The Appearance of Impropriety

The appearance of impropriety is often as damaging to all concerned as is the impropriety itself.

With that in mind I bring to your attention a fascinating front page article in the March 27, 2008 New York Times. It can be read at
http://www.nytimes.com/2008/03/27/world/asia/27ammo.html?_r=1&th&emc=th&oref=slogin.

It is an amazing story of a munitions supplier to Afghanistan. I make no judgment on the article except to say that it is an extraordinary example of the appearance of impropriety among a number of people.

Here is the story of a young man, Efraim E. Diveroli, who in 2003 became president of an apparently inactive corporation, AEY Inc., and immediately began bidding on US government contracts. In January, 2007, AEY won a contract from the US Army that could amount to as much as $300 million to supply ammunition to the Afghan army and other Afghan fighters. According to the story, the ammunition eventually supplied was aged, poorly packaged and boxed. Some of the ammunition was manufactured in China in 1966 (42 years ago) and was acquired from Albania for shipment to Afghanistan. Much of it seems to have been declared obsolete by NATO and the US State Department.

There appear to be multiple intermediaries involved in the transactions, including one company of unclear ownership that was organized to participate as a middleman. Additionally, according the Times article, the contract with the US Army also has the appearance of impropriety in its vague language and limited restrictions.

Through the appearance of impropriety the whole affair blemishes the US Army contracting officers involved, AEY, Inc. and Mr. Diveroli, as well as several others. The most confusing part of this is how it has lasted so long, and that the Army has said it will allow AEY, although now suspended from further government bidding, to complete the current contract. If the facts are as reported, why would the Army want to buy more ammunition from AEY?

One other comment – where is all the money going? Or, should I say, where does it appear all the money is going?

Your comments are invited.

Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.