The salad oil scandal, also referred to as the soybean scandal, was an American major

corporate scandal A corporate collapse typically involves the insolvency or bankruptcy of a major business enterprise. A corporate scandal involves alleged or actual unethical behavior by people acting within or on behalf of a corporation. Many recent corporate col ...

in 1963 that caused over $180 million ($ billion today) in losses to corporations including American Express,

Bank of America The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...

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 later financial crises including the 2007–2008 subprime mortgage crisis. The scandal involved the Allied Crude Vegetable Oil company in

New Jersey New Jersey is a state in the Mid-Atlantic and Northeastern regions of the United States. It is bordered on the north and east by the state of New York; on the east, southeast, and south by the Atlantic Ocean; on the west by the Delaware ...

in the United States, owned by Anthony "Tino" De Angelis, a former commodities broker. De Angelis had been in trouble with the law previously for supplying schools with beef from uncertified sources under the National School Lunch Act.

Fraud

De Angelis was awarded a contract with Food for Peace, a federal program which sold excess food stocks to poor countries. He discovered that he could obtain loans based upon Allied's fraudulently-inflated inventory of

salad oil Vegetable oils, or vegetable fats, are oils extracted from seeds or from other parts of fruits. Like animal fats, vegetable fats are ''mixtures'' of triglycerides. Soybean oil, grape seed oil, and cocoa butter are examples of seed oils, or fa ...

. Ships supposedly full of salad oil for Allied would dock and inspectors would certify the cargo, allowing Allied to post the oil as

collateral Collateral may refer to: Business and finance * Collateral (finance), a borrower's pledge of specific property to a lender, to secure repayment of a loan * Marketing collateral, in marketing and sales Arts, entertainment, and media * ''Collate ...

and obtain millions of dollars in bank loans. In reality, the ships tanks contained only water, with a few feet of salad oil floating on top to trick inspectors. When inspectors audited Allied's facilities, the company would transfer the same oil stock from tank to tank to fool the inspectors while entertaining them during lunch. In all, Allied posted 1.8 billion pounds of

soybean oil Soybean oil (British English: soyabean oil) is a vegetable oil extracted from the seeds of the soybean (''Glycine max''). It is one of the most widely consumed cooking oils and the second most consumed vegetable oil. As a drying oil, processed s ...

as collateral to fraudulently obtain $180 million in loans, when the actual stock was a mere 110 million pounds.

Impact

The scandal was exposed when the Russian soybean market did not open up, and soybean prices fell drastically as a result, causing the investors to attempt to cash in. American Express stock dropped more than 50% as a result, which cost the company nearly $58 million. De Angelis was convicted of fraud and

conspiracy A conspiracy, also known as a plot, is a secret plan or agreement between persons (called conspirers or conspirators) for an unlawful or harmful purpose, such as murder or treason, especially with political motivation, while keeping their agre ...

charges in connection with the scandal and served seven years in prison, gaining his release in 1972.

References

Notes {{DEFAULTSORT:Salad Oil Scandal Corporate scandals Corporate crime 1963 in the United States 1963 in economics

Fraud

Impact

See also

References