The Salad oil swindle

The Salad Oil king, Tino De Angelis, was finally deposed in November of 1963, to face criminal charges for taking out loans against non-existent vegetable oil, then using the proceeds to speculate in the futures market. He served seven years of a ten-year sentence.

De Angelis had grown up working in the meat and fish markets of New York in the 1930's. In this era, the usual method of supplying meat to the consumer was to transport the live animal to market, then have the local abattoir process the meat as demanded. De Angelis believed a better method would be to ship the meat frozen, rather than move the animals live. He started doing so in 1938, and became quite wealthy running this new business. The black market for foodstuffs during World War II also improved profits. Caught supplying the Yugoslavian Government with inferior quality meat in 1947, the US government established the Meat Control Board shortly thereafter to ensure it would not happen again.

After the war, in the early 1950's, De Angelis saw another opportunity to profit under the American 'Food for Peace' program, this time in vegetable oil. The US had a surplus of such edible oils, and made available the surplus under this program to war affected nations. De Angelis formed the Allied Crude Vegetable Oil Co. and promptly set about purchasing oil to supply it for export, assisted by government subsidy to do so. Business grew until De Angelis held roughly 75% of the market by the late 1950's. Sales were recorded at around $US 200 million in the accounts. (Jones Condon insolvency practitioners, at

Headquartered in Bayonne, New Jersey, Allied was now selling a lot of food oil. Already very wealthy, and a big player in the vegetable oil market, perhaps De Angelis believed he could corner the market in what he traded, for this seemingly is what he set about doing. De Angelis had also discovered that big banks would lend him money secured by his salad oil inventory, and that such salad oil floats on water.

"Starting in 1962, De Angelis began to weave a complex web, buying vast amounts of vegetable oil in both the spot and futures markets while supposedly storing the product in a tank farm he had acquired in Bayonne…" (

By 1963, Allied held warehouse receipts legally verifying the existence of $60 million worth of salad oil, issued by a subsidiary of American Express, which Allied then used as collateral for $175 million in loans. The loans were in turn used to speculate on vegetable oil futures. (The Daily Reckoning,

Markets have a habit of knowing however. A few brokers began to suspect they might be dealing with the same person in the buying of so much product. Allied was investigated - again. This time the tanks at Bayonne were found to contain seawater, with just a little oil on top to fool inspectors, which De Angelis had been doing for years. American Express had been secretly receiving reports for some time of discrepancies in Allied inventory and sent inspectors to investigate, who promptly made their enquiry of De Angelis, or staff to whom De Angelis directed them to see. Amex got the answers De Angelis wanted them to hear in other words. The ABS had even reported that the tonnage of edible oils handled by Allied was in excess of the entire US edible oils production. (Remember, Allied was established in the first place to export just the surplus US oil production.) No one noticed.

Tanks full of seawater meant the loans were worthless which spelled possible disaster for Amex, being responsible for the warehouse certificates, now also worthless. For the time, this was a massive scandal on a scale hitherto unprecedented. The public learned of the scheme on November 19th, 1963, when Allied filed for bankruptcy, with hundreds of millions unaccounted for. The Amex share price practically halved, down to $35 a share. Would they go out of business like De Angelis ?

In Omaha Nebraska, an unknown fund manager named Warren Buffett thought not, and started buying. Thus began one of the most successful investments ever made, and the start of a legendary investment career.

Further reading:

Trumbore, Brian,

Jones Condon, Chartered Accountants and Insolvency Practitioners, Revive, Issue No. 12, February 1998

Reno Gazette - Journal, Protect yourself from spooky stuff like Enron, Jan 26 2002, available at

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