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First Efraim Diveroli was mocked for being the only U.S. arms dealer with a MySpace page. Now it looks like the feds will rest most of their prosecution on his emails.

The feds say they've got a pretty good paper trail on Diveroli, the 22-year-old arms trader who was just arrested and accused of providing shoddy and illegal Chinese ammo for the Afghan Army.

You remember him? He's the Miami party boy who inexplicably landed a $300 million U.S. Army weapons contract in January 2007. The New York Times put him on the front page back in March.

He was arrested along with several others involved with his company, AEY, Inc., including David Packouz, the AEY director and vice president; Alexander Podrizki, the company's man in Tirana, Albania; and Ralph Merrill, who provided "financial and managerial assistance."

They were charged with violating the Arms Export Control Act, which prohibits buying and selling weapons from certain countries.

According to the indictment released today by the U.S. attorney in Miami, Diveroli got nervous last year when his Albanian supplier emailed him some photos showing that the weapons he planned to buy and ship were clearly marked "Made in China."

Diveroli emailed the U.S. State Department in April asking whether, hypothetically, it was OK to fulfill a U.S. Army contract with weapons from China, the indictment says.

It's not, they told him. Not without special permission from the President.

He emailed back and asked if there was an exception for weapons that may have been sitting in Albania for 20 years, the indictment says.

The State Department emailed back and said there was no such exception.

So he had one of his financial backers, Ralph Merrill, help take care of the problem.

On or about April 25,2007, RALPH MERRILL sent an electronic communication to EFRAIM DIVEROLI and DAVID PACKOUZ, which referenced attached photographs showing methods of "cleaning wooden crates." Attached to the communication was a photograph showing a person scraping the words "MADE IN CHINA" off of a wooden crate.

Diveroli then filled out forms for the Army indicating that the ammo was from Hungary rather than China.

The Army paid AEY more than $10 million between July and December 2007, according to the indictment, before the Times broke the story in March and his arms exporting license was suspended.

There may be more charges coming from this investigation. A spokeswoman for the ICE office, Nicole Navas, said Friday that the investigation was ongoing and declined to comment further.

Another week, another DOJ investigation of itself.

The latest, reported this morning by the Washington Post, involves J. Robert Flores, the Administrator at the Department of Justice's Office of Juvenile Justice and Delinquency Prevention, who has been the subject of a recent series of articles by ABC News investigating grants awarded by his office.

Flores is facing a federal criminal investigation for questions arising from "his hiring practices, travel expenses, and personal ties to groups which he gave millions of dollars" the Post reports.

ABC documented several questionable grant awards by Flores. He gave the World Golf Foundation's First Tee Initiative a grant, after the group invited him on a trip and paid for him to play a round of golf. The group's honorary chairman is former President George H. Bush. Though Flores reimbursed the organization for the $159 in green's fees, he did so only yesterday -- hours before his Congressional testimony.

Flores awarded a half-million dollar grant to First Tee, despite it ranking 47th out of 104 applicants and being "not recommended" by staff who said they "didn't understand how funding this program would advance juvenile justice." The decision was openly rebuked by members of the committee.

"The foundation paid for your greens fees and then the next year you disregard the recommendations of your professional staff and award the foundation a half-million dollar federal grant. You have tainted the process," said Rep. Elijah Cummings (D-MD).

Of the 104 applicants ranked by the peer review process, Flores failed to award grants to any of those in the top five. Rather, Flores gave funding to five programs, not recommended by staff, including an abstinence education program called Best Friends, led by Elaine Bennett, the wife of Reagan administration Cabinet official Bill Bennett. Two faith based programs were also selected.

From Chairman Henry Waxman's (D-CA) opening statement:

Mr. Flores awarded a $1.1 million grant to the Best Friends Foundation, an abstinence- only organization, that ranked 53 out of 104 applications. The career staff who reviewed this application said it was "poorly written," "had no focus," "was illogical," and "made no sense."

Flores testified to the distribution of over $8 million in department grants. According to emails and testimony from Flores' own staff in the office of Juvenile Justice, as well as the peer review board that ranks the grants, the grant administration was distinctly slanted.

"Mr. Flores, it seems you're the only person at the Department of Justice who thinks your process was fair, transparent and served the interest of taxpayers," Waxman concluded.

