military attaché that's a representative of the US Armed Forces in that embassy. And so we would contact that military attaché and say, " Hey, we're US government contractors." We send them a copy of our contract so they see we're real. "And we need your help in convincing this government to give us a flyover permit." And then that military attaché would apply diplomatic pressure as they were able to within that country to make them approve this permit. And that worked for almost all the countries that we worked on, except for Uzbekistan. Uzbekistan just refused to give us a flyover permit and no matter how much pressure we tried to exert. And then, I had the idea, I told Efraim, "What if we hire the Uzbekistani National Airline to do the shipping?" And he was like, "Yeah, that's a great idea." And so we asked them for a quote and they actually gave us a quote and it was actually relatively reasonable. It wasn't even outrageous. And suddenly, our flyover permit was granted.
[00:25:24] Jordan Harbinger: Right. It's like, "We would love to hire you, but there's just one problem," one of the wealthiest men in Uzbekistan who owns this airline.
[00:25:30] David Packouz: Yeah.
[00:25:30] Jordan Harbinger: "We can't seem to get flyover permits. Do you know anything about that?" And he is like, "Let me make one quick phone call and solve this whole problem."
[00:25:37] David Packouz: Exactly.
[00:25:37] Jordan Harbinger: Skin in the game.
[00:25:38] David Packouz: You have to have some motivation. Exactly. They need some skin in the game. Yeah. Yeah.
[00:25:41] Jordan Harbinger: That's impressive. Look, my question was how do you even start the process of figuring out who to talk to the person that's going to give you this permission and this kind of knowledge—
[00:25:49] David Packouz: Mm-hmm.
[00:25:50] Jordan Harbinger: —is so specialized that it's no wonder there are riches in these like little tiny, well in these little tiny niches where it's like, okay—
[00:25:57] David Packouz: Yeah.
[00:25:57] Jordan Harbinger: I can get ammo from this place, from this other place over these places.
[00:26:02] David Packouz: Mm-hmm.
[00:26:03] Jordan Harbinger: And it's just like, well, that's where the cash is because it's a huge pain in the ass. You need a ton of connections.
[00:26:08] David Packouz: Yeah.
[00:26:08] Jordan Harbinger: And you can't just hire some one-stop shop that's going to be able to do this.
[00:26:12] David Packouz: Exactly. You learn as you go.
[00:26:14] Jordan Harbinger: Mm-hmm.
[00:26:14] David Packouz: I mean that's like any business, every business has its quirks and I think that a lot of people stay out of the arms business because there are hazards, both moral business and you know possibly physical at times.
[00:26:29] Jordan Harbinger: Sure.
[00:26:29] David Packouz: And definitely political. So the hazards are significantly more than just basic commodity businesses.
[00:26:39] Jordan Harbinger: You're listening to The Jordan Harbinger Show with my guest David Packouz. We'll be right back.
[00:26:43] This episode is sponsored in part by Grammarly. There are a few tools that I use every day, kind of all day, every day, and I can't live without. Grammarly is one of those. I've been a user of theirs for years. It's like having somebody over my shoulder gently reminding me ways that I can improve my written communication, which Jen used to have to do. "Hey, that's really unfriendly. This comes across really abrupt." Now, Grammarly does it automatically, so it's saving Jen a ton of time, but it also helps you become and right more clearly, concisely, professionally. I think you should start using this if you work in an office environment or if you're someone like me who's like firing off emails all the time and you don't necessarily think about how it might be perceived on the other end due to the speed that you're drafting them. That's been super helpful. This is their tone detector. It gives you feedback and how your message comes across, and it is just absolutely invaluable. Like I said, I got a tendency to be curt. Not always great. This thing runs in the background. It's like an extra set of ears or trusted eyes that I can rely on to help me be more mindful of how I'm coming across, which again, super helpful in professional settings. Super helpful if you are running the team and you don't want people to think that you're kind of a dick and it's easy to implement because it, again, it runs in the background of everything that I write, my email program, my browser everywhere on my computer. Grammarly will underline incorrect words and grammar and show you what to replace it with. And here's what I love about it. It also tells you why. So you're like, "Oh, that's why this works like this." Not just, oh, spell that wrong every time or never hyphenate that. You hover over it and tells you why. Awesome. The right tone can move any project forward when you get it right with Grammarly. Go to grammarly.com/tone to download and learn more about Grammarly Premium's advanced tone suggestions. That's G-R-A-M-M-A-R-L-Y.com/tone.
[00:28:27] This episode is sponsored in part by apartments.com. Do you fantasize about who you'd be if you lived somewhere different? Maybe you'd surf if you lived by the ocean, or if you lived by a coffee shop, maybe you'd finally write that novel, if you had a dishwasher, maybe you'd actually cook a proper dinner at home instead of doing takeout every day and get fat like me. With over one million available units for rent on apartments.com, the you abilities are endless, and with instant alerts you'll never miss out on seeing what could be your new perfect place. Visit apartments.com, the place to find a place.
[00:28:56] If you're wondering how I managed to book all these great thinkers, authors, creators, arms dealers every single week, it's because of my network and I'm teaching you how to build your network for free over at jordanharbinger.com/course. This course is all about improving your relationship-building skills and inspiring other people to want to develop a relationship with you. It's all done in a very easy, non-cringey, down-to-earth way. It's not awkward, it's not cheesy, it's all practical. Takes a couple of minutes a day and many of the guests on our show subscribe and contribute to the course. So come join us, you'll be in smart company where you belong. You can find the course at jordanharbinger.com/course. And no, I don't want your credit card information. You're not going to get billed. There's not a ridiculous upsell. That's just something that I think does well for everybody and makes you appreciate the show just a little bit more. So enjoy.
[00:29:42] Now back to David Packouz.
[00:29:46] Look, I've been in North Korea, I've been to Albania. It was at the time the poorest country in Europe. Now I think it's Moldova, but like these are not places where when you're 40 and you have kids, you want to just be schlepping into. And it's like, who are you going to meet?
[00:29:57] David Packouz: Right.
[00:29:57] Jordan Harbinger: This gangster, this corrupt politician, this arms dealer—
[00:30:00] David Packouz: Yeah.
[00:30:00] Jordan Harbinger: —we're all going to meet in a warehouse in the middle of nowhere and inspect this product.
[00:30:05] David Packouz: Right.
[00:30:05] Jordan Harbinger: Like, no way. It's a bad idea. Even if they're like, "No, we're just going to do business."
[00:30:10] David Packouz: Mm-hmm.
[00:30:10] Jordan Harbinger: It's just you're going to draw the short straw at some point.
[00:30:13] David Packouz: Right.
[00:30:13] Jordan Harbinger: You're going to meet an Efraim.
[00:30:14] David Packouz: Yeah. Except for Henri, he manages to skate by somehow.
[00:30:17] Jordan Harbinger: Mmm.
[00:30:18] David Packouz: Nothing seems to touch him.
[00:30:19] Jordan Harbinger: But again, he's a broker. He's probably like, "I'm not inspecting the product."
[00:30:22] David Packouz: Yeah.
[00:30:22] Jordan Harbinger: "I'll meet you at the Four Seasons in Geneva."
[00:30:26] David Packouz: Right.
[00:30:26] Jordan Harbinger: "I'm not going there. You're coming here. I'll get you a visa." Right?
[00:30:28] David Packouz: No, I mean, Henri would be on the ground.
[00:30:31] Jordan Harbinger: Really?
[00:30:32] David Packouz: Yeah. Yeah. I mean, to inspect the product. I don't know about the delivery aspect, but he has been on the ground and the sources to be there. So, you know, he gets his hands dirty.
[00:30:42] Jordan Harbinger: Yikes. Yeah. That's a guy I'd love to talk to, although he'd never tell me anything.
[00:30:47] David Packouz: He wouldn't.
[00:30:48] Jordan Harbinger: Yeah. All the most interesting people are the ones who are like, "I don't know what you're talking about, Jordan."
[00:30:53] David Packouz: Yeah.
[00:30:53] Jordan Harbinger: "No. We are merely an importer exporter of textiles."
[00:30:56] David Packouz: Yeah. I mean, if he told you everything he'd ruin his business.
[00:30:59] Jordan Harbinger: Sure.
