Transcript for:
Insights from David Pakows on Contracting

The big contract was all munitions and the total thing where we bid it at was just under $300 million. $300 million. $300 million. Wow. Where did all the money go?

Our special guest today, David Pakows. Welcome to the channel. Thank you.

Some of you may know him from War Dogs. Your life was featured in that movie. It's just super exciting. And I can't wait to learn more because from my understanding. You lived in Israel as a kid.

You somehow got involved in government contracting. Law enforcement's involved. And then, boom, Jonah Hill is in a movie about your life in government contracting. To be clear, Jonah Hill plays my former partner. No, I understand that.

I understand that. I know he doesn't play you. I'm the handsomer guy.

The one with the better hair. Yes, yes, yes. So how did you even get into government contracting? Well, I got into it because I was at the time I was in college.

I had a few businesses, online businesses selling SD cards on eBay. I was importing bedsheets and linens from Pakistan, selling them to in bulk to nursing homes and hospitals. And I was doing all right.

But I bumped into an old friend of mine who was played by Jonah Hill in the movie. Efrem Devaroli, and he was doing government contracting and doing very, very well at it. And he heard what I was doing, and he tells me, you know, a lot of stuff you're doing is finding sources overseas, working logistics, financing, contracts and stuff.

It was all in the commercial sector, but a lot of those skills could be transferred over to the government contracting sector. He says, a lot of what you're doing is very similar to what I'm doing. So I could use a partner, and I bet I'm making way more money than you.

We should make more money together. And I asked him, you know, how much money you making? And he was 18 years old at the time.

Whoa, 18? 18, and he'd been doing government contracting on his own for about one year. He'd learned it from his uncle when he was 16, 17. Okay. And he logged into his bank account, and he showed me his bank account, and he had $1.8 million in the bank in cash. 18. After one year of work, yeah.

So I was blown away, just as you were, and I realized, you know, this guy knows something I don't, and I could learn a lot. So I said, I'm in, let's do this. And he taught me how government contracting worked. His specialty was more in the weapons and ammunition.

He was a gun nut, so he was mostly focusing on that stuff. And he asked me to focus on other things so we could expand the business. So I started out with fuel.

contract. Okay. Delivered. My first contract was 50,000 gallons of propane to the Air Force in Wyoming. And what was the contract award for that?

You mean like the amount? Yeah. I don't remember the total amount. I just remember that my 50% of the profit as we worked it out was $8,000.

Oh, but that's still great. Yeah. Yeah. It was good for only a few weeks of work. So it was not bad at all.

I was pretty happy. And of course that was with no past performance. So that set us up for larger contracts down the road.

Not that we ended up going into the fuel eventually. We did a few fuel contracts, but we were already so well established as a company in the weapons and ammunition sector that we just kept on going for bigger contracts there and eventually won a mammoth contract that became the story of the movie. Yes.

And so prior to the two of you kind of reuniting, is your... Kind of like childhood friends, went to school together. Right.

So he was already selling weapons because of his family? Yeah. How did that come about?

He went to, so he got kicked out of high school when he was 16. Oh. And I think he got caught smoking weed. And he went to a private Jewish school, as did I.

We actually weren't in the same school, but we were in similar schools. The only two Orthodox Jewish schools in Miami Beach. And, uh... But our families went to the same synagogue, so that's how we became friends. Neither of us liked to pray, so we'd sneak out during prayers and go hang out on the basketball courts.

And then when he was 16 and got caught smoking weed by his school, he got kicked out. And his parents said, well, if you're not going to take school seriously, you're going to learn what real life's about. You're going to join the workforce.

And so they sent him off to his uncle. His uncle owned this big pawn shop in south central L.A. And, yeah.

And so he started working in the pawn shop, in the warehouse, and he became obsessed with guns, as a lot of teenage boys do. And he started learning all about guns, loved selling the guns in the pawn shop. Then he started selling guns and ammo online with the gun boards, which is like the kind of the eBay of guns. And then he started doing government contracts in this field because his uncle was doing, not like large contracts. At the time, he was mostly focused on the local and state police, doing contracts for them in accessories and small arms weapons and ammo and stuff like that.

And so he learned how to do government contracts with his uncle. And then he had a falling out with his uncle. They each claimed the other screwed. The other, I believe in both.

So they're both well known for their shady business practices, unfortunately for me, and for everyone who does business with them. So yeah, and that's how he separated from his uncle and he came back to Miami, started his own company called AEY Inc., which is what makes it in the movie. There's a famous scene where Jonah Hill is asked what AEY stands for, and he says, oh, it stands for nothing, just like IBM. And You know, and the guy says, oh, actually, IBM stands for International Business Machine.

He's like, get the fuck out of here. And that's actually kind of true in the way he treated his employees. He was very, you know, egotistical and harsh on his employees, including on me.

He wasn't a pleasant person to work with. But A-E-Y does stand for something. It stands for the initials of his dad's three sons.

So he is the E of A-E-Y. He's Ephraim E. So it's Avram E. Ephraim Eshiah. which is the three sons of his dad.

So he took over the business, the corporate structure from his dad because he was still like not 18 yet when he had moved back to Miami. So he couldn't legally do it himself and registered it with, got the cage code to register with the government, got his FFL so he can do the gun business. And then he started bidding on contracts. And this was the height of the, this was right after the invasion of Iraq.

So this was in 2004, 2005. I feel old now. But yeah, this was in 2000. He started in 2004. I started working with him towards the end of 2005, beginning of 2006. So after he already had been in business on his own for about a year. And yeah, he was kicking ass.

