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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.

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


Public Accountability Under Securities Laws
heinonline.org [PDF]
… Perhaps the first scandal widely publicized involving .a possible failure by auditors was the McKesson & Robbins case … 3 NORMAN C. MILLER, THE GREAT SALAD OIL SWINDLE (1965) … In order to make valid compari- sons, and valid economic decisions, it is necessaiy that the …

The Spanish Cooking Oil Scandal: Toxic Oil Syndrome or Cover-Up?The Spanish Cooking Oil Scandal: Toxic Oil Syndrome or Cover-Up?
books.google.com [PDF]
… Perhaps the first scandal widely publicized involving .a possible failure by auditors was the McKesson & Robbins case … 3 NORMAN C. MILLER, THE GREAT SALAD OIL SWINDLE (1965) … In order to make valid compari- sons, and valid economic decisions, it is necessaiy that the …

The bleak wasteland of financial reportingThe bleak wasteland of financial reporting
search.proquest.com [PDF]
… Perhaps the first scandal widely publicized involving .a possible failure by auditors was the McKesson & Robbins case … 3 NORMAN C. MILLER, THE GREAT SALAD OIL SWINDLE (1965) … In order to make valid compari- sons, and valid economic decisions, it is necessaiy that the …

Toward a run-free financial systemToward a run-free financial system
books.google.com [PDF]
… Perhaps the first scandal widely publicized involving .a possible failure by auditors was the McKesson & Robbins case … 3 NORMAN C. MILLER, THE GREAT SALAD OIL SWINDLE (1965) … In order to make valid compari- sons, and valid economic decisions, it is necessaiy that the …

Selling hope, selling risk: some lessons for law from behavioral economics about stockbrokers and sophisticated customersSelling hope, selling risk: some lessons for law from behavioral economics about stockbrokers and sophisticated customers
heinonline.org [PDF]
… Perhaps the first scandal widely publicized involving .a possible failure by auditors was the McKesson & Robbins case … 3 NORMAN C. MILLER, THE GREAT SALAD OIL SWINDLE (1965) … In order to make valid compari- sons, and valid economic decisions, it is necessaiy that the …



Q&A About Salad Oil Scandal


Who was Tino De Angelis?

He was a New Jersey-based wholesaler and commodities trader who dealt in vegetable oil futures contracts.

Why did they lose so much money?

Because Tino De Angelis had no intention of delivering on his promises to buy their soybean oil futures contracts at a price higher than what they paid for them.

Who was convicted of fraud and conspiracy in the scandal?

Anthony De Angelis.

How did American Express take one of the biggest hits from this scandal?

They lost nearly 58 million dollars and experienced a 5 drop in AMEX stock as a result.

How much money did they lose?

They lost $175 million (1.4 billion in 218 dollars).

What is the book about?

The book is about Tino De Angelis.

Where did they transfer oil to while taking inspectors out to lunch?

To different tanks.

What were they fooled by?

They were fooled by oil floating on water.

What is the name of the scandal?

The Salad Oil Scandal.

What did he do that got him into trouble?

In 1963, he attempted to corner the soybean oil market. Soybean oil is an ingredient of salad dressing and has many other uses. In the aftermath of his scam, 51 investors were swindled out of approximately 175 million dollars (1.4 billion in 218 dollars).