[00:30:59] David Packouz: Maybe once he retires, if he ever does that.
[00:31:01] Jordan Harbinger: This is probably a ridiculous question. It feels like one, but is this stuff insured? Because it's three loads per week. What happens if some of it goes bad or isn't working or the plane doesn't make it? I mean, it seems like you should have that, but can you even insure that?
[00:31:14] David Packouz: I think there might be insurance that you could buy, but it would be extremely expensive.
[00:31:19] Jordan Harbinger: Yeah.
[00:31:20] David Packouz: And I know that at least as far as we were concerned, we did not insure anything.
[00:31:25] Jordan Harbinger: This all seems like a really fun and interesting business and there's a lot of wheeling and dealing, which I would've loved in my 20s. I'm way, way too old for this kind of stuff right now. I don't know about you.
[00:31:35] David Packouz: Same. Yeah, no, I'm out of that business with no intentions of going back.
[00:31:39] Jordan Harbinger: I do picture you guys walking around with silk suits and metal briefcases and sunglasses. Just the straight up Nicholas Cage circa 1996 aesthetic period.
[00:31:47] David Packouz: That's exactly what we did. It wasn't silk, it was regular suits, but—
[00:31:52] Jordan Harbinger: Linen.
[00:31:53] David Packouz: But we did have some like those cool shades and metal briefcases.
[00:31:59] Jordan Harbinger: Yeah.
[00:31:59] David Packouz: Because we specifically tried to look like Nicholas Cage because that's who we were basing our look on. We wanted people to take us seriously, you know?
[00:32:07] Jordan Harbinger: Yeah.
[00:32:07] David Packouz: Maybe that wasn't the way to go, but—
[00:32:09] Jordan Harbinger: At the time it works though, right?
[00:32:11] David Packouz: Yeah.
[00:32:11] Jordan Harbinger: Because everyone's like, "Oh, that guy, he looks like an arms dealer." "All right, fine."
[00:32:14] David Packouz: More than anything, it was that we always carried documentation, proving that we had active contracts. And once you show them that, and they're like, "Okay, I mean, regardless of how young these guys look, they actually have, they're doing business, so you want to do business with them or not."
[00:32:29] Jordan Harbinger: How did you start to smell that Efraim was going to screw you over?
[00:32:34] David Packouz: So after af of course, after the logistics issues were taken care of and we started delivering on a regular basis, three, four aircraft a week started going into Afghanistan and I had more or less taken care of all the issues. And the only things I really needed to do was more or less just like babysit the logistics companies and make sure that the receiving contracting officer in Afghanistan signed off on the documents. So my workload went way down because I had already set everything up and I stopped coming into the office as much because I didn't have to do my job. And he started complaining and I remember I was staying at the office late one night where everyone else had left. I still had some stuff I had to do and Efraim comes into my office and he says, "Hey, you know, a lot of the guys around the office are complaining that you're not pulling your weight." At this point we had about like 15 people working for us. We had started just us two but like after we won the 300-million-dollar contract, he decided to spend two grand a month on an office. Now, that was when we actually moved out of his apartment.
[00:33:47] Jordan Harbinger: You're like a WeWork selling AK-47s and missiles.
[00:33:51] David Packouz: Yeah, pretty much. So he comes into my office and he's like, "A lot of the guys around the office are saying that you're not pulling your weight around here." And I'm like, "What are you talking about? Well, what guys are saying that? Because I'm doing what I need to do and I don't know what you're talking about." He's like, "Yeah, because you're not coming into the office that much." I'm like, "Well, I'm taking care of what I need to do, right? My job is to babysit the Afghan contract and that's what I'm doing and things are smooth, so what's the problem?" And he's like, "Yeah, but you're not like helping out with our other contracts that we're going for." And I said, "Well, first of all, I told you not to go for those contracts." Because he was like chasing literally every f*cking thing. He was chasing two-million-dollar contracts, you know, a half-a-million-dollar contract. I'm like, "Dude, why are you wasting your time with that? We got a 300-million-dollar contract. Let's concentrate on delivering this successfully."
[00:34:43] Jordan Harbinger: Mm-hmm.
[00:34:44] David Packouz: "Pulling as much profit that we can out of this. And then that's going to make us the vast majority of the money. We're more than getting distracted by going after a whole bunch of tiny contracts that we might not even win." But he was like, "Hey man, you know, we're on a roll. Everything's money, you know, I'm going for it all. So you take care of the Afghan contract. You leave the rest of me." I'm like, "Okay. I mean, if that's what you want to do." So he started chasing all these other contracts and a lot of them as these things tend to do, got to be a bit of a logistical headache.
[00:35:15] Jordan Harbinger: Mm-hmm.
[00:35:15] David Packouz: And he's running around like crazy screaming at everyone in the office, you know, to do this, that, and the other. And I'm like, "Listen, you know, we have a deal-by-deal basis. You know, I'm responsible for the deals I work on. That's what I'm getting paid on. So if you decide to do other contracts, I'm not getting paid on that. You know, why should I work on that?" And he's like, "Yeah, but like if the company goes bankrupt, then the Afghan contract gets destroyed too. So you got to make sure that the company is taken care of."
[00:35:47] Jordan Harbinger: Mm-hmm.
[00:35:48] David Packouz: And I said, "Well, in that case, are you willing to give me a percentage of the company instead of just the contracts I work on?" And he's like, "Come on, come on. Don't be ridiculous."
[00:35:57] Jordan Harbinger: I want you to work for free.
[00:35:59] David Packouz: Yeah, that's exactly it. He wanted me to work for free. And I said, "Well, in that case, if you don't give me a piece of the company, then I'm not going to do it." And he's like, "Well, how about this? I'll give you one percent of the company."
[00:36:12] Jordan Harbinger: Instead of the like, massive amount you're going to get from the 300-million-dollar contract?
[00:36:16] David Packouz: Yeah. I'm like, "Well, you know, we have a deal. As for the Afghan contract, I was supposed to get 25 percent of the profit initially," so I was like, "Well, 95 percent of the money that the company's going to make is going to come from the Afghan contract. So I think I'll just stick with our deal on the Afghan contract rather than go into one percent of the company."
[00:36:33] Jordan Harbinger: Yeah, for all the headaches.
[00:36:34] David Packouz: Yeah, exactly. And he's like, "Well, that's my offer ticket or leave it." And I said, "What? Are you not going to pay me what we agreed on in the Afghan contract?" And he's like, "You're in breach of contract. You're not doing your job." I'm like, "I'm not in breach of contract. I'm doing my job. And if you're not going to pay me what you agreed on, I'll see you in court." And so then I left and that was the end of that. And I sued him. You know, I was getting my lawyer all lined up and everything, and two months later, the feds raided his office.
[00:37:07] Jordan Harbinger: Phew.
[00:37:08] David Packouz: I was already, you know, long gone by that point, two months out of the company, but one of the secretaries in the office called me up because I was on good terms with everybody.
[00:37:18] Jordan Harbinger: Sure.
[00:37:19] David Packouz: I was considered the nice guy and he was the asshole.
[00:37:22] Jordan Harbinger: Right.
[00:37:23] David Packouz: So like, when people would have problems with him, they would come to me and complain about him, you know? So I remained on good terms with them. I'm still good friends with some of the people I worked with back then. So one of the secretaries calls me up and she's like, "Hey, I just want you know that the feds just raid the office and—"
[00:37:40] Jordan Harbinger: Oh God.
[00:37:40] David Packouz: "They told us all to step away from our computers and they told us to leave. And they're gathering up everyone's computer and they're packing up all the files, all the filing cabinet, and they're taking it all." And I'm like, "Oh sh*t, we're f*cked."
[00:37:52] Jordan Harbinger: Mm-hmm.
[00:37:54] David Packouz: And so I called up Alex, who is still in Albania, supervising the repackaging job in Albania. And I told him what happened. I'm like, "Hey, you know, just FYI, the feds just raided Efraim's office." So Alex calls up Efraim, a new guy named Danny answers the phone. Danny is the guy that replaced me with—
[00:38:14] Jordan Harbinger: Uh-huh.
[00:38:14] David Packouz: —once I left, he ended up screwing Danny over too.
[00:38:17] Jordan Harbinger: Oh, I'm so surprised to hear that. Yeah.
