Tino De Angelis
Encyclopedia
Anthony "Tino" De Angelis (born 1915) is a Bayonne, New Jersey
based commodities trader who bought and sold vegetable oil futures
around the world. In 1962 he started to corner the market for soybean oil
, used in salad dressing. In the aftermath, investors (51 banks) learned that he had bilked them out of about $175 million in total ($1.2 billion in year 2000 dollars). The scandal is named after De Angelis's company, Allied Crude Vegetable Oil Refining Corporation.
immigrants. He worked in a meat and fish market, and while still a teenager was managing some 200 employees. He soon found that the new National School Lunch Act
program would buy practically anything given certain price requirements. After he took over Adolph Gobel Company in North Bergen, New Jersey
, he gained a large contract, but then overcharged the government $31,000. He also delivered over 2 million pounds of uninspected meat. Gobel went to court and went bankrupt.
In 1955, he formed Allied Crude Vegetable Oil Refining Corporation and other related companies to take advantage of the U.S. Government's Food for Peace
program. This program sold various surplus products to Europe for low cost in order to shore up their weak post-war economies. He formed Allied in a dilapidated "tank farm" in Bayonne and, with the patronage of major grain exporters, he began shipping massive quantities of substandard shortening
and other vegetable oil products to Europe. De Angelis slowly became a major player in Europe and the commodities markets, expanding into cotton and soybeans.
Starting in 1962, De Angelis decided that his network was strong enough that he could make a serious attempt to corner the market on soybean oil and started to buy massive quantities. On the basis of this huge value of inventory, he took out massive loans from various Wall Street
bank
s and companies, and used the cash to buy all of the futures on the oil. This way he would not only own a large quantity of soon-to-be expensive oil, but also cheap futures that would soon be worth a considerable value when the prices went up. He also used this cash to pay his staff, influence the community and occasionally make sincere gestures, such as paying a government official's hospital bill.
(Amex) in the early 1960s was a respected name in traveler's checks and credit cards. They created a new division that would specialize in "Field Warehousing". It was a way for Amex to loan a business money based on inventory of goods and commodities. Tino De Angelis was a new customer, and Amex wrote him warehouse receipts for many millions of pounds of vegetable oil. The receipts could be taken to a bank or broker and exchanged for cash. The lender would then "own" the oil as collateral.
As the exchanges became more regular, De Angelis reduced the actual amount of oil he had. The tanks at Allied Crude were increasingly filled with water, with a small, and constant, amount of oil floating on top. Some tanks had special compartments at the top, and others were a maze of pipes where oil could be shuttled between them to make one tank of oil appear in other tanks at key times. When inspectors visited and dipped the tanks, they found oil and everything seemed fine. The loans based on the warehouse receipts were "guaranteeing" that the oil was really in the tanks.
What was puzzling about the quality of Amex's Field Warehousing operation was that since De Angelis was theoretically buying so much, they essentially authenticated the existence of much more salad oil than was actually accounted for in the entire United States, according to monthly reports from the Department of Agriculture. While the warehouse operation was small for Amex, they were lenient with De Angelis, as he was one of their biggest customers. With Amex continuing to vouch for the inventories, their trusted seal of approval combined with De Angelis' talent for offering great deals, mainstream companies such as Bunge Limited
, Staley, Procter and Gamble, and The Bank of America
also provided loans.
On November 19, 1963, De Angelis's company filed for bankruptcy
, at which point investors learned hundreds of millions were unaccounted for. The brokerages who handled De Angelis's futures trades were now tainted, and the next day the NYSE, worried about potential U.S. Securities and Exchange Commission involvement, suspended Williston and Beane and Ira Haupt and Co. from trading. Word started spreading as traders investigated the suspension, and desperately tried to get their holdings out of the companies.
The entire debacle was overshadowed by the assassination of U.S. President John F. Kennedy
on November 22, 1963. Hours before Kennedy was shot, NY Stock Exchange president G. Keith Funston was attempting to avoid a massive crash caused by the 20,700 customers of Ira Haupt, who feared their holdings were now worthless. Because of the trading the brokerage firm did on De Angelis' behalf, they owed various banks over $37,000,000 that it could not pay. The Kennedy assassination provided the panic that Funston was trying to avoid. In 27 minutes, the Dow dropped 24 points (about 5%) and 2.6 million shares were sold off; the exchange closed 83 minutes early that day.
During investigations it was learned that De Angelis had hidden over $500,000 in a Swiss bank account and this led to a charge of contempt, since he had declared bankruptcy. He also could not explain large cash withdrawals from Allied. Eventually the details were sorted out, and Amex was forced to take a massive loss when they made good on their warehouse contracts. The two trading firms were eventually snapped up by larger players, and De Angelis ended up with a seven year jail term. Interestingly, keen observer and investor Warren Buffett
took advantage of the stock plunge of American Express and bought 5% of the company for $20 Million (US).
In 1972, De Angelis was released. He was soon involved in another scam, this time a Ponzi scheme
involving Midwest cattle. This attempt collapsed before it really got started.
The swindle was documented in detail by Norman C. Miller
in The Great Salad Oil Swindle
(Baltimore, MD: Coward McCann Books, 1965). The book is based on Miller's coverage of the story in the Wall Street Journal, which won a Pulitzer Prize in 1964.
