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The Great Salad Oil Swindle is a book by Wall Street Journal reporter Norman C. Miller about Tino De Angelis, a New Jersey-based wholesaler and commodities Trader who dealt in vegetable oil futures contracts.[1] The book was published in 1965 by Coward McCann.
OverviewIn 1963, De Angelis was responsible for the Salad Oil scandal, a major financial racket involving fraudulent warehouse receipts, when he attempted to corner the soybean oil market. Soybean oil is an ingredient of salad dressing and has many other uses. In the aftermath of the scandal, 51 investors were swindled out of approximately $175 million ($1.4 billion in 2018 dollars).
RecognitionMiller was awarded the Pulitzer Prize in 1964 for his reporting of the De Angelis scam[2][3] in the Wall Street Journal, on which the book is based.
The final six weeks of 1963 produced the strangest market scandal of the century—the great salad oil mystery. It reached one climax two days before Christmas with the indictment by a Federal grand jury in Newark of Anthony DeAngelis, president of the bankrupt Allied Crude Oil Refining Corporation of Bayonne, N. J.
The 48-year-old Mr. DeAngelis, a short, portly man called “Tino” by his friends. was the man who touched off the fireworks by submitting his company to voluntary bankruptcy proceedings late in November.
In rapid-fire fashion, one prominent brokerage house went into liquidation and a second was absorbed by another concern. There were repercussions in the commodities market, where the situation first evolved, and in the stock market, where a near-crisis was averted by the action of the New York Stock Exchange.
Involved in the maze of legal proceedings were dozens of banks, import-export firms, commodity houses, insurance companies, wealthy privately owned concerns and a warehousing subsidiary of the American Express Company.
One estimate put the potential total losses at $100 million or more.
Mr. DeAngelis is expected to face trial this year, probably in the spring. He was released on $5,000 bail after pleading not guilty on the 18-count in- dictment. He is charged with transporting nearly $40 million in forged warehouse receipts across the New Jersey-New York state line.
The maximum penalty for each of the 18 counts is 10 years in prison and a $10,000 fine.
Attorney General Robert F. Kennedy said the investigation was being continued by the Federal Bureau of Investigation, the Securities and Exchange Commission and the Department of Agriculture.
It is possible that tighter controls—or higher margins—might be placed on commodities trading as one result of the salad-oil case.
Allied Crude, the keystone company of Mr. DeAngelis, speculated heavily in the futures market on soybean oil and cottonseed oil. It thus became the biggest factor in the entire trade for vegetable-oil futures, or contracts to deliver commodities on a specific date.
In addition to buying up these contracts, the DeAngelis company also became involved in the spot, or cash, market for these commodities. It is here—in the process of taking physi- cal delivery of oil—that tank farms and warehouse receipts came into the picture.
Allied Crude used warehouse receipts for oil supposedly in storage as collateral to help finance its mammoth market operations. It borrowed money from banks and various brokers on the basis of these receipts.
But court testimony by employes of Allied Crude revealed an overstatement of the stored oil against which receipts had been issued. In the process a parade of creditors began pushing forward their claims on this missing oil.
The Attorney General said that the forged receipts purported to show that Allied Crude had stored 400 million pounds of soybean oil in tanks at Bayonne. A value of 10 cents a pound is attached to this oil to make up the figure of $40 million.
The forged receipts assertedly were taken from Bayonne to New York, the indictment said. It stated also that these receipts purported to show that Allied Crude had stored varying amounts of soybean oil in the Bayonne tanks of American Express warehousing, Ltd. This concern, a wholly owned subsidiary of American Express Company, had subleased the from Allied Crude.
A warehouse receipt typically is issued by a storage company to certify that a specific amount of goods has been placed in a tank, warehouse, barge or other storage facility. These receipts are one of the oldest and most trusted forms of financing. After their initial issuance, warehouse receipts often pass from one business concern to another. This chain of passage is one of the complicating factors in the salad oil mystery.
On Dec. 30, American Express Warehousing filed a petition in Federal court under Chapter XI of the Bankruptcy Act. It is seeking to continue in business through an arrangement with its creditors.
Company officials said that the court petition was a procedure to obtain a single forum for the early determination of claims against the warehousing concern.
Among the privately owned concerns with a big stake in the Allied Crude matter is the Bunge Corporation, a major commodities exporter. Bunge, one of the creditors of Allied Crude, hired an independent surveyor to check the tanks where crude, degummed soybean oil was purportedly in storage.
Bunge was under the impression that some 160 million pounds of vegetable oil—valued at upward of $15 million—had been stored in four tanks of American Express Warehousing. Upon inspection, the surveyor found two tanks empty, a third half-full, and a fourth filled with watered soybean oil.
The tank-storage facility at Bayonne is the biggest in the East. Some 200 tanks linked by a spaghetti-like maze of pipes, ring the port area.
Another chapter of the Allied Crude drama unfolded on Wall Street. In its wake it left the old-line brokerage house of Ira Haupt & Co. in liquidation. J. R. Williston & Beane, Inc., was absorbed by Walston& Co.
Both Ira Haupt and Williston & Beane were suspended by the New York Stock Exchange on Nov. 20 after these brokerage houses violated the exchange's net capital rule. This requirement rigidly holds that at all times a firm's liabilities may not exceed 20 times its net capital.
It was an ignored call for more margin issued by the two firms to Allied Crude that set the Wall Street drama into motion.
Allied Crude, the biggest single commodities customer of Ira Haupt, got an $18 million overnight margin call from this firm. The margin call from Williston & Beane was $610,000.
When Allied Crude decided to enter bankruptcy proceedings, it fell upon the two brokerage houses to honor the mar- gin calls. The sudden drain on financial resources was too much. The suspension was lifted for Williston & Beane, which soon decided to join forces with Walston.
Haupt's financial crisis spurred the Big Board into a mammoth decision. It authorized payments of up to $12 million of. its own funds in a move to protect the 20,000 securities customers of Haupt. Part of the price was the liquidation of Haupt, and the exchange's chief examiner —James Mahony—went to work at Haupt's main office at 111 Broadway, a block from the exchange.
The exchange took care to point out that it had no legal obligations for the debts of member firms to their customers. “The board of governors took this unusual step on the basis of the exceptional facts surrounding this particular case,” Keith Funston, president of the exchange. declared.
Never before in the 171-year history of the Big Board had any payment of this magnitude been authorized. The funds were designed to permit the securities customers of Haupt to withdraw their cash balances and securities that they owned. But this is a timeconsuming process that is still continuing.
This was only the second time that the exchange had come to the rescue of customers sustaining losses. The previous case was that of DuPont, Homnsey & Co. in 1960. The exchange voluntarily paid $797,000 to make up losses suffered by clients of that Boston-based brokerage firm.
The DuPont, Homsey case—unlike the crisis at Haupt—involved fraud. The Boston firm's senior partner, Anton E. Homsey, was expelled from the exchange for pledging the securities of clients without their knowledge. He was later imprisoned and his firm liquidated.