[00:38:19] David Packouz: Yeah. And he ended up screwing the guy he replaced Danny with as well. I mean, it's just like a never-ending succession of people that he promises the world to and then screws over. I just heard that he just recently got into some big lawsuit with somebody. So he's still—
[00:38:34] Jordan Harbinger: Same guy.
[00:38:35] David Packouz: —doing the same thing. Yeah, he's the same guy. So Danny answers the phone, you know, Alex wanted to feel him out, see what was going on. And so Alex is like, "Hey, Danny, I need some of documents for the shipment that's coming in today, that's going to be leaving today to Afghanistan. I need these and these documents. Can you send them over to me?" And Alex told me that he hears Danny cover the phone, the mouthpiece of the phone, and he still can hear Danny talking and he's like telling Efraim, "Hey, it's Alex. He says he needs this document. What should I tell him?" And he hears Efraim saying, "Oh, don't tell him anything. Just tell him that there was a bomb threat. Yeah. Yeah. There's a bomb threat. So we had to leave the office, and so we can't get the documents, but as soon as they clear things up, we'll get it to him right away. So don't worry about anything." And so Danny gets on the phone and repeats exactly what Efraim told him. And Alex is thinking, "Why are they lying to me?"
[00:39:29] Jordan Harbinger: Why are they lying to him? Who cares?
[00:39:30] David Packouz: Right.
[00:39:31] Jordan Harbinger: They just say, "Hey, we got raided, like it's not good, but we're going to, whatever. We'll figure it out."
[00:39:34] David Packouz: So in Alex's mind, I don't know the real reason, but in Alex's mind, Alex's thinking, "Well, maybe Efraim is thinking that he's going to throw him under the bus."
[00:39:43] Jordan Harbinger: Oh yeah. Good point.
[00:39:44] David Packouz: Efraim is going to claim he had no idea about the Chinese ammo. This was all Alex's idea. Alex was the guy who was supervising everything. Alex is the only one who knew about the Chinese ammo, and it's all Alex's fault. And Efraim was totally innocent. And so that's what Alex is thinking and Alex is like, "There's no way I'm f*cking going down for this motherf*cker."
[00:40:06] Jordan Harbinger: Mm-hmm.
[00:40:06] David Packouz: Alex wasn't even getting paid such a very, he was getting paid a straight salary. He wasn't getting a commission or anything, and he was getting paid a straight salary and it wasn't even a particularly high salary. So Alex is like, "You know what? This is not worth it. I'm out of here and he's on the next flight home." And so Alex and I both hire lawyers and our lawyers, the first thing they tell us is go look through your emails and look for the keywords of what you're worried about.
[00:40:32] Jordan Harbinger: Make sure there's no evidence in there.
[00:40:34] David Packouz: Yeah.
[00:40:34] Jordan Harbinger: Smoking gun emails saying, cover up all the Chinese documents. Yeah, oh God.
[00:40:38] David Packouz: Exactly. Well, they're like, "Well, you know, if there is smoking gun evidence, we should know about it," you know?
[00:40:43] Jordan Harbinger: Yeah.
[00:40:43] David Packouz: "So why don't you gather all the things that you think could be damaging and send it over?" And so we both look through our emails and we realize how much smoking gun there is. We were not careful at all, unfortunately. I mean, I think in the beginning, Efraim was like, "Hey, you know, we should only do talk by phone," you know? But then after like a few days, we were still also frazzled and like, we were all on different time zones, so we had to get time-sensitive information to people who might be asleep. And we were super tired. So eventually someone just started writing, "Hey, you know, do this, this. Make sure you repackage. Make sure there's no Chinese documentation." And that came out there and we were all copied on these emails.
[00:41:33] Jordan Harbinger: Oh God.
[00:41:33] David Packouz: There was literally rock solid evidence of that we were aware of the whole situation at the time and our lawyers said, "Hey, you know, this evidence is pretty strong against you. It's not like Efraim is going to pay for your legal defense, so if you're going to fight them in court, you're going to need, do you have like a few hundred K because that's what you're going to need." And I didn't have a few hundred K because effort didn't give me a penny and Alex sure didn't have few hundred K. He wasn't getting paid very much. So really our only option was to cooperate. And the government told us that, they're like, "Hey, you know, if you guys cooperate, we don't think that, you're not really a target, so we're not even going to charge you. We're really just going for Efraim." You know, we're like, "Great, because he tried to screw us over, so we owe him nothing. We're not making any money off this whole thing, so why should we go down for it?"
[00:42:25] And six months go by and nothing happens. And we're like, "Okay, well, maybe they decided not to pursue this case because they don't always bring charges with every investigation they do." About six months later, I think it was March, I remember it was March 27th of 2008. So literally, 15 years ago, almost to the day the New York Times published this front page article about us, they had both mine and Efraim's mugshots on the front page. We did not look good. And it was right next to a big picture of rusty-looking ammunition. And the New York Times said that we were delivering low-quality defective ammunition to the Afghanis, and we were putting all the soldiers in danger, you know, and that this was all George Bush's fault because he hired these two stoner idiots to do this 300-million-dollar contract. So that was like the whole narrative.
[00:43:19] And the reason they got that picture on the front cover was because Efraim had bought, I think it was 30,000 rounds of Bulgarian. It wasn't even the Chinese stuff, it was Bulgarian ammo. He had bought it sight unseen because he had gotten like a super, super good deal. Like even better than the Albanian deal. Literally, I think like maybe 20 percent the cost of the Albanian ammo.
[00:43:42] Jordan Harbinger: Oh, wow.
[00:43:42] David Packouz: Yeah, so it was super cheap, practically free, but it was a small quantity, like very small, like 30,000 rounds. And you know, 2.7 million rounds fit in an aircraft so it was something that we were already shipping grenades from Bulgaria, so we figured, we'll buy these rounds. We didn't have time to inspect it.
[00:44:02] Jordan Harbinger: Yeah.
[00:44:02] David Packouz: If it's good, we'll make some money on it, good margins. If it's bad, the government will just reject it and it's not such a big loss because it was so cheap and we had room on the plane anyway. So Efraim decided to go for that and when it got to Afghanistan, the government inspected it and it turned out to be total sh*t. And they rejected it. And they're like, "We're not paying you for this, we're not giving this to any soldiers." And so the US Army had nowhere to put that 30,000 rounds, so they just put it to the side of the airport runway—
[00:44:31] Jordan Harbinger: Oh man.
[00:44:31] David Packouz: —where they had unloaded it and they just left it there.
[00:44:35] Jordan Harbinger: Oh. And that's the photo the New York Times takes.
[00:44:37] David Packouz: Exactly.
[00:44:37] Jordan Harbinger: This rusty, moldy out in the weather for months at a time, even though it's already 20 years old or 40 years old ammunition. Oh man.
[00:44:44] David Packouz: Exactly. So that's the ammo that the New York Times saw because all the other ammo was already issued to the troops. I don't think they went very deep into Afghanistan. Probably not a safe thing to do. So they just asked the local people, "Hey, can you show us some of the stuff that AEY has delivered?" And they're like, "Yeah, that's some of the stuff they delivered."
[00:45:05] Jordan Harbinger: Yeah.
[00:45:06] David Packouz: And so they took pictures of that and they extrapolated and said, "Oh, this is the some of the stuff that they delivered, implying that this is all the stuff that we're delivering." And so that became a huge political scandal. And there were hearings in Congress. You could look this up on YouTube. There's like, I think it was Henry Waxman who was one of the lead congressional people at the time. He is talking about us on the floor of Congress. And they said that, "Congress contacted us and said that they wanted us to testify in front of Congress." And our lawyers said, "Well, if you make them testify, they're just going to plead the fifth because they're under criminal investigation." So Congress said, "Well, on, on second thought, well, we're not going to bother with that." So we didn't end up testifying in front of Congress and the US Army was like, "Whoa. We had no idea about any of this. We're taking the contract away," even though it came out later in court, that they were informed by the Justice Department who were doing the investigation. As soon as they raided the office, the Justice Department found handwritten notes on Diveroli's desk, one of the to-do items was repackaged Chinese ammo. So that kind of tipped them off. And the Justice Department knew what was going on and they told the Army. This came out in court later, they sent the Army an email saying, "Hey, this ammo is Chinese. It may be illegal. You should probably stop taking delivery on this." And the Army said—
[00:46:38] Jordan Harbinger: But they needed it.