The Bush Administration has had since March 12 to respond to the subpoenas from the House oversight committee requesting documents pertaining to the EPA decisions on greenhouse gas and ozone regulations. Yet it waited until this morning -- the day the Committee was scheduled to vote on their contempt for their failure to respond -- to assert executive privilege.

Time and again, that inveterate stonewaller, EPA administrator Stephen Johnson, has gone up against committee Chairman Henry Waxman (D-CA) and bobbed and weaved through his testimony, never quite answering questions but never quite invoking executive privilege either.

During a May 20, 2008, appearance before the committee, Johnson was specifically asked by Waxman whether he was invoking executive privilege. "Not at this time," Johnson replied.

Well that time must have passed.

More on "Stonewall" Johnson's evasive maneuvers after the jump.

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Scott McClellan isn't offering much in the way of new revelations about the Plame affair during his testimony on Capitol Hill today but there has been a moment or two of good political theater.

Rep. Steve King (R-IA) asked whether McClellan's very presence today was poisoning the relationships between all future presidents and their press secretaries.

"What is your advice to your successor secretaries, White House press secretaries, as to how they should handle themselves and how a president might want to handle them - and there's two parts to this question - what would you say to the succeeding secretaries on whether, at what point they should step up and tell the world in the middle of their job perhaps, and how will the president handle this from this point? Does he have to then put the next press secretary into a cubicle and slide press releases to him under the door for fear that he'll be coming, either write a book or come before the judiciary committee and divulge information that I believe was at least from a national security- not national security but from the integrity standpoint, could you not have taken some of this to the grave with you and done this country a favor?"

For those who've read McClellan's book, we not hearing much new. He's talking about the "permanent campaign" and how the Bush Administration was "less than truthful" in selling the Iraq invasion to the public in 2002 and 2003.

About Bush and Iraq: "I think his driving motivation was this idealistic and ambitious vision that he could transform the Middle East...that Iraq would be a lynch pin for democracy in the Middle East."

Rep. Sheila Jackson Lee (D-TX) was looking for more.

Should the president be impeached?

"I do not support impeachment based on what I know," McClellan said.

The Democrats on the House Judiciary Committee seemed eager to extract something new from McClellan, asking him for all sorts of the details about the administration's inner workings.

Steve Cohen (D-TN) asked McClellan what he knew about Iran.

"I think the views of the people in the administration are pretty well know in terms of what we ought to do to confront Iran," McClellan said.

As for Republican National Committee email accounts, Cohen asked: "Are you aware of any particular policy to use those to avoid government oversight?"

"No," McClellan said.

Cohen finally asked: Is there anything else that your editor 'edited out?'

"I don't think there is anything that would be of interest to this committee that was, as you say, edited out," McClellan said.

Rep Hank Johnson (D-GA) asked about the commutation of Scooter Libby's prison sentence.

"There are some who believe that he did that so that he could make sure that Scooter Libby would not at some point spill the beans on the VP or someone else."

"I don't know," McClellan said. "I can understand why people view it that way."

"It sends a terribly message... and I think that the president should not have made that decision. But that is his right to do it."

The repeated mention of impeachment seemed to irritate some Republicans.

"You didn't come here believing someone ought to be impeached did you?" Dan Lungren (R-CA) asked.

"I am not here for that purpose," McClellan said.

"I have heard my colleagues here refer to impeachment four times, yet we've been told by the leadership on the Democratic side that impeachment is off the table," Lungren said. "Is what we are doing here Kucinich like?"

No surprises. The House has passed a new federal surveillance law. It's expected to go to the Senate next week and on to the President for a signature.

The final vote was 293 for, 129 against.

A big win for AT&T and Verizon.

Meanwhile, the House Judiciary Committee is getting underway again with the Scott McClellan hearing.

The House is now voting on changes to the new federal surveillance law.

There were plenty of Democrats speaking out against it during the hour-long debate.

"This bill scares me to death and I urge a no-vote," said Rep. Barbara Lee (D-CA), co-chair of the House's Progressive Caucus.

She compared the bill to the era of former FBI head J. Edgar Hoover. "We already remember how Dr. [Martin Luther] King and his family were the victims of the government's most shameless wiretapping. We must never go down this road again."

