Salad oil scandal
Encyclopedia
The Salad Oil Scandal, also referred to as the "Soybean Scandal", was a major corporate scandal
in 1963 that ultimately caused over $150 million (~$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
.
, which discovered that it could obtain loans based upon the inventory of its salad oil.
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 a 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.
Once the scandal was exposed, 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. Tino 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.
Corporate scandal
A corporate scandal is a scandal involving allegations of unethical behavior by people acting within or on behalf of a corporation. A corporate scandal sometimes involves accounting fraud of some sort...
in 1963 that ultimately caused over $150 million (~$1.1 billion in 2008 dollars) in losses to corporations including American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
, Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
and Bank Leumi
Bank Leumi
Bank Leumi is an Israeli bank. It was founded in London as the Anglo Palestine Company on February 27, 1902, by members of the Zionist movement to promote the industry, construction, agriculture, and infrastructure of Palestine.-History:...
, 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
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
.
Description
The scandal involved the company Allied Crude Vegetable Oil in New Jersey, led by Tino De AngelisTino De Angelis
Anthony "Tino" De Angelis is a Bayonne, New Jersey based commodities trader who bought and sold vegetable oil futures around the world. In 1962 he started to corner the market for soybean oil, used in salad dressing. In the aftermath, investors learned that he had bilked them out of about $175...
, which discovered that it could obtain loans based upon the inventory of its salad oil.
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 a 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.
Once the scandal was exposed, 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. Tino De Angelis
Tino De Angelis
Anthony "Tino" De Angelis is a Bayonne, New Jersey based commodities trader who bought and sold vegetable oil futures around the world. In 1962 he started to corner the market for soybean oil, used in salad dressing. In the aftermath, investors learned that he had bilked them out of about $175...
was convicted of fraud
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
and conspiracy
Conspiracy (crime)
In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement...
charges in connection with the scandal and served seven years in prison, gaining his release in 1972.