[00:46:38] David Packouz: Yeah, the Army said, "Well, this is mission-critical supplies, and we're going to continue taking delivery on it unless we get a letter from the Attorney General of the United States requesting that we stop taking delivery on it." The Attorney General never sent that letter. Why they never sent the letter? I don't know. Maybe they made the political calculation that, "Hey, as long as there isn't a political stink about this, let's just keep it quiet and continue taking delivery." Maybe they didn't care, I don't know. But they only started caring once the New York Times published that article and suddenly the Army pretended like they were shocked and appalled.
[00:47:16] Jordan Harbinger: Right, man.
[00:47:17] David Packouz: And they had no idea the whole time. And then they immediately canceled the contract with AEY and they put it out for open bid. And then the Justice Department brought charges against us right after that, like a week later.
[00:47:33] Jordan Harbinger: Nothing like a good public humiliation to get the government to take action. And by the way, this is—
[00:47:37] David Packouz: Exactly.
[00:47:38] Jordan Harbinger: When people crap on journalists, this is why good journalism is so important, by the way.
[00:47:42] David Packouz: Yeah.
[00:47:42] Jordan Harbinger: It's not the focus of this conversation, but it's like—
[00:47:44] David Packouz: Yeah.
[00:47:44] Jordan Harbinger: Really, the only thing keeping a lot of this stuff in check, articles like that.
[00:47:49] David Packouz: Mm-hmm.
[00:47:49] Jordan Harbinger: Even though the photo was a little disingenuous.
[00:47:51] David Packouz: Right.
[00:47:52] Jordan Harbinger: This kind of deal would be the least of our concerns if people weren't worried about getting exposed, right? I mean, you see that in countries with no free media. It's just a mess.
[00:47:58] David Packouz: That's very true. I fully support free journalism and the freedom of the press and freedom of speech. I do wish that journalists would be less disingenuous.
[00:48:08] Jordan Harbinger: That's the Internet, man, click farm crap.
[00:48:10] David Packouz: Yeah. It obviously did a lot of harm to us. Not that we were totally innocent or anything like that, but it definitely skewed the story. And once one publication publishes something, none of the other journalists bothered to check whether it's true or not.
[00:48:25] Jordan Harbinger: Mm-hmm.
[00:48:26] David Packouz: They're just like, "Oh, as reported in the New York Times, this and this happened," and it's the gospel truth from then on, no matter, even if there's counter-evidence to it.
[00:48:34] Jordan Harbinger: So what do they charge you with just that one specific act of fraud, which was repackaging the ammunition? Is that it?
[00:48:40] David Packouz: So the way they work is, and this is kind of speaks to how the justice system works in the United States. First, they had told us they weren't going to charge us with anything, right? And when we initially agreed to cooperate, they're like, "Oh, you're cooperating. You're not even a target. We're not going to even charge you." But then once it got into the newspapers, they're like, "Oh, you know, we need to charge you because you're too closely associated with the actual acts that we're charging Diveroli with. So we can't just let you go and charge him only." The initial thing that they charged us with was they said, "You delivered 71 aircraft loads of this Chinese ammunition, and each aircraft load had a document that stated what was in the—
[00:49:28] Jordan Harbinger: Oh man.
[00:49:28] David Packouz: —in the aircraft.
[00:49:29] Jordan Harbinger: I know where this is going.
[00:49:30] David Packouz: Right. So like, it states what the type of ammunition is in the aircraft, the quantity of the ammunition, the year it was manufactured, and the place of origin and under place of origin, you guys put Albania. And you knew that the real place of origin was China. And not only did you put this false information on the document, you actively covered it up. You had a whole patent repackaging operation to hide the fact that it was Chinese origin, and then you lied on the documents. So each time you lied on this document and you submitted it to the government. Efraim signed the document but I'm the one who was submitting it all to the government. So I was liable. You know, you submitted the document that you knew was false to the government and each one of these documents is an act of fraud.
[00:50:16] Jordan Harbinger: That's terrifying.
[00:50:17] David Packouz: Yeah. And you did the 71 times. So we're going to charge you with 71 acts of fraud. And each of these acts of fraud could get you five years in prison. So you can get 355 years in prison or you could plead guilty. And they use their discretion as prosecutors to combine those 71 acts into one.
[00:50:41] Jordan Harbinger: I'm scared for you right now, even though I already know the outcome is different because—
[00:50:44] David Packouz: Yeah.
[00:50:44] Jordan Harbinger: You had kids at this point, right? Which makes it a hundred times scarier.
[00:50:47] David Packouz: Yeah. My daughter had just been born. She was actually born like a month after that we won the contract.
[00:50:54] Jordan Harbinger: My god. Oh, man. And you're just—
[00:50:56] David Packouz: Yeah. My daughter was one years old at the time. And so they're like, "If you plead guilty then you know, we'll combine it to one act so you can get maximum of five years and because you plead guilty, we'll tell the judge, you know, it's not up to us what sentence you get, but we will tell the judge who's going to give you the sentence that you should get on the low end of the range. So, you know, maximum you could get legally is five years—
[00:51:17] Jordan Harbinger: Oh, man.
[00:51:17] David Packouz: But if you know we're going to recommend the judge that gives you one year or even less, you know, who knows? Maybe you'll only get probation. So let me think about that. You know, I could get probation—
[00:51:28] Jordan Harbinger: Yeah.
[00:51:28] David Packouz: —or 355 years in prison and even if I do win the case, you know, if I fight them in court, I need to a few hundred thousand dollars to fight that even have a fighting chance because you use a public defender or as the private lawyers love calling them a public pretender.
[00:51:45] Jordan Harbinger: Yeah, that's not fair though. The public defenders are usually better than these private lawyers, but whatever.
[00:51:49] David Packouz: Well, not to sh*t on public defenders.
[00:51:50] Jordan Harbinger: Yeah, they're busy.
[00:51:51] David Packouz: With the private lawyers, yeah, exactly. This is another issue with the system. The public defenders often have one to 200 cases they're working on at any one time. Prosecutors have five or 10. So the level of distraction and focus between the prosecutor's side and the public defenders. It's just not equal.
[00:52:12] Jordan Harbinger: Right.
[00:52:13] David Packouz: You're lucky if your public defender even knows your name, let alone the details of your case.
[00:52:17] Jordan Harbinger: Skill-wise though, it's not fair to say public defenders don't know what they're doing. They're way more experienced a lot of the time than these other guys.
[00:52:24] David Packouz: Yeah.
[00:52:24] Jordan Harbinger: But yeah, the level of focus that you're going to get, I mean, do you get better service in first class on an airplane or on an economy?
[00:52:30] David Packouz: Right.
[00:52:30] Jordan Harbinger: It's not because the flight attendant in first class knows the job better.
[00:52:34] David Packouz: Yeah. I 100 percent agree and not, you know, saying that the public defenders don't have their hearts in the right place and aren't skilled.
[00:52:42] Jordan Harbinger: Yeah. Yeah.
[00:52:42] David Packouz: That's not what I'm saying. I'm saying that the system is stacked against them.
[00:52:46] Jordan Harbinger: It's true. I just like to stand up for those types of attorneys because they're way more—
[00:52:51] David Packouz: Yeah.
[00:52:51] Jordan Harbinger: —idealistic. And frankly—
[00:52:53] David Packouz: I think you have to be.
[00:52:54] Jordan Harbinger: Yeah. And I went to law school with a bunch of those people and they were the best people in law school. The a-h*les like me became podcasters or like went into private practice.
[00:53:03] David Packouz: Right, right. Look, I completely believe it. I think you have to be idealistic to be a public defender, but from a defendant's point of view—
[00:53:12] Jordan Harbinger: Yeah. You get more attention.
[00:53:13] David Packouz: Yeah. The chance of going to prison for 355 years, I wouldn't feel comfortable being case 199 on a public defender's caseload. And if I wanted to get a private defender—
[00:53:25] Jordan Harbinger: Yeah.
