It is a question many federal and congressional officials have been asking since March, when the army suspended AEY from future U.S. government contracting, citing shipments of Chinese ammunition and claiming that the company's young president, Efraim E. Diveroli, misled the army by saying the munitions were from Hungary. American law prohibits trading in Chinese arms.

House investigators have also gathered testimony that the American ambassador to Albania, John Withers II, helped cover up the illegal Chinese origins of ammunition that AEY was shipping from Albania to Afghanistan under the army contract.

Tom Casey, a State Department spokesman, said Tuesday that the departmen...

It is a question many federal and congressional officials have been asking since March, when the army suspended AEY from future U.S. government contracting, citing shipments of Chinese ammunition and claiming that the company's young president, Efraim E. Diveroli, misled the army by saying the munitions were from Hungary. American law prohibits trading in Chinese arms.

House investigators have also gathered testimony that the American ambassador to Albania, John Withers II, helped cover up the illegal Chinese origins of ammunition that AEY was shipping from Albania to Afghanistan under the army contract.

Tom Casey, a State Department spokesman, said Tuesday that the department's inspector general had been asked to investigate the accusations. A statement posted on the Web site of the United States Embassy in the Albanian capital, Tirana, said that Withers expected to be absolved of any blame.

One answer to Waxman's question is that Pentagon officials never consulted a "watch list" the State Department had compiled of 80,000 individuals and companies suspected of illegal arms transactions, including Diveroli and some middlemen the company used.

Under American law, American dealers must disclose every entity involved in an arms shipment overseas, including brokering, transportation and repackaging companies.

The State Department checks subcontractors and partners against a watch list of organizations and people suspected of involvement in illegal arms deals.