Salad Oil Scandal
The infamous Salad Oil Scandal was a 1963 fraud in which Allied Crude Vegetable Oil began securing loans based on its inventory of what appeared to be tanks full of salad oil. In reality, Allied filled the tanks mostly with water, with a layer of oil floating on top. Inspectors dipped into that top layer and assumed the tanks were full of oil.
Allied Crude Vegetable Oil was run by Anthony "Tino" De Angelis.
American Express was a big victim/dupe in this fraud. According to a Time magazine article in 1963, a subsidiary of American Express owned the tank farm where Allied Crude supposedly stored millions of pounds of oil. Oil which had apparently only ever existed on paper. Investors worried AmEx would be on the hook for all this oil.
Allied's speculation in vegetable-oil futures and its failure to meet margin requirements destroyed brokerage house Ira Haupt Co., and the New York Stock Exchange set up a multimillion-dollar fund to help mitigate the fallout.
American Express, which had basically loaned money based on nonexistent collateral was rescued by ... Warren Buffett, who saw the potential to buy a strong credit card/travelers check business at a sale price.
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