He was winning a lot of contracts in Iraq. And that. set us up for the larger contract that we eventually wanted to get. And tell us about that one, because that's the famous one from the movie with the Chinese ammo and so many want to know.

Right. Is the movie real? It's hard to know how they depicted it. So break it down to us, because, man, there's so many nuggets.

So the movie is, I would say, people ask me if the movie is real. It's about 70%. True.

Yeah. 70% is massive. Pretty good.

That's a little... Oh my goodness. That's my own estimate. I mean, it's kind of hard to put a number on it.

But I would say the overall story is true. Some major parts were either completely made up or changed significantly. Like the best example is the Triangle of Death scene, right? Everyone asks about that.

And the crazy thing about the Triangle of Death scene is that it actually was true. But, but with a big but. But it didn't happen to us.

It happened to someone else. It actually happened to the guy who wrote the screenplay of War Dogs. So Stephen Chin, who is the screenwriter of the screenplay, he got the job to write War Dogs because he had written another screenplay about another two government contract, American government contractors in Iraq who were actually on the ground in Iraq. And he, to write that screenplay, he visited Iraq to interview these guys.

And he couldn't get like a commercial flight to Iraq. This is in 2004, I think. So right when Ephraim was doing this, he was flying over to Iraq.

And of course, he couldn't get a flight into Iraq, so he flew into Jordan. And he hired a Jordanian guy to drive him to Baghdad. And his Jordanian driver decided to stop in Fallujah, which was the most dangerous place in the whole country, because he could get free gas. And then they got chased by insurgents and shot at and got saved by the U.S.

Army, like in the movie. So that actually happened. Yeah, I mean, he was, as he told me, as we all would have been. So, yes, that actually happened, but not to me.

And when Stephen was writing the screenplay, Todd Phillips, the director, said, hey, you know, these guys are just spending too much time behind a desk. Right. We need to get them and you get some action in this movie.

So he's like, why don't you put your story in there? And it kind of melded fact and fiction because there was a Beretta deal that which what that whole scene was about. We did win a Beretta deal.

However, unfortunately, we actually ended up defaulting on that deal. We didn't end up delivering successfully on that. So yeah, because, and it was because at the time after we won the contract, the Italian government made it illegal for Beretta to export to Iraq. So we got kind of caught up in the geopolitics of the situation. Wow.

So talk to us about the big contract. Right. So the big contract, right.

So the big contract was it was all munitions. So it wasn't weapons. It was just munitions. And it was everything from small arms stuff for pistols all the way up to machine gun rounds and tank rounds and mortars and anti-aircraft rockets. And the total thing where we bid it at was just under $300 million.

$300 million. $300 million. And we had beaten.

We're told by a contracting officer later over the phone unofficially that we had come in $52 million under the next bidder. Yeah. And the next bidder wasn't considered even particularly reliable. So like the major companies like General Dynamics and ATK Systems who were bidding were our major competitors. They bid it more in the neighborhood of $500 million.

So, yeah, we could have made a lot more money on it. But, you know, who met? Yeah. But we were still doing about a 10 to 20 percent margin on the property. That's amazing.

And where were you getting, I mean, was all of the ammunition coming from overseas? Like, talk to us about that. So the munitions were going to the Afghan National Army and police, who were allies of the United States. They were the ones fighting the Taliban. The Afghanis are used to Warsaw Pact weapons.

So there's two major weapon classes in the world. There's NATO, which is like the M16, and Warsaw Pact, which is the AK-47. And obviously they're not compatible with each other, different size bullets and all that. So the United States doesn't make a very large amount of Warsaw Pact style munitions.

So when they wanted to supply the Afghanis with munitions, they realized, well, the Afghanis are already trained on the Warsaw Pact weapons. They also happen to be... way cheaper than NATO stuff.

So the taxpayer is going to save a lot of money by going that route rather than trying to make it a standard NATO military. And so the army, the US army who was putting out the contract decided that they were going to supply Warsaw Pact munitions. And of course, since no one in the US was making it, they had to get brokers. Originally, they actually tried to get it directly from the Russians. And the Russians were the only single supplier who could supply everything.

But then the Russians... decided to supply the Iranians with nuclear technology and they got themselves put on a blacklist and then it became illegal for the army to buy from the Russians. So they put out the contract, the request for quote, for middlemen to come in and put together the whole package because they didn't want to deal with 50 different separate suppliers and all these, and all like the Eastern European countries. So that's where we came in. And we had already had a very large amount of past performance for these types of items because We delivered this stuff to Iraq in much smaller quantities.

So we had plenty of past performance, plenty of multimillion dollar contracts that we had succeeded, all under $20 million, but quite a few. Yeah, that's amazing. And so we bid it. We didn't actually think we were going to win because it was just such, it was like our biggest contract up to that point was, I think, $15 million, a single contract. And this was...

We'll be in the hundreds of millions. And so we were like, there's no way we're going to win this. But we technically qualify for it.

So we have to bid it because we technically qualify for it. You never know unless you try it, right? Never know unless you bid.

Exactly. So we worked a long time. It was quite a few months, quite a lot of sleepless nights, scouring the internet and calling up Eastern European countries and companies and trying to talk to people on the phone.

who didn't speak English and also a lot of companies at that time didn't even have email addresses. They only had faxes. Yeah.

And like half the time the fax would fail when you like halfway through. So you'd try to send a fax and you think it went through and then you call them up and they're like, we didn't get any fax. And so it was a lot of wasted time and a lot of, and of course, I don't know what it's like now because I haven't done this business in a little bit.

But they still had a very heavy, like, Soviet era mindset, which is not a business friendly mindset. It's more of a like, like, why are you bothering me by calling me up kind of mindset? I can do my, if you don't call me up, my job is easier.