[00:53:26] David Packouz: —then it costs $200,000 to $300,000, which I didn't have. So it wasn't really much of a choice. Even if I had the money, I probably would've made the same choice, but I didn't even have the money. So I didn't have the money, so I didn't even really have a choice. But of course, I pled guilty. And eventually, Efraim pled guilty as well. Alex pled guilty as well. Ralph didn't plead guilty actually. He went to court and he ended up losing.
[00:53:52] Jordan Harbinger: Ooh.
[00:53:53] David Packouz: Yeah. So Ralph got sentenced to four years because he fought them.
[00:53:58] Jordan Harbinger: Yeah.
[00:53:58] David Packouz: Well, at least, it wasn't 355 years, but he spent all, like every penny he had, he spent defending himself in court. I think he spent like a million dollars plus.
[00:54:09] Jordan Harbinger: Oh geez.
[00:54:10] David Packouz: Yeah. And I got very, very lucky. I went back to school. I started working at a nonprofit. I tried to make—
[00:54:20] Jordan Harbinger: I was going to say a good move, man.
[00:54:21] David Packouz: —good stuff as possible for what the judge—
[00:54:22] Jordan Harbinger: What are you doing now, sir? Are you still the arms business? Actually, I work at an orphanage for no money.
[00:54:27] David Packouz: It was actually a food bank, but yes.
[00:54:29] Jordan Harbinger: Food bank, I wasn't even that far up. Yeah.
[00:54:30] David Packouz: Yeah.
[00:54:31] Jordan Harbinger: It's like, I go to church every day, even though I'm Jewish and I go to synagogue, and also—
[00:54:36] David Packouz: Yeah.
[00:54:36] Jordan Harbinger: Yeah. Like I sweep the streets outside the school—
[00:54:39] David Packouz: Yeah.
[00:54:39] Jordan Harbinger: —as a hobby.
[00:54:39] David Packouz: You know, when you have that kind of, when you have years of prison hanging over your head, you're going to do anything that you think even gives me a slight chance.
[00:54:47] Jordan Harbinger: Yeah.
[00:54:47] David Packouz: You know, I told myself, there's no way I'm going to miss out years of my daughter's life for this.
[00:54:53] Jordan Harbinger: For Efraim Diveroli of all people.
[00:54:55] David Packouz: I'm just not going to do that.
[00:54:56] Jordan Harbinger: No, thank you.
[00:54:56] David Packouz: Exactly. Exactly.
[00:55:00] Jordan Harbinger: This is The Jordan Harbinger Show with our guest David Packouz. We'll be right back.
[00:55:05] This episode is also sponsored in part by SimpliSafe. Spring is in Bloom, and you know what comes next vacation season. But before you pack your bags, be sure to secure your home with SimpliSafe home security. While you're basking in the sun sipping on some piña coladas, don't you want to be completely relaxed knowing that your property and belongings are safe? As loyal customers for years, we rest easy at night knowing that our home is monitored around the clock by trained agents ready to defend against break-ins, fires, and other threats. And when we're traveling, we're able to check in remotely on our security cameras. We can lock and unlock our doors remotely to let the housekeepers or pet sitters and those types of peeps in. And SimpliSafe's installation process is a breeze. Jen did it all. She's handier than me. But if you're anything even remotely lazy like me, you can opt for certified technicians to handle it for you. SimpliSafe has been named The Best Home Security of 2023 by US News and World Report, and is CNET's editor's choice for home security.
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[00:56:14] Jordan Harbinger: Guys, I want to give a shout out to one of my favorite YouTube channels. It's called The China Show. It's run by two of my friends of Laowhy86 and SerpentZA. Imagine picking those names a bunch of years ago and being like, this will never be cringey. Winston and C-Milk, really good guys. I guess that's another name, C-Milk. There's the story there. I'm sure. These are great guys. They lived in China for 10 years, 14 years respectively. They are incredibly versed with Chinese news. They do a roundup of things going on in China like AI and why people are going bonkers over ice cream. But also things like the Pentagon leak and what those documents have to do with Chinese policy. So it's not super nerd-alert when it comes to in-the-weeds policies and politics, but it's really interesting. They try to keep it funny and light as well. I watch pretty much every one of their videos that they put out, all these guys, especially The China Show episodes. If you want to stay up-to-date on China, if you want to get an idea for the threat that the Chinese Communist Party has, or just get a really cool and funny look into Chinese culture itself. Then I definitely recommend The China Show. One recent video they did was on the state of AI in China, and it just kind of devolves into this funny cultural critique. So definitely check out the link in the show notes. It's called The China Show. You can literally just search for the China show on YouTube and you'll find it and let me know what you think. Good guys, great show.
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[00:58:15] Now for the rest of my conversation with David Packouz.
[00:58:20] So how did they catch Efraim, man? I mean, he doesn't seem like a guy who learns from his mistakes, so I assume he's just like busy selling rockets and missiles and guns.
[00:58:29] David Packouz: Yeah. Efraim, probably, if I had to guess, he probably would've gotten maybe a year in prison just cause he was the ringleader. He pled guilty, so they also reduced his counts down to one just like mine. When he signed his plea agreement, you know, the way it works, you plead guilty, you sign a plea agreement admitting to all your crimes, and you promise not to do any more crimes. And the government promises, the prosecutor's promise to give a positive recommendation to the judge saying "This guy has been cooperative and he feels really bad and he's a changed person. He'd be a good citizen from now on. So, go easy on him, judge." But part of that agreement is you can't commit any more crimes before your sentence because if you commit more crimes, they can't tell the judge, "Hey, go easy on him."
[00:59:19] Jordan Harbinger: Efraim got for years. So what other crimes did this moron freaking commit?
[00:59:23] David Packouz: Yeah.
[00:59:23] Jordan Harbinger: After he plea — this is like Billy McFarland from Fyre Fest. Like, "Hey, man, just stay out of trouble for one second." "Cool. I'm going to go scam people with fake meatball tickets. Be right back."
[00:59:32] David Packouz: Pretty much. Yeah. It's pretty entertaining, at least for me.
[00:59:36] Jordan Harbinger: Yeah.
[00:59:36] David Packouz: I'm sure not for Efraim. So what happened was they told them to stay out of the arms business while he was awaiting sentencing, but of course, he couldn't do that. He created some shell companies being run by like one of his new employees that he promised the world to, who he replaced Danny with.
[00:59:56] Jordan Harbinger: Right.
[00:59:57] David Packouz: But of course, he's a control freak, so he couldn't let his employees do all the talking. When it got down to it, he was trying to sell these magazines, these high-capacity magazines to some gun dealer in central Florida, in the Orlando area. And when it got real close to making this deal, Efraim wanted to negotiate. And so he insisted that his employee put him on the phone as a consultant, right? And he gets on the phone and the guy he's talking to who's a gun dealer in central Florida realizes who he is. And he Googles him. And he realizes, "Hey, you know, this guy is in a lot of trouble right now." I assume this is what he was thinking. I don't know for sure, but I assume this is what he was thinking, "What if he's trying to entrap me—?"
[01:00:45] Jordan Harbinger: Ah.
[01:00:45] David Packouz: Into doing something illegal.
[01:00:47] Jordan Harbinger: That's a reasonable assumption actually.
[01:00:49] David Packouz: Yeah. A very, very reasonable assumption. This is pretty much how these things work. And so he's nervous and he calls up the ATF.
[01:00:58] Jordan Harbinger: Wow. That wouldn't be my first call, but okay. I'd just be like, I don't know if I'd go to the feds, but, you know, whatever.
[01:01:04] David Packouz: Yeah. The ATF are the people who are responsible for licensing gun dealers.
[01:01:08] Jordan Harbinger: Oh, so he's probably, yeah. "Look how good of a dealer I am. I'm proactive."
[01:01:12] David Packouz: Exactly. Like "I'm being clean-cut here."
[01:01:15] Jordan Harbinger: Yeah.
[01:01:15] David Packouz: "I don't want to get in any trouble. I want to make sure I'm not breaking any laws or regulations. So advise me what to do on this, ATF." And the ATF is like, "Oh, that's so interesting that this guy wants to do business with you. Why don't you keep on talking to him and why don't you introduce one of our undercover agents as your partner?" And so the undercover agent gets on the phone with him and he says to Efraim, "You know, I'd love to do this deal with you, but I'm the kind of guy who really has to meet someone in person and shake their hand and look in the eye before I can do deal."
