Great frauds in history: Tino De Angelis’ salad-oil scam

Anthony “Tino” De Angelis was born in 1915 in the Bronx. After leaving school to work for a butcher in a meat market, he joined a large meat processor, the Adolf Gobel company. He worked his way up to become its president in 1949, but the company was soon forced into bankruptcy as a result of a scandal in 1952 that involved overcharging the US government $31,000 ($274,000 today) for substandard food. De Angelis quickly moved on to start another business, the Allied Crude Vegetable Oil Refining Corporation, which he set up in 1955.

What was the scam?

De Angelis decided to corner the market for soybean oil, buying up huge amounts of the physical commodity, as well as soybean futures, in order to profit from any price rises. To get the necessary funds to do this, as well as keep paying his staff, he borrowed large amounts of money secured against the salad oil in his company’s storage tanks (which were guaranteed by American Express). However, unknown to outsiders, the tanks were partly filled with water, giving an inflated view of the reserves. De Angelis also stole blank receipts from American Express and started forging his own receipts.

What happened next?

Initially the firm’s buying pushed prices higher, helped by speculation that the US was about to agree a trade deal with Russia that would involve the export of large quantities of soybeans. However, when talks on another agricultural trade deal collapsed, the soybean price plummeted. This left Allied Crude Vegetable Oil with huge losses in the futures market, forcing it to declare bankruptcy in November 1963. When the receivers came in to investigate its assets, they discovered the scam. De Angelis was arrested, and later sentenced to twenty years in jail.

Lessons for investors

The scam destroyed two brokers, Williston and Beane, and Ira Haupt and Co, who had lent money to De Angelis. Both sold to competitors for a pittance. American Express also had to pay $150m ($1.25bn today) to cover guarantees on Allied’s oil. The whole debacle shows the importance of proper due diligence on any investment. Even after American Express was tipped off about possible fraud, it still allowed Allied to audit its own tanks. Amazingly, investors would allow themselves to be conned out of $7m ($33.2m today) by another Ponzi scheme that De Angelis ran after he was released from jail in 1972.