Diveroli v. United States

Efraim Diveroli (defendant) was an international arms dealer. Diveroli’s company, AEY, Inc. (defendant), won an approximately $300 million contract with the United States Army to provide ammunition to the Islamic Republic of Afghanistan. Under the terms of the contract, AEY was forbidden from purchasing ammunition directly or indirectly from Chinese manufacturers. After Diveroli purchased ammunition from an Albanian company, he learned that the ammunition had been manufactured in China. Diveroli contacted the United States Department of State (the State Department) and asked whether it would be legal for a United States company to purchase ammunition manufactured in China if the ammunition had been in the possession of an Albanian company for 20 years. The State Department told Diveroli that the transaction would be illegal and that deviations from the policy could only be granted by the president of the United States. Diveroli decided to hide the source of his ammunition, painting over Chinese markings on the ammunition and repackaging the ammunition. Diveroli delivered the ammunition to the Army, claiming that it was manufactured in Albania. The United States government (plaintiff) discovered that the ammunition was manufactured in China and charged Diveroli and AEY with fraud and conspiracy to commit fraud. Diveroli entered into a plea agreement. During the proceedings, Diveroli attempted to present a public-authority defense, arguing that he had permission from Robert Newsome, an employee at the United States Embassy in Albania, to sell the Chinese ammunition. In an email to Diveroli, Newsome told Diveroli that the embassy was not going to intervene on AEY’s behalf. The district court denied Diveroli’s request. After being sentenced, Diveroli argued that the district court erred by not allowing him to present his public-authority defense.