[01:01:45] Jordan Harbinger: Okay.
[01:01:45] David Packouz: "Why don't you come up to Orlando and we'll shake on it and do this deal?" And Efraim is like, "Yeah, I totally understand. I'm that kind of guy too. Sure. I'll be up there this weekend. We'll shake on it and do this deal." And so Efraim goes up to Orlando, which breaks the conditions of his probation bond.
[01:02:07] Jordan Harbinger: Yeah. Or his bail or whatever.
[01:02:09] David Packouz: His bail. Exactly. And he was not allowed to leave the Miami County. And so he goes to Orlando, which breaks the conditions. And he meets the undercover ATF agent. And the agent tells him, "Hey, you know, I just picked up this cool new HK handgun. It's the newest thing on the market. Check this out." And Efraim's like, "Oh, I heard about that. That's so cool. I've been wanting to try those out. Hey, give me that. Let's go to a range. Let's go shooting." And he picks up, the ATF hands him the gun and he's like, "Let's go shooting." Then he tells the ATF agent, he's like, "What can I say? You know, once a gun runner, always a gun runner. Am I right?"
[01:02:51] Jordan Harbinger: Yikes.
[01:02:52] David Packouz: And then right after that, the ATF agent slaps cuffs on him and he says, "You're under arrest. You're a felon in possession of a firearm."
[01:03:02] Jordan Harbinger: Oh, wow.
[01:03:03] David Packouz: Because he had already pled guilty, which makes him officially a felon. And if you're a felon, if you're in possession of a firearm, you can get up to 10 years in prison.
[01:03:12] Jordan Harbinger: Ah.
[01:03:13] David Packouz: So they arrested him. They told the judge, "Hey, this guy's a flight risk because he already didn't respect the conditions of the bail he's on."
[01:03:21] Jordan Harbinger: Sure.
[01:03:22] David Packouz: So why should we give him bail for this? And the judge agreed. And so they kept him in county jail actually in central Florida for like a year.
[01:03:30] Jordan Harbinger: Oh wow.
[01:03:31] David Packouz: While Ralph's trial was getting worked out and eventually, I think after a year he got sentenced. He hired the best lawyers in Miami. I heard from somebody he spent like two million on his lawyers over the course of like three years.
[01:03:47] Jordan Harbinger: Oh my God. That's insane.
[01:03:49] David Packouz: I mean, these guys are expensive. I mean, Roy Black's firm and he's like one of the most famous lawyers in Miami. I think he doesn't even like talk to you unless you put down a million-dollar retainer.
[01:03:59] Jordan Harbinger: Wow. Okay.
[01:04:00] David Packouz: Yeah, for real. And he got best lawyers in Miami. I mean, he could have gotten 15 years total, five for the fraud charge and 10 for the gun charge. But his lawyers convinced the judge to give him a combined sentence of four years.
[01:04:14] Jordan Harbinger: Phew. Man, it's so classic, right? Like he can't help screwing people over, screws over the guy, gets the New York Times piece written. That's what exposes everything, gets him in trouble. "Hey, you can't do this." "Well, nobody's going to tell me what to do. There's no consequences that I'm going to ever face."
[01:04:28] David Packouz: Yep.
[01:04:28] Jordan Harbinger: And it's just like Shakespearean in that the gun is also his undoing at the end of the day, right?
[01:04:35] David Packouz: Yeah. It's straight out of a movie, the whole, "once a gun runner always—" it's just like he's got his movie Hollywood line—
[01:04:42] Jordan Harbinger: Right.
[01:04:42] David Packouz: —right at that critical point. It's like almost made for the screen.
[01:04:46] Jordan Harbinger: Yeah. It's like watching Blow with Johnny Depp, where they're like, "Man, I feel so bad we have to arrest this guy."
[01:04:51] David Packouz: Yeah.
[01:04:51] Jordan Harbinger: And he's like, "Where's my knife?" Right? It's like the same—
[01:04:53] David Packouz: Yeah.
[01:04:53] Jordan Harbinger: —thing.
[01:04:54] David Packouz: Yeah.
[01:04:54] Jordan Harbinger: Do you think if you've made all that money in that deal that you would've actually quit being an arms dealer, or would you just keep going? I mean, we in law and Wall Street, we say golden handcuffs. You're like, "I'm done after this." And then you're like, "Except I've got this sweet boat and this house in Nantucket and my wife likes sending the kids to the super expensive private schools. Maybe I'll work for a few more years." I mean, it's—
[01:05:14] David Packouz: Yeah.
[01:05:14] Jordan Harbinger: You're not going to quit if you made 15, 20, whatever million on a deal. You're not going to.
[01:05:18] David Packouz: I would have to agree with you. I mean, my plan was always to quit. My plan was five to 10 million. That was my number. Like I thought above five million, I'm probably set for life as long as I don't spend ridiculous money and, you know, 10 million, I'll be really set and I could maybe use half a million and jumpstart a music career. That was my dream. Because I'm a musician, I play guitar. I'm a singer, I write songs. And I realize that you need money to have any sort of promotion and to get out there. And so my dream was I was going to make a bunch of a few million dollars and use some of that money to jumpstart a music career. But in reality, when I think about it, I'm like, I don't know, man. If I had made 10 million and I had 50 million coming, if I just stuck out one more year, would I really not stick out one more year and make another 50 million?
[01:06:12] Jordan Harbinger: Yeah. I mean it's—
[01:06:13] David Packouz: And then once you make that 50 million, are you going to not stick another year and make another a hundred million? You know, it's just like it never ends. So I have to say that in retrospect, I'm actually really happy with how things ended up going, that I had a real kick in the ass and it really, really showed me what was important in life and set me on a much better path, which I'm much happier on now.
[01:06:35] Jordan Harbinger: Do you mind if I ask how much you actually made as in arms dealer?
[01:06:39] David Packouz: It's embarrassing to say.
[01:06:41] Jordan Harbinger: Good, then people won't do it, you know? Come on. That's the point.
[01:06:44] David Packouz: Yeah. Well, I mean, I would've made a lot if I hadn't been screwed over, but in the end, in the end, I actually only pulled out, and this is so embarrassing to say, but I only pulled out about $30,000 out of the whole thing.
[01:06:57] Jordan Harbinger: Oh my God. You would've been better off working at Chipotle or something like that.
[01:07:00] David Packouz: I would've, I would've. And the reason for that was, It wasn't that I didn't make any money, it was that Efraim insisted on rolling the money I made into the next deal.
[01:07:09] Jordan Harbinger: Mm-hmm.
[01:07:10] David Packouz: So he was like, "Hey, I'm using my money to fund this, so why don't you know you are making money on this contract, so why don't we use some of your money to fund this?" So he never let me pull the money out, which should have been an obvious clue that he never really intended to pay me. But he kept on running, you know, rolling the money into the next deal, to the next deal, to the next deal. So by the time that he ended up screwing me, that was like all my money.
[01:07:35] Jordan Harbinger: Yeah, no, it makes sense. I mean, I wouldn't even be that embarrassed about it.
[01:07:39] David Packouz: Yeah.
[01:07:39] Jordan Harbinger: You were literally like a kid.
[01:07:42] David Packouz: Yeah.
[01:07:42] Jordan Harbinger: And also you were being taken advantage of by somebody who manipulated the governments of multiple countries.
[01:07:47] David Packouz: Yeah.
[01:07:47] Jordan Harbinger: It's not like—
[01:07:48] David Packouz: That's true.
[01:07:49] Jordan Harbinger: It was hardly you getting fleeced when you should know better. 20/20 hindsight, of course. Like, oh, he wanted me to do this. Oh, that was the first red flag.
[01:07:57] David Packouz: Right.
[01:07:57] Jordan Harbinger: Ah, I don't know, man. I wouldn't be so hard on yourself.
[01:08:00] David Packouz: Well, yeah, I mean, I'm over it. 15 years will do that.
[01:08:04] Jordan Harbinger: Yeah, of course. Look, what are you doing now? Because actually—
[01:08:07] David Packouz: Yeah.
[01:08:07] Jordan Harbinger: —I want to know what you're doing now and if any arms dealer skills overlap with it, but also I think what you're doing now is awesome.
