Salad Oil Scandal

Definition

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.


Salad Oil Scandal

What is ‘Salad Oil Scandal’

One of the worst corporate scandals of its time. It occurred when Allied Crude Vegetable Oil Company discovered that banks would make loans secured by its salad oil inventory.

When the ships full of salad oil would arrive in the docks, inspectors would test it and confirm that the ship was full of salad oil. However, the company didn’t remind anyone that oil floats on water. They had filled salad oil tanks with water and put a few feet of oil on top, fooling everyone. The company would even transfer oil to different tanks while taking inspectors out to lunch. In 1963, the scam was busted and over $175 million worth of salad oil was missing.

Explaining ‘Salad Oil Scandal’

Commodities trader and company founder Anthony De Angelis was convicted of fraud and conspiracy in the scandal and served seven years in prison. American Express took one of the biggest hits from the scandal, losing nearly $58 million and experiencing a 50% drop in AMEX stock as a result.

Further Reading