Kerry: How Was Arms Dealer Classified SDB? The chairman of the Senate Small Business Committee is demanding an explanation of how a Miami arms dealer received more than $200 million in contracts after it was erroneously designated a small disadvantaged business. The company, AEY Inc., is under investigation for allegedly supplying decades-old ammunition to Afghanistan’s army and police. AEY “may have fraudulently obtained as many as 50 contracts with the Defense and State Departments by claiming to be a Small Disadvantaged Business,” Sen. John Kerry, D-MA, said in a news release. Government Executive magazine reported that the company was listed in the Federal Procurement Data System as an SDB in 2006, although it had never applied for the status or been certified by the Small Business Administration. Before it was classified as an SDB, the company had received $8.1 million in federal contracts. After the classification, it was awarded contracts worth $204 million. The State Department, which first used the SDB designation, said it was a “coding error.” But that does not explain how the error was repeated on subsequent contract records. AEY, headed by 22-year-old Efraim E. Diveroli, has been suspended from future contracts. The New York Times reported AEY shipped tens of millions of old Chinese rifle and machine-gun cartridges to Afghanistan, in violation of a law prohibiting trading in Chinese arms. Some of the ammunition was manufactured in the 1960s, and was shipped in boxes that were falling apart. In letters to the secretaries of State and Defense, Sen. Kerry expressed “serious concerns with the oversight of small business contracting programs.” He asked them to explain how their contracting officers verify the small-business status of vendors. “I believe your agency owes Congress and the American public some answers,” Kerry wrote to Defense Secretary Robert Gates. “I am concerned that a lack of oversight of contracting programs at DOD is allowing companies like AEY to erroneously access hundreds of millions of dollars in contracts as an SDB, undermining efforts to level the playing field for small firms.”