[01:08:14] David Packouz: Thank you. Thank you. It's actually an interesting story of how I got into my current business. Well, I'll give you, I'll give you the slightly longer version.
[01:08:24] Jordan Harbinger: Yeah.
[01:08:24] David Packouz: Because I know what you're talking about, which I'll get to. So what happened was, the way I got into my current business is I was under, this actually led directly from the whole War Dog story. I was under house arrest. I got seven months of house arrest, which is a breeze. I mean, I have no complaints about that.
[01:08:44] Jordan Harbinger: Gosh, even now, and now in the days, I'm basically under house arrest right now. I got two little kids in DoorDash.
[01:08:49] David Packouz: Exactly.
[01:08:49] Jordan Harbinger: That's fine. Sign me up.
[01:08:50] David Packouz: Yeah. Yeah. It's a million times better than prison.
[01:08:53] Jordan Harbinger: Sure.
[01:08:53] David Packouz: That's for sure. So I was staying home for seven months and I was playing lot of guitar. And I really missed playing with a drummer because the drums give the music the energy. You know, you dance to a beat. But I obviously couldn't go to the studio because I couldn't leave my house and no drummer was going to, you know?
[01:09:11] Jordan Harbinger: Yeah, I'm under house arrest. I can't make the meeting.
[01:09:14] David Packouz: Yeah.
[01:09:14] Jordan Harbinger: Okay. That's a valid excuse.
[01:09:16] David Packouz: Exactly. And of course, no drummer, you know, I had a few friends who were drummers, but they weren't going to pack up their entire drum set into a van and bring it over to my apartment. And there's barely any room in my apartment at the time for a drum set. Even if we did, it would wake up the entire neighborhood. So it wasn't exactly something I could do. So, I bought a drum machine, which is like, for those who don't know, it's like an electronic device that is a tabletop thing. It has a bunch of buttons. Each button makes a different drum sound. You could tap the buttons to make a beat and it plays it over and over in a loop. And then, so I'd make beats and I play my guitar to it. But you could make different beats on it, but every time I wanted to change the beat on the drum machine, like when you go from like verse to chorus, the beat changes. I'd have to stop playing my guitar—
[01:10:02] Jordan Harbinger: Oh yeah.
[01:10:02] David Packouz: —press a button on the machine—
[01:10:04] Jordan Harbinger: Lame.
[01:10:04] David Packouz: —and go back to playing my guitar. Exactly. It interrupted the flow of the music. So I thought, man, I really need like a hands-free drum machine, a drum machine in the form of a guitar pedal, like something I could tap with my foot. Guitar pedals are a common device that guitarists use to create effects on their guitar. So like when you change the sound of a guitar from like clean to distorted, most of the time you're hitting a guitar pedal and it changes the sound. So I thought I need to combine a drum machine and a guitar pedal. And I went online to look for it and I couldn't find anything. I asked my musician friends and they're like, "Never seen anything like that, but if you find it, let me know because I want one too. That sounds super cool." And so I thought, "If nobody's making it, everybody wants it. This is going to be my ticket to redemption here."
[01:10:49] Jordan Harbinger: Sure.
[01:10:51] David Packouz: And so it took me three years, but eventually I got a working prototype and it's called The BeatBuddy. This thing is, as Gizmodo says, "A genius idea."
[01:11:02] Jordan Harbinger: Yeah.
[01:11:03] David Packouz: I love that line.
[01:11:05] Jordan Harbinger: I mean, yeah, you can die now on that one.
[01:11:07] David Packouz: Exactly. It's a pedal that you could press with your foot goes on the floor and it moves according to the beat. And when you tap it, it does like a drum fill. If you hold down the pedal, it does a transition. When you let go, it goes to the next part. So you can go from like verse to chorus back to different parts and you could also plug in, it also has a thing you can plug in more buttons to have more capabilities.
[01:11:32] Jordan Harbinger: Oh, very cool. Like MIDI control and whatnot.
[01:11:35] David Packouz: Exactly. It's not full MIDI control. So yeah, so that's, that was my first product came out in 2014 and it became a big success in the musical world. I've had some of my musical idols ended up buying it. It was super cool.
[01:11:51] Jordan Harbinger: Really? That's frigging cool. That must have felt great.
[01:11:54] David Packouz: Yeah, it was amazing. So one of my favorite bands that I grew up learning to play guitar was Alice in Chains.
[01:12:02] Jordan Harbinger: Oh, I love Alice in Chains too, man. Definitely.
[01:12:03] David Packouz: Love Alice in Chains.
[01:12:04] Jordan Harbinger: Yeah. People are going to be like, what? Jordan likes Alice in Chains. Yeah. That's going to surprise a lot of people, I think.
[01:12:09] David Packouz: Yeah. So Mike Inez the bassist of Alice in Chains came up to me at like our second trade show in 2015, and he was like, "Oh, you made the BeatBuddy." And I'm like, yeah. He's like, "Yeah, I just bought one two months ago. I've been writing all my new music with it."
[01:12:24] Jordan Harbinger: Wow.
[01:12:25] David Packouz: And I was like, "Dude, I learned to play guitar listening to your music."
[01:12:29] Jordan Harbinger: Yeah. That's super cool.
[01:12:31] David Packouz: It's so freaking cool, so cool.
[01:12:33] Jordan Harbinger: I got to say you're much smarter than they made you look in the movie. Do you get that all the time?
[01:12:38] David Packouz: Well, thank you. I appreciate, uh, people have said that.
[01:12:41] Jordan Harbinger: Yeah.
[01:12:41] David Packouz: I also get that I'm much more handsome than they portray me in the movie. I say I have way better hair.
[01:12:46] Jordan Harbinger: I'll leave that up for debate. Yeah.
[01:12:49] David Packouz: I see. I like that line. Only Hollywood could give me a full head of hair.
[01:12:53] Jordan Harbinger: That's right.
[01:12:54] David Packouz: But yeah, thank you. I do appreciate that. I mean, you know, the movie, they changed a lot.
[01:13:02] Jordan Harbinger: I love the invention. I was actually talking about the other one—
[01:13:05] David Packouz: Yeah.
[01:13:05] Jordan Harbinger: —that is going to change the world. You know, the guitar thing is cool, but this — stand back everyone.
[01:13:10] David Packouz: Yeah, yeah, yeah. So this is what I actually am really excited about now. The reason I mentioned that was because that was my first invention.
[01:13:18] Jordan Harbinger: Sure.
[01:13:19] David Packouz: And since then I've come out with six other products, musical products. I don't know if we have time to get into them, but just very short one, this is the simplest one, it's a product that organizes your cables. See it's called the Cabli.
[01:13:33] Jordan Harbinger: XLR cable winding. How does that not exist already? Yeah. That's amazing.
[01:13:36] David Packouz: I was playing some shows and it had like seven cables and it was taking me forever to wrap it around my arm and I was like, I just need like a freaking cable and a wheel, and boom.
[01:13:45] Jordan Harbinger: That's one of those — because you go, how does, wait, that doesn't exist? Okay. And you make it and immediately everyone needs it who uses that.
[01:13:52] David Packouz: Exactly. So that's our simple version. We also came out with the world's most advanced looper pedal for the musicians. They'll know what I'm talking about a looper pedal. It's a common thing but we came out with, it's like almost like a digital audio workstation in a looper pedal. It's like a hybrid of pro tools or logic.
[01:14:11] Jordan Harbinger: We're going to link to all the Singular Sound site in the show notes as well. But show me the Instafloss, man. That's where I'm like, where I don't want to floss my teeth again after this interview.
[01:14:20] David Packouz: The Instafloss, as you mentioned, is the first product that is not music related. I came up with this with my brother and we were eating mango and mango gets all those fibers stuck in your teeth. And so we were flossing our teeth afterwards and we're like, "Man, this is such a pain in the ass. I wish we had a machine that could floss our teeth for us."
[01:14:42] Jordan Harbinger: Yeah, no kidding.
[01:14:42] David Packouz: Because everybody hates to floss. So we started batting around ideas and eventually, we came up with this, it's called the Instafloss. And it's like an improved version of a Waterpik water flosser. The difference between this and a Waterpik, a Waterpik is a single jet of water that you have to trace your gum line, both the top and the bottom and the inside, which is very difficult to do from behind your teeth and you also have to keep it at an exact 90-degree angle to the tooth. So what we did was we created this like eight-shaped manifold and it has 12 jets of water instead of one. And they shoot from the sides. So all you have to do is bite and this turns as well. So all you have to do is bite in over here. And you're done in 10 seconds. You just sweep it across.
