Great Salad Oil Scandal

The Salad Oil Scandal of 1962 was a major corporate fraud that caused over $180 million ($1.79 billion in today's value) in losses to corporations including American Express, Bank of America, and Bank Leumi, as well as many international trading companies. The scandal involved the Allied Crude Vegetable Oil company in New Jersey, United States, owned by Anthony "Tino" De Angelis, a former commodities broker.
== History ==
The scandal began when De Angelis, a former commodities broker, discovered he could obtain loans based on Allied's fraudulently inflated inventory of salad oil. By 1962, De Angelis had become a significant player in commodity markets and devised a plan to corner the soybean oil market.
De Angelis's scheme involved using his large inventories of commodities as collateral to secure loans from Wall Street banks and finance companies. His strategy was to buy soybean oil futures, driving up the price of his vegetable oil holdings, which would increase both the value of his inventories and allow him to profit from futures contracts.
American Express, which had recently created a new division, American Express Warehousing, specializing in field warehousing, wrote De Angelis warehouse receipts for millions of pounds of vegetable oil. De Angelis then discounted these receipts for cash through brokers. Emboldened by his success, De Angelis began falsifying warehouse receipts for non-existent vegetable oil.
To deceive inspectors, De Angelis employed various tactics:
# Filling tanks mostly with water, with only a thin layer of oil floating on top.
# Connecting tanks with pipes to transfer oil between them during inspections.
De Angelis expanded his fraudulent activities, securing loans from 51 companies, including Bunge Ltd., Staley, Proctor and Gamble, and Bank of America. Remarkably, his reported vegetable oil "holdings" exceeded the entire United States inventory as reported by the Department of Agriculture.
The scheme began to unravel when a large order from Spain was reversed. Instead of cutting his losses, De Angelis attempted to prop up the market through various illegal means, including forging and stealing warehouse certificates, check kiting, and attempted bribery.
The fraud was eventually exposed when inspectors discovered that Allied Crude had only $6 million worth of vegetable oil instead of the claimed $150 million. This revelation caused the futures market to crash, with soybean oil prices plummeting from $9.875 on November 15 to $7.75 on November 19, 1963.
On November 19, Allied Crude Vegetable Oil Refining Co. filed for bankruptcy. The scandal's aftermath included the suspension of two brokerage houses, Williston & Beane and Ira Haupt & Co., from trading by the NYSE.
== Key People ==
=== Anthony "Tino" De Angelis ===
De Angelis was the mastermind behind the Salad Oil Scandal. He founded Allied Crude Vegetable Oil Refining Corporation and orchestrated the fraudulent scheme. Prior to this scandal, De Angelis had been involved in another financial con related to the National School Lunch Act and Adolph Gobel Co., where he swindled the government by overcharging for food deliveries and providing uninspected meat. 
After the Salad Oil Scandal was exposed, De Angelis was convicted of fraud and conspiracy charges and served seven years in prison, gaining his release in 1972. Even after his release, he continued to participate in other fraudulent schemes, including a Ponzi scheme involving livestock in the Midwest in 1975.
== Impact ==
The scandal had far-reaching consequences, weakening several Wall Street firms and contributing to the financial turmoil following the Kennedy assassination. It led to the liquidation of Ira Haupt & Co. and forced the merger of J. R. Williston & Beane with a rival firm.
American Express was particularly hard hit, with its stock dropping more than 50% and the company incurring losses of nearly $58 million. However, this presented an opportunity for investor Warren Buffett, who acquired a 5% stake in American Express for $20 million, which proved highly profitable as the company recovered.
The New York Produce Exchange, a smaller futures exchange, shut down in response to De Aneglis' bankruptcy.
== References ==
Category:Scandals
Category:Fraud
Category:Financial Scandals
Category:Commodities
Category:American Express
Category:Bank of America
Category:Bank Leumi