So get off the phone as quickly as possible. And oh, and you don't speak Russian, so fuck you. So it was very difficult to get through to everybody.

But after quite a few months of persistence and sleepless nights. We had a very extensive spreadsheet with all our sources of suppliers and... And we thought we had a pretty competitive bid, in particular because we had a connection out of Albania through a Swiss arms dealer, a guy named Henri Tomé, who in the movie is played by Bradley Cooper.

Yes, Bradley. And he was very connected with the government of Albania, and he got us this amazing deal for the AK-47 ammo. And the reason he got such a great deal was because at the time Albania was trying to join NATO. And one of NATO's requirements was that they get rid of all their old Soviet-era munitions and weapons. So they were going to have to pay to dismantle this stuff.

And so they were thrilled to sell it for pretty much anything. And so we got a really, really good price on it. Now, the thing we didn't know about that at the time was that Albania had gotten almost all that ammo from China back in the 70s. Oh. Yeah.

And, um... And our contract very specifically said no Chinese ammunition, either directly or indirectly, can be supplied under this contract. And we knew that they put that in there because there was an arms embargo against China that was put in place in 1989 because of the Tiananmen Square massacre, where the Chinese government killed a whole bunch of pro-democracy protesters. But we also knew that the ammo was supplied to Albania in the 70s before there was an embargo.

So technically it didn't violate the embargo. Well, it did violate the terms of our commercial contract with the U.S. Army.

So we were faced with a dilemma. We thought, well, we can go to the Army and we can say, hey, guys, you know, we kind of messed up. We didn't realize that this was originally from China and which violates the terms of the contract.

Can you give us a waiver, please? And they probably, in retrospect, they probably would have died because we found out later in court that they knew. that it was Chinese ammo the whole time.

Really? They didn't actually care. It only mattered once the New York Times published it and turned it into a political scandal.

Yeah. Yeah, in fact, they got a, jumping a little ahead in the story, but they got an email later on from the Justice Department informing them that this is Chinese ammunition and that it may violate. you know, the law or something.

But they said, we're not going to stop taking delivery on this unless we get a letter from the attorney general of the United States instructing us to stop taking delivery on it, the head of the Justice Department. So, of course, that letter never came. I don't know why, but they just didn't care.

So they already kept on taking delivery after having been informed by the Justice Department for another six months. Six months? Six months.

So they took around like $30 million worse. after they were informed that it was Chinese. And they only stopped once the New York Times published a front page article about the story. And that's when they were like, oh, we had no idea.

So, yeah, I was jumping ahead a little bit in the story. But, yeah, at the time when we found out that it was Chinese, we realized we could either ask, tell the government, tell the army that it's Chinese and that we asked for a waiver. And we figured if we did that.

They could either give us the waiver or they could say something along the lines of, well, you know, all your competitors were very upset that you won the contract, by the way. They had to bid under the conditions that they could only supply non-Chinese munitions, which this violates. It's not fair to all the, you know, to the open market. So the only right thing to do here is to take away your contract and put it out for open bid and you can bid on it again and don't bid the Chinese this time.

And so we thought that might. might happen. And so we didn't want to risk losing our $300 million contract.

And so we decided instead of telling the army, we're going to hire an Albanian guy to just repackage all the ammunition into a plastic and cardboard boxes so that they wouldn't find out that it was Chinese. And that was obviously a very big mistake, which eventually was our downfall. But at first it went very well.

And the army was very happy with the quality of the ammo. We were delivering three, four aircraft loads with like 45 tons each on them a week. So it was just going like clockwork. And at this time, once it started going like clockwork, my former partner decided that he didn't want to pay me the millions of dollars he owed me. And so he said, you know, he pretty much offered to give me like a...

like a fraction of what a very small fraction of what he owed me and I told him I'm not going to take that um and because we have an agreement and so I quit and I was getting ready to sue him and um and then a couple months after that uh the feds raided his office wow and and so To put it all in perspective, on the financial part, was your take supposed to be maybe 25? So yeah, it was supposed to be 25%. A profit.

A profit. So 25% of profit would have been a lot of money. Multiple millions.

We were on track to make, if we had completed the whole deal, we were on track to make about $60 million. No. Life-changing money.

Exactly. I was going to make $15 million. Oh my goodness. And instead... And instead he wanted to give me $100,000 a year salary and 1% of the company, which, you know, and yeah, I was like, I'm not going from 25 to 1%.

So, yeah, no thanks. And he's like, well, it's data zero. And I said, well, I'll see you in court. And that was the end of that.

And meanwhile, the feds are raiding his office. So they raided his office around two months after I quit. How did that even happen?

How did they read the office and how didn't anyone find out about the ammo? The way they found out was, of course, Ephraim just couldn't leave well enough alone. And he always was looking to wait to squeeze more money out of every deal.

Right. And which worked out well for him and us. And by extension, if he had paid me, it would have been us.

Right. So not really. But it worked out well for him in general.

But. He never knew where to leave it. So Efrem tried to squeeze more money out of the Albanian deal by trying to cut out the Swiss arms dealer who had set it up for us.

Henry? Henry, yeah. Tried to cut him out of the deal by going directly to the Albanians. And the Albanians refused to cut Henry out of the deal, right?

Probably, I assume. Obviously, we don't know. Probably because Henry was paying off politicians who kind of put the whole thing together.

which is a good thing that we weren't doing that directly because that's very illegal. And even knowing about it is being part of it is illegal. So we didn't know.

I mean, he didn't tell us. But Ephraim tried to cut him out. They refused to cut him out, but they made him an offer. They said, look, you want to save a little bit of money?

