Every so often, history gifts us a story so audacious that it reads like a tasty dish for inquisitive minds. Today’s menu: fraud flambé with a vinaigrette of hubris, served on a bed of bank collateral with a side of corporate panic. Forks up as we bite into the great Salad Oil Scandal of 1963.

This was no small kitchen mishap. We’re talking about a Bronx-born con artist, thousands of shiny storage tanks filled with H₂O masquerading as canola, and a bunch of very important men in suits who nodded sagely at warehouse receipts without ever questioning whether their collateral was nothing more than salad dressing for mermaids. Banks bled money, American Express got doused in scandal, and the soybean oil market collapsed faster than a soufflé in a wind tunnel.

And yet, despite the biggest agriculture con in history, one savvy young man from Omaha emerged to develop a reputation as a wizard of investing and became one of the wealthiest men in the world.

Pull up a chair. Try not to spill your dressing.

Before the Swindle: Who Was Anthony “Tino” De Angelis?

If you were expecting a criminal mastermind who looked like a Bond villain, complete with a white cat and a shark tank in the basement, you’re going to be disappointed. Anthony “Tino” De Angelis was born in the Bronx in 1915 to Italian immigrant parents. By all accounts, he was unassuming: five-foot-five, stocky, slicked-back hair, horn-rimmed glasses, and a taste for pearl-gray ties rather than gaudy bling. Think less Al Capone, more the guy at the corner deli who gives you a suspiciously generous scoop of potato salad. But behind that modest appearance, De Angelis burned with ambition hot enough to deep-fry a soybean.

He left school at sixteen and got his start in the food business at a meat and fish market. Within three years, he was managing the place. From there, he became a foreman at a Bronx hog processing plant, then moved into butchery investments. By the late 1940s, he and his wife were running the D’Angelus Packing Company out of New Jersey. In 1950, he bought controlling interest in the Adolph Gobel Company—founded by the so-called “Sausage King of New York.” And yes, “Sausage King” was apparently a real title, not a deleted subplot from Ferris Bueller’s Day Off.

De Angelis financed the purchase with a hefty $325,000 bank loan and talked up his intent to keep the long-established business going. In reality, he’d spotted a juicier opportunity: the federal government’s brand-new National School Lunch Program. On paper, it was about feeding children balanced meals. In practice, it was a giant gravy train for anyone willing to shovel surplus meat into government contracts—quality optional. De Angelis jumped aboard with both hands, supplying meat to the program and charging accordingly.

It didn’t take long for Uncle Sam to notice that something smelled funny, and it wasn’t just the hot dogs. By 1952, De Angelis was accused of overcharging the government by $31,000 and selling over $2 million worth of uninspected meat. Had that meat been bad, the headlines could have read like a horror novel: “The Day America’s School Lunches Fought Back.” Instead, the government sued, the FTC accused him of inflating assets, and stock trading in his company was suspended. Yet somehow, Tino wriggled free. He wrote a six-figure check to make the problem go away, blamed the whole thing on a misunderstanding, and managed to dodge prosecution. The Gobel Company went bankrupt, but De Angelis simply sashayed on to his next scheme.

Setting the Table for the Salad Oil Scandal

And that’s when soybeans entered the chat. Thanks to the postwar Food for Peace Program, America had more soy oil than it knew what to do with, and the government was eager to ship it overseas. De Angelis saw the opportunity of a lifetime: buy soybeans in the Midwest, refine them in his New Jersey facilities, and sell the oil to export companies at a slim markup. They got their supplies without having to build infrastructure, and he got steady customers—and more importantly, financing. Banks and exporters started loaning him millions to grease the wheels.

By the mid-1950s, De Angelis had founded Allied Crude Vegetable Oil Refining Corporation. He snapped up a battered tank farm in Bayonne, New Jersey, and converted it into a sprawling soybean oil refinery. It consisted of 150 tanks, some of which were 50 feet tall. It was a precarious high-wire act—buying soybeans at high prices, selling oil at low margins, and relying on volume to make it work—but somehow, he pulled it off. Before long, Allied was supplying more than 75% of all edible oils shipped overseas. Tino De Angelis had transformed himself from a Bronx butcher’s apprentice into the so-called Salad Oil King of New York.

