Salad Oil Scandal
The Salad Oil Scandal, also referred to as the "Soybean Scandal", was a major corporate scandal in 1963 that ultimately caused over $150 million – approximately $1.1 billion in 2008 dollars – in losses to corporations including American Express, Bank of America and Bank Leumi, as well as many international trading companies. The scandal's ability to push otherwise cautious and conservative lenders into increasingly risky practices has prompted some comparisons to recent financial crises including the 2007–2008 subprime mortgage financial crisis.[1]
Description
The scandal involved the company Allied Crude Vegetable Oil in New Jersey, led by Anthony "Tino" De Angelis, a former commodities broker who had been in trouble previously for providing the federal school lunch program with poorly prepared meat. Despite this, he was able to obtain a contract with Food for Peace, a federal program which sold excess food stocks to poor countries.[2] De Angelis discovered that he could obtain loans based upon the company's supposed inventory of salad oil.[3]
Ships apparently full of salad oil would arrive at the docks, and inspectors would confirm that the ships were indeed full of oil, allowing the company to obtain millions in loans. In reality, the ships were mostly filled with water, with only a few feet of salad oil on top. Since the oil floated on top of the water, it appeared to inspectors that these ships were loaded with oil. The company even transferred oil between different tanks while entertaining the inspectors at lunch.[4] In all, Allied claimed to have 1.8 billion pounds of soybean oil, when it actually only had 110 million pounds. The claimed inventory was the basis for the company raising $180 million from investors.[2]
Once the scandal was exposed – because the Russian soybean market did not open up, and soybean prices fells drastically as a result, causing the investors to attempt to cash in – American Express was one of the biggest casualties. Its stock dropped more than 50% as a result of the scandal, which cost the company nearly $58 million. De Angelis was convicted of fraud and conspiracy charges in connection with the scandal and served seven years in prison, gaining his release in 1972.[5]
See also
- The Great Salad Oil Swindle (book)
References
Notes
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- ↑ 2.0 2.1 Malone, Noreen (April 1, 2012) "Salad Oil Swindle!" New York
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