House Speaker Nancy Pelosi (D-CA), gave the bill a lukewarm endorsement, saying the bill many supported was "not an option."

She said the real decision was between this "compromise" bill and the one the Senate has passed, which offered even broader surveillance powers and more protection for telecom companies. "That is the comparison, the contrast, that we have to make today."

"I'm not asking anybody to vote for this bill. I just wanted you to know why I was," Pelosi told the House. "Difficult decisions for all of us. ... I respect every point that was expressed on this floor today. ... The knowledge, the sincerity, the passion and intelligence of those who supported and who don't support this bill have been very valuable in making this bill better."

Rep. John Conyers (D-MI) pointed to a constitutional concern.

"The grant of retro-active immunity is inconsistent with our basic principles. We are breaking with a very proud tradition and intervening in a pending court decision in an effort to reach a preordained legal outcome. This is a bad precedent," he said.

Republicans without exception spoke in favor of the bill, often citing the dangers of terrorism. "This bill will prove that we have the ability to monitor the conversations of al Qaeda overseas," said Rep. Dan Lungren (R-CA) "It's not the Mona Lisa, but it's not a bad paint job."

Rep. Dennis Kucinch (D-OH) spoke briefly. "These blanket wiretaps make it impossible to know whose calls are being intercepted by the National Security Agency."

From the Miami Herald:

A 22-year-old munitions dealer and others in his Miami Beach company were arrested on charges of selling prohibited Chinese weaponry to the U.S. government to supply allied forces in Afghanistan, according to law enforcement officials.

Efraim Diveroli, president of AEY Inc., and three other employees were arrested Thursday night and Friday morning -- accused of conspiring to misrepresent the types of munitions they sold to the U.S. Department of Defense as part of a $300 million Army weapons contract, officials said.

Diveroli and the others are charged with violating the Arms Export Control Act stemming from an investigation that began earlier this year by the Pentagon and Immigration and Customs Enforcement.

Remember this guy?

The White House pulled out the old executive privilege trump card at the last minute today to avert a House government oversight committee vote to hold Administration officials in contempt of Congress.

Committee Chairman Henry Waxman (D-CA) has announced that EPA Administrator Stephen Johnson and Susan Dudley, administrator for information and regulatory affairs at the White House, have invoked executive privilege as the basis for not complying with subpoenas from Waxman's committee seeking documents about new smog requirements and a decision blocking California greenhouse gas limits.

Waxman postponed the vote on contempt in order to determine whether the statements of executive privilege were valid. "But," he emphasized, "to date I have not seen a valid instance of their executive privilege":

I don't think we've had a situation like this since Richard Nixon was president. When the President of the United States, may have been involved in acting contrary to law and the evidence that would determine that question for Congress, in exercising our oversight, is being blocked by an assertion of executive privilege. I would hope and expect this administration would not be making this assertion without a valid basis for it, but to date I have not seen a valid instance of their executive privilege.

We'll have video of Waxman's statements coming shortly.

The House debate about the FISA law is underway. The House has capped debate at just one hour.

So far, the Democrats seem to emphasize that this legislation will not get the Bush Administration off the hook.

Rep. John Conyers (D-MI) said he opposed the bill, but did point to one bright spot in the legislation.

"[The bill] will ask the inspector general to conduct an independent investigation of the president's wiretapping program," Conyers said. "This will uncover the truth for the American people, hopefully, about the president's activity."

Rep. Sylvester Reyes (D-TX), the chair of the House Intelligence Committee, also noted that: "This bill does not grant immunity to any government official that might have violated the law."

The girlfriend of fugitive Samuel Israel III was arrested Thursday, for aiding and abetting his flight. Israel, recently sentenced to 20 years in prison for swindling his hedge fund clients out of almost $400 million, faked his suicide days before he was supposed to enter prison. His girlfriend told authorities that she had helped Israel pack a recreational vehicle, attach a motor scooter and then drove with him to a rest area, where the R.V. was left for later use. (New York Times)

Two former Bear Stearns senior executives were arrested on Thursday for securities fraud relating to the subprime mortgage fallout. The former hedge fund managers were among 60 people arrested this week in a sweep the Justice Department is calling "Operation Malicious Mortgage." Over 400 people have been arrested since March on charges of mortgage fraud. (New York Times)

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