Of course, wherever Tino went, lawsuits and accusations followed: tax evasion, shorted deliveries, leaky oil cans, you name it. He always seemed to settle just shy of a courtroom disaster, leaving onlookers wondering whether he was brilliant, lucky, or simply coated in the same Teflon as his beloved oil drums. But one thing was certain: his biggest scheme was yet to come.

The Trick That Launched a Thousand Loans

Soybean oil — just like the black oil that comes out of the ground — can be stored in mass quantities and became an asset. With enough of the stuff, you could pledge receipts to banks and brokers, borrow against it, and turbocharge your trading in futures. The system depended on warehouse inspections, stamped paper, and trust. Emphasis on trust.

De Angelis realized the easiest way to move from being a big player to an even bigger player on paper was to fall back on a simple truth that even a high school science student could tell you—oil floats on water.

He realized a perilous truth: the amount of oil lenders believed you had was way more important than the amount you actually possessed. The more oil lenders believed you had, the more money they would throw your way to buy even more.

If you fill a tank mostly with water and top it off with a thin layer of oil, a dipstick—or a cursory glance—tells a story the balance sheet likes.

Allied perfected the choreography:

• Build a bunch of storage tanks;
• Put plenty of water in the tanks;
• Add enough oil to float on top of the water to deceive the casual observer;
• Connect the tanks with an elaborate pumping system to quickly change the oil/water ratio if an inspector wanted to look more carefully.

The paperwork, like the tanks, looked deep. The inventory, like the tanks, was shallow. Not realizing the shallowness of both the oil inventory and the veracity of De Angelis’ promises, American Express agreed to finance Allied’s business ventures. When American Express sent inspectors to examine the inventories, Allied’s crew got to work with the big bait-and-switch con.

The Scam Goes Supersized

If you thought the whole “let’s hide water under a thin skim of oil” trick was bold, buckle up—because De Angelis wasn’t about to stop there. Why settle for lying about what’s inside your tanks when you can also lie about how many tanks you have? Allied reported having storage tanks as part of its empire of goo that didn’t actually exist. They were as imaginary as the “moral” part of a politician’s moral indignation.

Through a convoluted web of leases, subleases, and good old-fashioned smoke and mirrors, Allied managed to convince bankers and brokers that its New Jersey tank farm was holding nearly a billion pounds of salad oil—despite the fact the place could only hold about half that much if you filled every tank to the brim and ignored minor details like physics.

And when fake tanks and waterlogged oil weren’t enough, De Angelis got hold of blank American Express warehouse receipts and helpfully filled them out himself. Voilà! Instant oil, no soybeans required. On paper, he claimed nearly two billion pounds of soybean oil. In reality, he had a measly 110 million pounds. That’s not a rounding error; that’s the financial equivalent of saying you own the Library of Congress when you’ve got three old paperbacks and a Dilbert calendar.

The audacity worked—at least for a while. Allied spun those “verified” receipts into loans from 51 major institutions, including household names like Procter & Gamble, Chase Manhattan, Bank of America, and Bank Leumi. American Express took its cut on every transaction, and everyone went along for the ride—right up until gravity, and reality, came crashing down.

When the Music Stops and the Tanks Gurgle

Despite the talent available to all of the big-named financial gurus who backed Allied’s operations, no one seemed to notice one troubling little fact: the amount of inventory claimed by Allied exceeded the USDA’s entire holdings. One would think that would have raised a bit of concern by at least one person, but by the time regulators, lenders, and counterparties realized they’d been served a tall glass of wishful thinking, the numbers were staggering.

Allied had pledged impossibly vast quantities of oil as collateral for loans. Those loans — roughly $175–$180 million — would be several billions in today’s money. When investigators finally dipped beyond the glossy surface, they found, to use a technical term, a whole lot of malarky. Instead of the reported 1.8 billion pounds, Allied had closer to 110 million pounds. That’s like the bank letting you pledge the Taj Mahal as collateral for a loan, only to discover that the only real estate you own is a time share for a condo in the suburbs of Hell Valparaiso, Indiana.