We'll do this. We know that you hired some other Albanian guy to repackage the ammunition, right? We just hired some random...

He owned a cardboard box factory. We needed to... strong cardboard boxes. So we hired him to supply the boxes and the workers to do the repackaging job.

And so the Albanians who were in charge of the ammo, they said, well, why don't you give us that repackaging contract? We'll make money off that contract. And then we can give you a little discount on the ammo.

And that way it's a win-win for everybody. And Ephraim said, sure, that guy's fired, you're fired, and let's do this. The guy who he had just fired got a little upset.

And he said, hey, you know, I got stuck with $20,000 worth of cardboard boxes that I have nothing to do with now. Can you at least buy them for me? And I told Ephraim, buy the boxes for me. Ephraim said, yeah, yeah, yeah, I'll do it. I'll do it.

No problem. Yeah, I'll do it. But he never does. Guy calls him a few more times, kind of gives him a cold shoulder.

Guy gets really upset, rightfully so. And he decides to call up the New York Times and tell them what we were doing. And he calls up the feds and tells them what we were doing. And his biggest mistake is he calls up the Albanian press and he tells them that kickbacks are being paid on this contract to Albanian politicians. And then a few weeks later, he winds up dead.

In, like, mysterious circumstances. He was by himself in an open field on a dirt road and he had apparently been run over by his own car. And so, yeah. So, um...

Very mysterious accident, if you can call it that. And so that's how the feds found out. There was also something else, like one of Ephraim's competitors was also badmouthing him to the feds, saying that he was doing something illegal that he wasn't doing. He was saying he was like importing Chinese AK-47s and filing off the serial numbers. And it was completely made up, but that gave them enough circumstantial.

evidence to a judge to execute a search warrant. And once they did the search warrant, they found everything. Came over.

And so, yeah. And so that's how the feds found out and raided the office. I wasn't working there by that time, thankfully, but that's how they found out. And then so they they we were waiting for them to charge us with something, but then they never did.

And six months went by. Nothing happened. So we saw, well, maybe they're just going to let it come. You know, maybe the army said, keep quiet about this because we need to ammo, which is kind of what they did.

And then around six months later, the New York Times finally publishes the results of their investigation. And it's a front page article with Ephraim and my mug shots on the front page. And we didn't look good.

And it's right next to a picture of rusty looking ammunition. And they said, the New York Times said that all the ammo we were delivering was low quality, rusty ammunition that was defected and putting our allies in danger and all that stuff. And which was not true.

I mean, we did deliver that ammunition they had a picture of on the cover, but it wasn't that wasn't even the Chinese ammunition. That was Bulgarian ammunition that we had bought like 30,000 rounds for worse because Ephraim. Efrem bought it sight unseen without inspecting it because it was so cheap. And we already had room on an aircraft that was delivering grenades from Bulgaria.

So we had like little room on the aircraft and it was super cheap. And so he said, hey, you know, it's not even worth flying over to inspect it because it's such a small amount. So we'll just roll the dice, pay a little bit for it.

If they accept it, great. We make a huge margin. If they don't accept it, not such a big deal because it's so cheap.

And so it turned out. not surprisingly to be total crap and the um receiving officer in Kabul uh rejected it took one look at it says I'm this is garbage I'm not paying for this we didn't get paid for it but because uh Afghanistan doesn't have any ammunition recycling facilities they had nothing to do with this stuff they weren't going to pay money to ship it back right so they just stuck it they moved it to the side of the airport and just left it there and then when the New York Times you a reporter came to investigate and asked to see some of the ammo that we delivered, someone pointed of, hey, yeah, that's some of the stuff they delivered. And so they got pictures of that.

And that's what ended up on the front page of the New York Times. And of course, the way they wrote it implied that a large portion, if not all of the stuff we were delivering was of this quality, which was not true. This created a huge political scandal. Um, there's hearings on the floor of Congress with Like a senator with a big, what do they call that, board that they use when they're making presentation in Congress with our pictures on it.

They're like, how could the government trust these two young 20-something-year-olds with a $300 million contract? And everyone used it for their own ends, for their own political ends. And once that started happening, the army came out and made a public statement and said, we had no idea they were doing this.

We're going to take this contract away, even though they had known for at least six months at that point. And they canceled the contract. And then the Justice Department said, we're going to charge you guys with fraud.

And the way they worked it was they said that you guys delivered 71 aircraft loads of this ammunition from Albania. And each aircraft load had a. certificate of conformance attached to it. The document that Ephraim signed listed the type of ammo, the quantity of ammo, the year of manufacture, and most importantly, the place of origin.

And we put the place of origin as Albania. And the government said, you guys knew it was China. And not only did you know it was China, but you had a whole repackaging operation to disguise it was China.

So you had a criminal intent. And so... So each certificate of conformance was an act of fraud.

And there's 71 aircraft loads. So that's 71 acts of fraud. And you can get up to five years in prison for each one.

So you can get up to 355 years in prison for this if you fight us in court. Now, if you plead guilty, we'll combine it all into one. As prosecutors, they have that discretion of what to charge you with and how they format it.

So they... That was the choice. And they said, if you plead guilty, of course, we're going to recommend to the judge that you get on the low end of the scale.

So maybe one year, maybe just probation. So what do you want? Either one year probation or 355 years in prison.

So it wasn't really a choice. We both pled guilty as well as two of our other associates. There were four of us who were charged.

Okay, it was four. Yeah. Yeah. Ralph, the investor in the movie, he's a laundromat owner in the movie.

He got to he. In real life, he's a Jewish laundromat owner in the movie. In real life, he's a Mormon machine gun factory owner. Oh, wow.

