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Definition: Salad Oil Scandal
Salad Oil Scandal, also referred to as Soybean Scandal, is one of the worst scandals which caused around $150 million in losses in 1963. The company mainly involved with this scandal was Allied crude vegetable oil company. The main companies who suffered the losses were American Express, Bank Leumi and Bank of America.
The fraud was carried out by the company which realized that the banks were willing to give loans against the inventory of salad oil. Millions of dollars of loans were taken against ships apparently carrying the oil.
The basic thing that the banks failed to understand was that oil floats on water and hence they never checked the tanker ships fully. Allied crude vegetable oil company filled the tanker ships with water and just few feet of oil on top of it to fool the officials and make them think that the tanker ship is full of salad oil and hence approved any loans. When finally, this scandal was exposed, American express suffered badly. The stock price of American Express plummeted by over 50% that day. Tino De Angelis who led Allied crude vegetable oil company was convicted of conspiracy and fraud charges in connection with the scandal and he served seven years in prison.