Frauds tend not to collapse because the fraudsters develop a conscience; they collapse because the cash cycle gets indigestion. For Allied, stress arrived when market conditions shifted and promised shipments failed to materialize. Scrutiny tightened. The fast shuffle of oil among tanks suddenly looked more like a shell game with industrial plumbing. Inspectors went back for a second look and didn’t like the view. The result was a thunderclap: Allied filed for bankruptcy on November 19, 1963; soybean oil futures and related markets lurched; lenders clutched their warehouse receipts and discovered they were roughly as valuable as souvenir menus.

The consequences rippled. A who’s-who of financial institutions took hits, including American Express—through a warehousing subsidiary that had vouched for, and issued receipts on, oil that didn’t exist at asserted levels—plus banks from California to Israel, and a raft of trading firms. Confidence in the entire apparatus of collateralized commodities took a swan dive worthy of a synchronized swimming team.

The scandal threatened to sink the entire New York Stock Exchange, and yet it barely registered with the public because of the timing. The big news broke on November 22, 1963, and it was overshadowed by the bigger event of that day: the assassination of President John F. Kennedy.

Between the impact of the Salad Oil Scandal and the news of Kennedy’s death, the Dow dropped 5% in the span of 27 minutes, forcing the exchange to close early.

American Express, Meet the Slipperiest PR Crisis in Corporate History

American Express was not a bit player; its name had adorned the warehousing operation that undergirded vast quantities of the supposed oil. When the scandal broke, AmEx stock plunged over 50% as investors tried to quantify the damage and wondered whether the brand best known for travelers cheques had just booked a one-way ticket to irrelevance. The company set aside millions for losses, endured investigations, and saw its sterling reputation marinated in headlines. The market reaction was swift and emotional. The business fundamentals, however, were more complicated.

At the time, American Express still had lucrative, defensible franchises—travelers cheques, charge cards, corporate services—that were wounded reputationally but not structurally. The company stepped up to the plate and paid out millions of dollars more than what it was legally required in an effort to salvage its reputation for financial integrity. The question for a cool-headed observer was simple: did the scandal permanently break the business, or did it temporarily break investor confidence?

Enter a young Nebraska partnership manager with a nose for mispriced narratives.

Warren Buffett Orders Opportunity à la Carte

Warren Buffett was running his investment partnerships in the early 1960s and had been honing the craft of buying great businesses at fair prices. To him, the Salad Oil Scandal presented a tasty spread of facts. The brand had been splashed with embarrassment. Shareholders were terrified. Yet the core consumer franchise—people happily using cheques and charge cards—looked intact. So he did what would become a hallmark of his career: he bought a lot when others wouldn’t touch a little.

Accounts vary on the exact per-share figures, but the storyline is consistent across credible sources: after the scandal knocked American Express from the low-60s to the mid-to-high 30s, Buffett accumulated roughly a 5% stake for about $20 million—an astonishing swing for his then-modest partnership and a remarkably audacious display of conviction. The investment recovered spectacularly over the subsequent years and has become one of the canonical examples of buying high-quality businesses during a headline hurricane.

If you want to understand the philosophy in a nutshell: scandals test the difference between temporary optical damage and permanent economic damage. When the underlying engine hums and the brand survives, the rebound can be dramatic. The Salad Oil episode helped cement a pattern Buffett would repeat—separate surface from substance, let panic set the table, and then eat when value is served hot.

The Bill Comes Due: Losses, Laws, and Lessons

Much like the Wall Street Panic of 1907, where two men nearly crashed the entire U.S. economy, the fallout of the Salad Oil Scandal flew far and wide. Multiple banks wrote off loans. Brokers and trading houses swallowed margin shortfalls. Reputations sagged under the weight of questions like: “So, you never actually verified the stuff?” Meanwhile, the soybean oil market convulsed; when suddenly revealed inventories are more water than oil, prices react with all the composure of a cat in a bathtub.