Very different. Very different. Very different character. Ephraim ended up stealing millions of dollars from him too, of course, but like he did with everybody. But yeah, and there was another guy who we had working in Albania, one of my best friends, Alex, he was also charged.

So. So three of us pled guilty. Ralph decided to fight him in court and ended up losing. He got four years in prison and spent like a million dollars on his legal defense.

It was like all the money he had left after Ephraim ripped him off for millions. And Ephraim, Alex, and I pled guilty. I got like seven months of house arrest.

Okay. Very, very reasonable, very relieving. Alex got five months of house arrest or even less because he was.

You know, even like lower on the totem pole, as they call it. Ephraim probably would have gotten house arrest or maybe less than a year in prison at most. But of course, he just couldn't keep his hand out of the cookie jar.

And he kept on doing stayed. He stayed. He kept on doing the arms business, even though they told him to get out while he was waiting to get sentencing.

And so while he was waiting, because the whole after they charged us, they didn't want to sentence us until after Ralph's. trial because Ralph was fighting them. And one of the one of the agreements that you make when you plead guilty is that you agree to testify in any related trial.

Right. And so they didn't want to sentence us until after Ralph's trial was done. And that took three years. Three years. Yeah.

Because the first trial, there was a hung jury and then they had to do the whole thing again. And then they convicted him on the second one. But the. So while we were waiting to get sentencing, the government told us, don't be in the arms business because that's not going to look good to the judge.

And so I, of course, was terrified. And so I went back to school. I went back to being a massage therapist. I used to work as a massage therapist before joining a firm as well. I joined a nonprofit to, you know, work up some points for the judge.

I did everything I could to avoid a harsh sentence. But Ephraim is fearless and crazy, I guess you could say. And he just kept on chugging along.

And he had a friend of his, someone who he eventually screwed over as well, of course, like he does with everyone. But he had someone else start a company under that guy's name. And then so he could do business under somebody else's name, which he wasn't allowed to do. The problem was, is that he was a control freak.

So when it came down to negotiating the deal. He insisted on getting on the phone himself. No.

Yeah. And so he was trying to negotiate a deal with some company in central Florida. And the guy who he was talking to realized who he was. And because we'd already had the New York Times article published about us, there's a bunch of newspaper articles about us.

And so he figured, I assume, that Ephraim was probably trying to entrap him into something to try to get a reduction on his sentence. And so he called up the guy he was talking, that guy Ephraim was talking to, he called up the ATF and he told the ATF, hey, I've got this convicted arms dealer who is trying to do an arms deal with me. What should I do? And the ATF says, oh, that's very interesting.

Why don't you introduce one of our undercover agents as your business partner? And so he introduces the undercover agent to Ephraim. The undercover agent says. Hey Ephraim, you know, why don't you, you know, I got to do, I got to look in your eye and shake your hand in order to do this deal. Why don't you come up to Orlando and we'll shake on this.

And while you're at it, why don't you bring up some of your guns? Because he knew that Ephraim couldn't be in possession of a firearm because he was already, he had already pled guilty, which made him a convicted felon. And it's illegal for a convicted felon to be in the possession of a firearm.

You can get up to 10 years in prison for that. So the ATF agent was trying to entrap him. And And Ephraim, to his credit, said, crazy, I'm not bringing a gun.

You know, I can't do that. I'm a convicted felon. The ATF, oh, come on, come on, do it, do it, do it.

Ephraim's like, no, no, man, don't, stop asking me for that. But he decides to go up and meet him anyway. He actually told the agent over the phone, okay, fine, fine, fine, I'll bring you the gun. I'll bring a gun. I'll bring a gun.

So he goes up to meet him, but he doesn't bring a gun. Okay. He doesn't bring a gun, but he didn't drive up to Orlando to meet the undercover agent.

And he wasn't allowed to leave the Southern District of Florida for the terms of his bond because he was already out on bond and not allowed to leave the Southern District. So he violated the terms of his bond by driving up to Central Florida. And the undercover agent sees him and he says, he's like, hey, you know, great to see you.

He's like, check, like, check this out. I just got the latest HK handgun. It's got these really cool sights on it.

And Ephraim, you know, looks at it. He's like, yeah, I heard about that. That's super cool.

I've wanted to shoot one of those. Let me see that. thing and picks it up. Let's go to the range and shoot off a few rounds because what can I say? Once a gun runner, always a gun runner, am I right?

And then the agent slaps the cuffs on him and he says, you're a felon in possession of a firearm. And so he got entrapped into that and of course because he violated the terms of his bond, he didn't get another bond and so he had to stay in county jail for like a year. while he was awaiting to get sentenced for everything. And he could have gotten, in theory, he could have gotten 10 years for the possession charge and five years for the fraud charge.

So he could have gotten 15 years, but he hired the best lawyers in Miami, spent billions of dollars on them. and got it negotiated down to four years. And he ended up serving like three and a half, got out for his drug program or whatever. So he ended up serving three and a half years in prison. And from everything I've heard, he's back up to his old shenanigans again.

He's still screwing over people left and right. Every once in a while, I get a phone call from one of his former business partners. Oh yeah, he screwed me too.

I mean, gotta get into a lawsuit with him now. Do you have any? Any advice about how to deal with this guy?

I'm surprised people still do business with him at all. I don't think he's ever done a deal where the other guy was happy. Like ever. Like honestly.

Like ever. So yeah. And now I think he, I heard that he has had so much experience getting sued by people that he's in the business of financing lawsuits.

So when you want to sue somebody and you can't afford it. Right, you fight the lawsuit. And I'm sure he's taking 90% of the money and probably 100% when all is said and done.