[01:15:26] Jordan Harbinger: I know people are like, "Wait, is Jordan kidding about this?" First of all, you have to send me one of those.
[01:15:32] David Packouz: Of course.
[01:15:32] Jordan Harbinger: I will absolutely use it every single day because I floss.
[01:15:35] David Packouz: Mm-hmm.
[01:15:36] Jordan Harbinger: I hate doing it. I do it every night. I try to do it in the morning, but I'm too effing lazy cause I just woke up. It just looks way better and way more efficient. I want one for my kid. You probably don't have kid sizes yet.
[01:15:46] David Packouz: Not yet, but we're going to make that.
[01:15:49] Jordan Harbinger: And I'm thinking like, oh, what if we don't need to throw plastic string in the toilet or which you're not supposed to do or in the garbage anymore every night?
[01:15:57] David Packouz: Yeah.
[01:15:58] Jordan Harbinger: And drool on my dirty fingers. Of course, I wash my hands, but I'm still shoving my fingers in my mouth, right? Like it's a whole thing.
[01:16:03] David Packouz: Yeah. Exactly.
[01:16:04] Jordan Harbinger: Instead I have this device that actually does it even better and works in 10 seconds instead of five minutes or however long it takes me to floss while I'm watching YouTube.
[01:16:11] David Packouz: Exactly.
[01:16:12] Jordan Harbinger: Really good. Definitely, I'm not kidding, I'm emailing you my mailing address after this because I want one of those things.
[01:16:18] David Packouz: Yeah, please do. I'd be happy to send you one.
[01:16:20] Jordan Harbinger: Thank you very much. Incredible story. Thanks so much for coming on the show, man.
[01:16:23] David Packouz: Thank you.
[01:16:23] Jordan Harbinger: I hope we sell enough Instafloss to have made this worth your time. I think we probably will.
[01:16:27] David Packouz: I hope so too. I hope so too. Yeah. Thank you. Anyone who wants to see it can go to instafloss.com. It's like Instagram but floss.
[01:16:35] Jordan Harbinger: Yeah.
[01:16:36] David Packouz: Instafloss.com. And you can see we have a video showing how it works and you could also order it. We're actually in the middle of producing it right now, the first production run, and we are going to deliver the first units to customers in June.
[01:16:49] Jordan Harbinger: David, thank you very much, man. Really appreciate it.
[01:16:51] David Packouz: My pleasure, my pleasure. Thank you.
[01:16:55] Jordan Harbinger: I've got some thoughts on this episode, but before we get into that, here's a preview of my conversation with an expert who spent more than two decades rooting out the counterfeit goods and services that fuel a trillion-dollar industry that only benefits petty crooks and organized crime networks. It's not just handbags or designer clothes, alcohol, makeup, even cancer medication are just the tip of the iceberg of what gets counterfeited. Here's a quick listen.
[01:17:20] Kris Buckner: Anything and everything is counterfeit from automobile parts, cancer medication, alcohol, kids' cough syrup. I mean, anything that somebody can fake to make money, they're going to do it. I mean, we found human feces, rat feces, and carcinogens and some of the counterfeit makeup. It's really, really scary. I mean, people can actually die or really get harmed over this stuff. The general public thinks, "Oh, it's poor people just trying to get by, trying to make a living." But somewhere down the chain, a criminal organization is involved in that counterfeit item.
[01:17:50] The sales of counterfeit goods is actually listed in Al-Qaeda's training manual on a quick and easy way to raise revenue for operational purposes, because why? It's a crime that's completely worth doing for them, where they can make huge amounts of money. And then let's look at the human impact. Where are these goods made?
[01:18:06] Jordan Harbinger: Chinese kids in these factories in the middle of nowhere. There was an investigator online who said he was about to do a raid with the police, and he heard children's music and he thought, "Oh wow, they have childcare for their workers." And then when they came in, they found a bunch of kids at sewing machines handcuffed to the machines and he said the smell was unbearable because they weren't allowed to go to the bathroom.
[01:18:26] Kris Buckner: The common perception, "Oh, it's poor people just trying to get by or trying to make a living," it's really not the case. I mean, this stuff's tied to organized crimes, criminal cartels. I mean, there's a whole big picture behind this stuff. You will see law enforcement do seizures where they're pulling three million cash out of someone's house, and that's all the proceeds from counterfeit goods. When you're buying that item, you are contributing to that child labor. You're contributing to that terrorist organization. That is where the money is going, undoubtedly.
[01:18:54] Jordan Harbinger: Even if you don't care that the Gucci bag you got for just 20 bucks can't be spotted as a knockoff by the snootiest in your circle of friends, hear why the trillion-dollar counterfeiting industry should concern you, check out episode 308 of The Jordan Harbinger Show with Kris Buckner.
[01:19:12] A lot here, but I don't want to make the episode any longer than two parts with my giant clothes. This kind of business is a feast or famine sales cycle because you can bid on a hundred contracts, you can lose all of them, and you get one that's like a hundred million dollars and that's your income for the whole year. Of course, because you're only getting a percentage of that. And it's like any sales cycle for any big B2B company, although they made way less money doing this than they would've if they were not cutting corners everywhere.
[01:19:35] As you probably heard or picked out from the show, the Albanian ammo turned out to be Chinese. Albania is a crazy place, man. I've been there, really great people, cool food, everything. But they had a dictator named Enver Hoxha and he pulled out of the Soviet Union, or at least the agreement with the Soviet Union. And he was convinced that the West was going to invade and the Soviets were going to invade, so he built something like 800,000 bunkers throughout the country and you can still see them. They're filled with garbage and water and dirt and they'll be in the middle of a farm field and all along every road. And they cost as much as an apartment to build because they were really, really fortified and had a communication system in them and everything. Absolutely wild. These bunkers, again, they're still there. There's gun in placements and places where you can shoot out of. He expected total war, right? Every man, woman, and probably child in the country to be fighting the Soviets and/or the West at the same time, NATO at the same time. So just a really interesting factoid about, well, unchecked, kooky power in a dictatorship like Albania, and that's where they had gotten that ammunition and it turned out to be from China. And oops, the consequences thereof.
[01:20:43] I love stories like this. If you guys know anyone I should talk to who's the subject of a book, or wrote a book or subject of a movie, then definitely suggested to me, especially if you're able to introduce me to them. Big part of the show is fan guest suggestions. I always appreciate it, and I hope you enjoyed this conversation as much as I enjoyed it as well. I thought it was a trip.
[01:21:02] All things David Packouz will be in the show notes at jordanharbinger.com, or ask the AI chatbot transcripts in the show notes. Advertisers, deals, discount codes, ways to support the show, all at jordanharbinger.com/deals. Please consider supporting those who support the show. I'm at @JordanHarbinger on Twitter and Instagram. You can also connect with me on LinkedIn.
[01:21:21] And speaking of connection, the best things that have ever happened to me in my life and business have come through my network and I'm teaching you how to build the same type of network for yourself in our Six-Minute Networking course. It's a hundred percent free. It's not schmoozy, it's not gross. It's free on the Thinkific platform at jordanharbinger.com/course. It really just takes a few minutes a day. I spend like two minutes a day doing this stuff. Maybe not even that. I wish I knew this stuff 20 years ago. It's changed my entire life, my business, everything. Dig that well before you get thirsty, folks. Build those relationships before you need them, jordanharbinger.com/course.
[01:21:55] This show is created in association with PodcastOne. My team is Jen Harbinger, Jace Sanderson, Robert Fogerty, Millie Ocampo, Ian Baird, and Gabriel Mizrahi. Remember, we rise by lifting others. The fee for this show is you share it with friends when you find something useful or interesting, the greatest compliment you can really give us is to share the show with people you care about. So if you know somebody who'd be interested in a story like this, love the movie War Dogs, read the book, aspiring arms dealer, maybe share this episode with them. In the meantime, I hope you apply what you hear on the show, so you can live what you learn, and we'll see you next time.
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