When the house of oily cards finally collapsed, prosecutors came down on Anthony De Angelis with the full weight of fraud and conspiracy charges. At first, a judge slapped him with bail so jaw-dropping it made headlines: $43 million—that’s close to $500 million in today’s money. At the time, it was reportedly the highest bail ever set in the United States. Clearly, the courts weren’t taking any chances on the Salad Oil King slipping away for a celebratory vinaigrette.

Reality, however, proved less dramatic. The bail was lowered to a far more manageable $150,000, and De Angelis eventually received a 20-year prison sentence. Like many high-flying fraudsters before and after him, he didn’t serve the full stretch. He was out on parole in just seven years, a little thinner, a little grayer, but apparently no wiser.

One thing tends to be true about serial schemers: prison is more like a networking event than a deterrent. No sooner was he free than De Angelis found himself drawn back to the siren song of creative accounting. In the 1980s, he dipped his toes into a pork-company scam described—quite generously—as a Ponzi scheme. That earned him another seven-year sentence, though he managed parole by 1983.

By 1993, at the age of 77, he was at it again—this time with a scheme involving forged lines of credit. You’d think most retirees would be content with golf and grandkids, but not our Tino. Though convicted yet again, he avoided dying behind bars. He passed away in 2009 at the ripe old age of 93, free as a bird and still remembered as the man who tried to turn water into oil—and nearly drowned Wall Street in the process.

How to Fool Smart People: The Psychology of the Swindle

Fraud feeds on systems optimized for speed and trust. The Salad Oil Swindle exploited a trio of human weaknesses:

1. Authority Bias: If a reputable warehousing subsidiary stamped a receipt, counterparties assumed the tanks were truth-serum honest. Turns out, paperwork can be well-intentioned and wrong.
2. Confirmation Comfort: Lenders wanted Allied to be huge; it made their books sing. Inspectors expected to see oil; they saw oil. The human eye is suggestible, especially when the ledger agrees.
3. Complexity Camouflage: Commodity chains are intricate; the more moving parts, the easier it is to hide a missing bolt. Water under oil is physically simple, financially devastating, and psychologically elegant.

Historic Echoes: Yesterday’s Oil, Tomorrow’s Collateral

We are not here to be smug about the 1960s. Our century has contributed its own vigorous crop of “you pledged what?” misadventures: warehouse receipt frauds involving base metals, mortgage securities built on defective assumptions, crypto exchanges holding IOUs and vibes. The recurring theme is eternal: trust, but verify—and maybe bring a hydrometer. The Salad Oil affair is a grandfather to modern collateral controversies, a reminder that financial systems need both paper assurances and physical reality checks.

Buffett’s Takeaway (and Ours)

Buffett’s American Express investment is frequently taught as a case study in separating reputational smoke from economic fire. The key observations: consumers still wanted to use AmEx products; the scandal impacted a subsidiary and the balance sheet, not the essence of the franchise; and the panic handed him a durable brand at a discount. Over time, that call looked inspired. Decades later, American Express remains a core Berkshire position, a lingering echo of lessons refined in the 1960s.

This is not to say every scandal hides a gem. Sometimes the scandal is the business model. The trick is to distinguish structural damage from cosmetic bruising. If your investment thesis rests on a commodity tank being mostly water, you don’t have a thesis; you have a puddle.

Conclusion: The Scandal That Slipped, Slid, and Still Sticks

In the end, the Salad Oil Scandal combines three irresistible flavors: a clever physical trick, a bureaucratic blind spot, and the financial industry’s recurring romance with leverage. Allied’s choreography turned a little oil into a lot of collateral, for a while. When the curtain lifted, reputations cratered, prices dived, and there was more water than anyone wanted to admit. American Express took its punch and recovered. Warren Buffett made one of the era’s most famous confidence-in-a-brand wagers. And the rest of us got a parable we can tell ourselves whenever a receipt looks too perfect or a tank looks too shiny: measure twice, sample deep, and remember that the slickest surfaces often sit atop the deepest water.

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