So, yeah. So that's what he's doing now, from what I heard, still living in Miami. So, yeah.

But for me, it turned out it was a good way to kind of pivot my life to something else. I think I was very, very grateful that... that I didn't do any prison time.

So I was terrified. I had my daughter, I have a daughter, she was a one-year-old at the time, and I realized, you know, I can get years, if not decades, in prison, and I could, like, miss my kid growing up. I never know my kid, you know?

So I was like, nothing is worth that. No amount of money is worth that to miss out on your life. And so I was extremely grateful that I got only seven months of house arrest, which wasn't so bad.

And it wasn't the kind of house arrest, like COVID-style lockdown. People could still visit me. So it wasn't so bad.

I've been a musician since I've been playing guitar since I was 15. And so I was playing a lot of guitar and having my musician friends come over and jam. And so it was fun. But of course, the thing I really missed at the time was playing with the drummer, because no drummer was going to bring his whole drum set over my house. And so I bought a drum machine, which is an electronic device that goes on the table and you can make beats on it and play your guitar along.

But every time I wanted to change the beat, I'd have to stop playing my guitar and press a button on the machine. So I thought, I really wish I had a drum machine in the form of a guitar pedal, a pedal on the floor that I could just control with my foot while I play guitar. And I looked online to try to buy something like this because I was sure someone made it already. And I was surprised nobody made it.

and I asked my musician friends if they'd seen anything like it. They said, no, but when you find it, let me know because I want one too. That sounds super cool.

So I figured if everyone wants one, nobody's making it, I'm going to make this thing. So it took me three years. I'd never made an electronics product before, any product before, but it took me three years. Eventually I had it made and it's called the Beat Buddy, like your buddy that plays the beat.

Oh, that's cool. And it's the world's first guitar, pedal, drum machine. So that's how I launched my company, Singular Sound, and we've made quite a few other music-related products since then.

So that came out in 2014, so it's been 10 years since the launch of the BeatBuddy. We're actually working now on BeatBuddy 2, which is the follow-up product. So yeah, it's been going very, very well. And that was my career of developing products got started.

About four or five years ago. I had an idea with my brother to, because we were eating mango and things got stuck in our teeth and we're like flossing is such a pain in the butt. So we created a product called Instafloss, which uses 12 water jets to floss all four quadrants of your mouth at the same time.

So top, bottom, outside and inside. And you just sweep it along your teeth and it gets you a full mouth floss in 10 seconds. So that we just started delivering to the.

first customers about a month or two ago. Oh, okay. So we've delivered to a few thousand people as of now, and it's starting to go really well. So, you know, breaking out of the music industry a little bit for the general market, which is exciting because there's not that many musicians, unfortunately, and a lot more people who need to floss.

Yes, a lot more. And you have a really cool video using it on your Instagram. Yes.

So I love the video. Yeah, definitely check it out. So people want to know, because this was one of the number one questions on Facebook.

Yeah. Where did all the money go? Yeah.

Unfortunately for me, I didn't get any of it because he screwed me out of all the money. He managed to keep most of it. So he only had to pay about $500,000 in fines.

That's it? That was it. It was like a, yeah, it was surprising because the way they calculate fines in fraud cases is they calculate it based on the amount of loss.

Okay. And in this case, the army didn't really lose anything. In fact. they would have saved 50 to 100 million dollars if they had just kept the contract which is why they probably did keep it even after they found out that it was chinese um yeah they were happy with the quality they were happy with the price uh the only loss they had was having to take the contract away from us and put it out for open bid they estimated that that cost them i think it was something in the neighborhood of like 350 000 and then there was another 150 something They tacked on top of that for some sort of penalty.

I don't remember what. But in total, it was about $500,000 in fines that Ephraim had to pay. Luckily, it was him, not me.

Yeah, definitely. Yeah, because when there's several people involved, it goes according to capability. And I was totally broke at that. Right. Because I had been living off my savings up until then because I wasn't getting paid a salary.

I was getting paid a commission. And then he ended up paying me nothing. And then I had to spend whatever money I had remaining on lawyers to keep me out of prison. So when all was said and done, I was pretty broke. And so, yeah.

And unfortunately, Bradley Cooper didn't give me a suitcase full of cash. As much as I would have loved for that to be true, that would have been cool. But no, he never did that.

He never did that. He had no incentive or reason to do that. That makes sense. But you've also had another pivot. Yeah, that's right.

With your training. Yes. Which I love. The War Dogs training to help people with government contracts.

The way that happened. Yeah, it's hard to understand. So ever since the movie came out, and so I've literally had hundreds of people ask me to teach them how to do government contracting. Of course, I mean, I feel bad for them and I'd like to help.

So I usually send them like a link, but it's. As you know, it's not an easy thing to teach yourself. It's a pretty complex thing that can trip you up in a million different ways.

And it's not the most digestible information online. And so then about it, about like about a year ago, I got a message from a guy named Logan. And he told me that him and his partner, James, had watched War Dogs about like five, six years ago. And they were around 21 years old at the time.

And they were so inspired by the movie. They said, well, if these guys could do it at our age, why can't we do it? And so they just threw themselves into it.

And they taught themselves everything. A lot of trial and error. It took them like six months to a year to win their first contract.

But eventually they won it. And they eventually ended up specializing in laundry services. Oh, OK.

They've started doing very, very well with it. Six years later, they have a multimillion dollar business and is winning large contracts, large multimillion dollar contracts all over the world with the U.S. Army doing laundry services. And they do a few other things as well, transportation services. And he just wanted to reach out to me and to say, hey, you know, thanks for the inspiration.

