When we think of oil barons, we think of people who make a living and then some in the petroleum business. But in 1955, Tino De Angelis decided that another oil was worth his investment: vegetable oil. And it made him a lot of money — and, eventually, also led him to prison.
In 1954, the United States enacted a law called the Agricultural Trade Development Assistance Act, which would lead to the creation of the Food for Peace program. The program provided an avenue for the sale of surplus goods to friendly nations, at that time, typically European ones. De Angelis created a company called the Allied Crude Vegetable Oil Refining Corporation which took advantage of the program by creating and exporting huge amounts of vegetable shortening and vegetable oil to allies in Europe, much of it substandard.
De Angelis’ company took off, and over the next few years, became a major player in the vegetable oil market. In 1962, he made a successful attempt to corner the market, buying massive amounts of vegetable oil off other vendors. With his inventory now large enough to dictate the price of the oil, De Angelis had another idea: buy vegetable oil futures, which were still trading for cheap (but would soon be worth much, much more), cornering the market on the oil used in salad dressing. To finance this, De Angelis took out loans with his stock of vegetable oil as collateral.
But to get the requisite amount of money loaned, De Angelis needed a lot more vegetable oil than Allied owned, even after the company bought the stores of other vendors. De Angelis turned to fraud (later dubbed the “salad oil scandal”), claiming to own much more vegetable oil than he did — in fact, the amount he stated he had was more than the Department of Agriculture believed was in the United States as a whole. Nevertheless, De Angelis invited his chief creditor, American Express, to inspect his warehouse and oil tanks (as they would have in the normal course of business anyway), and American Express dipped into the oil tanks, determined that there was, indeed, vegetable oil in them, and concluded that everything was on the up and up. Unbeknownst to Amex, De Angelis had filled most of the tank with water, but included enough oil such that it, being less dense, would float to the top and mask the contents of the liquid lying below.
After a while, Amex’s inspectors were tipped off to the fraud, confirming it in a surprise inspection. Suddenly, the house of cards crumbled, setting off a catastrophic shockwave. The futures market for vegetable oil crashed, as did American Express’ stock price — by a ridiculous 50%. De Angelis’ company declared bankruptcy and De Angelis himself served seven years in prison for his fraudulent dealings.
Bonus fact: American Express got its start in Albany, New York, in 1850 — well before the advent of credit cards (which developed in earnest in the 1920s and 1930s). In fact, it did not start out as a financial institution at all. Rather, Amex’s first business was in shipping — literally, “express mail.” (Here’s a shipping receipt from 1853.) The company did not enter the financial services sector until 1882, when it branched out, slightly, into a money order business.
From the Archives: Onion Ring: Another financial scandal — one which would make Eddie Murphy and Dan Aykroyd proud.
Related: “The Great Salad Oil Scandal” by Norman C. Miller. Published in 1964, so it only has one review (4 stars), but Miller won a Pulitzer for his work on the topic.