And I was super impressed, obviously. I was like, wow, this is actually these guys actually did it. It wasn't just someone begging me, please, you know. teach me everything hand me something on a silver platter and you know that which is what most people do right um these guys didn't ask for help they just threw themselves into it they taught themselves everything and they went all the way through and built a very successful business out of it and so i had the idea i'm like you know i haven't done the business in like 15 years i was banned from Right.

I was wondering that because you're still banned, right? No, actually now, just recently I became unbanned. So I could do it again.

Okay. Okay. Well, that's good. Okay. I am now eligible to do government contracting again, but it's a very recent thing.

But for the last 15 years or so, I've been banned from doing business with the government. And so I realized these guys are doing it now. They have an active business.

So I pitched them the idea. I'm like, what if we team up? Because I have an amazing story.

People know the story. A lot of people are reaching out to me. Why don't we work together to create a course, an online course to train people how to start government contracting businesses? And they love the idea. And so we've been working on it.

We're calling it War Dogs Academy. Yes. And people check it out, wardogsacademy.com. And we are building it. in as an extensive and digestible manner as possible, because we know that it's a difficult thing to wrap your head around and to, especially as a beginner, before you get used to all the terminology and everything.

So we're making it as easy as possible to get started. We also launched a forum so that people who want to get into this business can make contacts with each other and build partnerships. And I think the most exciting thing about it is that we have investors who are eager to invest and finance government contracts. Yes, I was so curious about that. How does that part work?

So we haven't finalized things yet because we're just getting it started. The academy is going, we're still in the, we already recorded all the course material. Oh, yes, I love that. It was like an 18-hour session, for real. We ended up recording a lot more than we thought we would.

And so now there's a lot of editing that's going on and we're putting together the written. component as well. And so we're still a few weeks out from the academy launching officially.

But we have a network of investors who are interested in funding government contracts. So one, as you know, one of the biggest stumbling blocks that someone getting into government contracting faces when they first start out is that usually when you get a contract to supply the government with, you know. bullets or whatever, you need to pay your supplier in advance before they ship because every sheep people will give you credit, especially if you're new. And the government only pays you 30 days at best after you deliver, right? So you need to float that contract.

You need to have the money to pay for the supplies and the transportation services and anything else that is associated with the contract. And you need to have that money for that period of time. between when you pay your supplier and when you get paid by the government.

And a lot of people don't have that money. Now, the good thing from an investor's perspective is that it's a relatively safe investment because as long as the government contractor has a good source of supply and follows all the terms of the contract, which is obviously critical, and the investor will do due diligence as far as that goes to make sure that they did everything correctly, then you know you're going to get paid. Right.

Government. Government is the one who prints the money, so they're never going to run out of it. They're never going to run it out.

So as long as you follow the terms of the contract, they are legally required to pay you and they have the money to pay. So from an investor's point of view, it's a pretty safe investment. So what we're planning on doing is we're planning on setting up a bidding system for contracts that have been won by our students and investors can bid what?

they are willing to fund the contract for. I love this. So that way our students get the best possible financing for their contracts and get to keep as much of the profit as possible. And investors get opportunities to invest in safe contracts at competitive rates.

That is awesome. Yeah. That is awesome.

And people, again, where can they go to learn more information? Wardogsacademy.com. Okay, excellent.

And we're also on Instagram and Twitter and all that. Yes. There's another. question from my Facebook group.

They want to know, what would you do if you would different or differently from the path that you took when you first got introduced to government contract? Oh boy. Well, I mean, so many things. It's hard for me to say that I wouldn't, I would run the other way because I think that like, you know, a lot of people are like, would you even do business with Ephraim in the first place? Right.

I mean, nowadays I wouldn't go near him. Right. I was wondering about that too.

Yeah. No. I, it doesn't matter what kind of deal he offered me, unless it was a check for $5 million that he actually owes me.

And he's like, here's the money I owe you. And can we be best friends again? I'd be like, give me a hug, buddy. You know, I'll, I'll give you a, we can be best friends if you pay me that $5 million you owe me. I just know that he's never going to do that just because of who he is.

And, uh, but even if he came to me, you know, with like an amazing deal, I mean, I know that he's going to think of some way to spur me because that's just how we work. At the time, I didn't know that, so I couldn't have made that decision. I think the way things ended up for me, I'm very happy with the way my life is now.

Right. And I have this awesome movie, which is super cool. And I didn't go to prison, which is amazing, the best part.

That was definitely the best part. And not many people can say they have a Hollywood movie made about them, especially living people. So, I can't say that I'm unhappy with how things turned out.

Would I have loved to have made all that money? Sure, I would have loved to have made all that money. And if I could have done things differently, I definitely would have gotten a much more legally binding contract with him so that I could at least enforce something out of him.

I was definitely way too lax in my contractual agreements at the time. I definitely made the mistake of trusting him more than I should have. And I should have known better. I definitely should have known better because I saw him screwing up with people.

And I guess it was my ego that said, oh, he's not going to screw me. I'm his best friend. You know, he wouldn't do that. We've known each other since we were kids. Right.

But of course not. I mean, someone who screws people over screws everyone over. It's just how they work.

So, yeah, I definitely lied to myself as far as that goes. And I would have done that differently. Would I have never gotten into it in the first place?

It's hard to know what my alternatives in life would have been. been. So I can't say that I would have ended up in a better place if I hadn't. So I don't know. I am happy with the way things turned out.

So I got to say, I probably would have just done what I did. Of course, there were things I made mistakes on, like the contract, and we wrote incriminating evidence in emails and things like that, that we shouldn't have done. Never write anything in email or text message that you were even... That is even possibly going to, if you are not comfortable with your email being read out in a court or being published in the newspaper, don't write that email. That's my advice to everybody.

That's great advice. Yes, exactly. Because as soon as you write it in an email or a text message, it's there forever.

Forever. It doesn't matter if you deleted that email or that text message. It's on some server somewhere.

And if the government wants to find it, they can. They will find it. And that most people who get convicted in a court of law do so based on written evidence that they themselves have sent. So, yeah, that's my advice.

My number one advice is don't do anything illegal, right? But if there's anything that you're even slightly concerned about, don't put it in writing. So, yeah, that would be a good advice. But, you know, despite it all, you paid a huge learning tax. Tax.

And now you're in this position to help people, many who are, will become inspired by watching this. Maybe they've never watched the movie War Dogs. They're going to watch and be like, oh, my gosh, I can do it. You're helping them in this space where there's billions of dollars to be spent and there's not one blueprint. That's true.

You know, there's lots of us out there who help based on our experience. Actually trillions of dollars. Yeah, there's a lot. Yeah, the government, I think they're. budget is $6.7 trillion.

For contractors, for other organizations. Yeah, the Pentagon alone is around $800 billion. It fluctuates by the year.

But yeah, it's just a bit under a trillion dollars. And that's just the Pentagon. So yeah, the federal government is the single biggest customer in the entire world.

And if you learn the skills of selling to the government, you have a huge advantage. because most people don't learn those skills just because there is a high barrier to entry. One thing I've seen some people comment on our posts, the War Dogs Academy Instagram account, and we had posted like examples of contracts and solicitations and things like that. And someone said, man, it looks so complicated and boring.

And we say, yeah, that's why you're going to make so much money because everyone else says that and they're not willing to put in the work. To get past that complicated and boring part, that's why there is so much money to be made here, because most people don't want to put in the effort. And if you are willing to put in the effort and you're willing to stick it out, then you can make literally millions of dollars.

Yeah, millions. Millions of dollars. Millions of dollars. And many people have done it, and many people continue to do it.

Both of us. Exactly. We are a living crew, but we're not, I don't think we're...

Particularly smarter than the average person. You know, I think anyone can do it. They just need to have the commitment in order to learn the nitty gritty of the details and to follow through with all the difficult work and the long slog that it takes in order to build a business. And that's the case with any business. I've been I've not been in government contracting for the last 15 years, as I said, because I was banned.

Right. And every business has its own unique set of challenges. Developing a product from the ground up was very difficult and had a lot of setbacks. But you have, I think the most important element in business in general is perseverance. Yes.

Yeah, you've got to persevere. Because you will always have things that go wrong. Always will. Nothing ever goes 100% right.

Wow. Nothing in life, not even in business, but in life in general, nothing ever goes 100% right. And the people who quit at the first hurdle are the ones who fail.

The ones who don't give up are the ones who succeed. And that is the most important thing. And I think I tell people when they're interested, when I talk about War Dogs Academy, this is not a get-rich-quick scheme. No.

It's not. It's a get rich scheme. It's a get rich. It's a great market where you can get millions. You can make as much money as you want.

You can make millions, but it's not quick. And it's not easy. It's not a get rich easy scheme. If you are willing to put in a lot of hard work and you're willing to put in time, then you can make millions. Right.

But it does take the hard work and it does take the time. And so I think as long as people have. internalized that requirement of what it takes, then they can do very, very, very well. People think, oh, it's just like the movie. I'm just going to type away on the computer here and then go do coke in the club and be banging models on the side.

No, that's not how it is. We actually, despite the movie, we actually almost never partied back then. Almost never.

We went out occasionally, but very occasionally. We were working 18-hour days for months at a time, for months. And with very little break. And that's what it takes.

Everyone who's been successful in the business will tell you that there have been periods of total hell where you've had to go months and months of very little else in your life other than slogging away at government contracts in order to make that happen. And I think that accepting the fact that that's required is. is a huge component of anyone's success. Because I think if you don't realize that and you think that it's going to be easy, then you're going to give up. Yes, you will give up. Yeah.

And so I... Because you're not expecting it. You're not expecting it.

And I love what you said. I love that. And I'm just so grateful to have you here, to physically have you here in Miami. This has been awesome, David. And once again, how can they get in contact with you?

Wardogsacademy.com. You can check out Wardogs Academy. Personal social media is David Pakows on all social media. That's David, P-A-C-K-O-U-Z.

Z like Z. Yeah. Yeah.

Some people hear C like Charlie, but no. No. Yeah.

And yeah, I'm on Instagram, Twitter, YouTube, all the usuals. Yes. I don't use TikTok much.

That's okay. Yeah. Yeah. But yeah, that's where I can be found on the internet.

And we'll have him back. If you ever, if you desire love, we're neighbors. Yeah, we're neighbors.

You know, here in Miami Beach, or you can come to Tulum. As y'all know, Mexico, in Mexico, we'll visit. I'm there. I'll be there in a few days. Awesome.

Lucky you. Yes. It's fun. And I have my book, winnerswaybook.com y'all.

So winnerswaybook.com. Check it out if you haven't. I have an amazing Facebook group and I want to extend a thank you to them for providing great questions.

Again, I'm so thankful to you because that movie had such a huge impact on me. And it's one of many reasons I recently got our FFL. Oh, congrats.

It's such a full circle. I hope you got the importers one. I'm working on that, too. Okay. So I'm working on that, too.

Yeah. Okay. Okay.

Good move. Good move. Good job. Awesome.

Well, thank you. My pleasure. No, don't forget, y'all, like, subscribe, hit the notification button.

And as always, this is how I always close every video. everything is possible, which you are a testament to. I am too. We all are.

All y'all watching. Everything is possible. Until next time, take care.