Bayonne, New Jersey
Bayonne is a city in Hudson County, New Jersey, United States. Located in the Gateway Region, Bayonne is a peninsula that is situated between Newark Bay to the west, the Kill van Kull to the south, and New York Bay to the east...
based commodities trader who bought and sold vegetable oil futures
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
around the world. In 1962 he started to corner the market for soybean oil
Soybean oil
Soybean oil is a vegetable oil extracted from the seeds of the soybean . It is one of the most widely consumed cooking oils. As a drying oil, processed soybean oil is also used as a base for printing inks and oil paints...
, used in salad dressing. In the aftermath, investors (51 banks) learned that he had bilked them out of about $175 million in total ($1.2 billion in year 2000 dollars). The scandal is named after De Angelis's company, Allied Crude Vegetable Oil Refining Corporation.
Biography
De Angelis grew up in the Bronx, the son of ItalianItaly
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
immigrants. He worked in a meat and fish market, and while still a teenager was managing some 200 employees. He soon found that the new National School Lunch Act
National School Lunch Act
The Richard B. Russell National School Lunch Act is a United States federal law signed by President Harry S. Truman in 1946. The act created the National School Lunch Program , a program to provide low-cost or free school lunch meals to qualified students through subsidies to schools...
program would buy practically anything given certain price requirements. After he took over Adolph Gobel Company in North Bergen, New Jersey
North Bergen, New Jersey
North Bergen is a township in Hudson County, New Jersey, United States. As of the United States 2010 Census, the township had a total population of 60,773. Originally founded in 1843, the town was much diminished in territory by a series of secessions. Situated on the Hudson Palisades, it is one...
, he gained a large contract, but then overcharged the government $31,000. He also delivered over 2 million pounds of uninspected meat. Gobel went to court and went bankrupt.
In 1955, he formed Allied Crude Vegetable Oil Refining Corporation and other related companies to take advantage of the U.S. Government's Food for Peace
Food for Peace
Public Law 480 also known as Food for Peace is a funding avenue by which U.S. food can be used for overseas aid....
program. This program sold various surplus products to Europe for low cost in order to shore up their weak post-war economies. He formed Allied in a dilapidated "tank farm" in Bayonne and, with the patronage of major grain exporters, he began shipping massive quantities of substandard shortening
Shortening
Shortening is any fat that is solid at room temperature and used to make crumbly pastry. The reason it is called shortening is because it prevents cross-linkage between gluten molecules. Cross linking is what causes doughs to be sticky. Seeing as cake is not meant to be sticky, shortening is used...
and other vegetable oil products to Europe. De Angelis slowly became a major player in Europe and the commodities markets, expanding into cotton and soybeans.
Starting in 1962, De Angelis decided that his network was strong enough that he could make a serious attempt to corner the market on soybean oil and started to buy massive quantities. On the basis of this huge value of inventory, he took out massive loans from various Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
s and companies, and used the cash to buy all of the futures on the oil. This way he would not only own a large quantity of soon-to-be expensive oil, but also cheap futures that would soon be worth a considerable value when the prices went up. He also used this cash to pay his staff, influence the community and occasionally make sincere gestures, such as paying a government official's hospital bill.
Warehouse receipts
American ExpressAmerican Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
(Amex) in the early 1960s was a respected name in traveler's checks and credit cards. They created a new division that would specialize in "Field Warehousing". It was a way for Amex to loan a business money based on inventory of goods and commodities. Tino De Angelis was a new customer, and Amex wrote him warehouse receipts for many millions of pounds of vegetable oil. The receipts could be taken to a bank or broker and exchanged for cash. The lender would then "own" the oil as collateral.
As the exchanges became more regular, De Angelis reduced the actual amount of oil he had. The tanks at Allied Crude were increasingly filled with water, with a small, and constant, amount of oil floating on top. Some tanks had special compartments at the top, and others were a maze of pipes where oil could be shuttled between them to make one tank of oil appear in other tanks at key times. When inspectors visited and dipped the tanks, they found oil and everything seemed fine. The loans based on the warehouse receipts were "guaranteeing" that the oil was really in the tanks.
What was puzzling about the quality of Amex's Field Warehousing operation was that since De Angelis was theoretically buying so much, they essentially authenticated the existence of much more salad oil than was actually accounted for in the entire United States, according to monthly reports from the Department of Agriculture. While the warehouse operation was small for Amex, they were lenient with De Angelis, as he was one of their biggest customers. With Amex continuing to vouch for the inventories, their trusted seal of approval combined with De Angelis' talent for offering great deals, mainstream companies such as Bunge Limited
Bunge Limited
Bunge Limited is a Bermudan food conglomerate with its headquarters in White Plains, New York. As well as being a leading global soybean exporter it is also involved in food processing, grain trading, and fertilizer...
, Staley, Procter and Gamble, and The Bank of America
Bank of America
Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...
also provided loans.
Scheme exposed
The inspectors were eventually tipped off by such things as attempted bribery and delivery mistakes. So they returned to Allied's tanks in Bayonne and found the water. The result was a massive crash of the futures market, wiping out in minutes the entire value of the loans.On November 19, 1963, De Angelis's company filed for bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
, at which point investors learned hundreds of millions were unaccounted for. The brokerages who handled De Angelis's futures trades were now tainted, and the next day the NYSE, worried about potential U.S. Securities and Exchange Commission involvement, suspended Williston and Beane and Ira Haupt and Co. from trading. Word started spreading as traders investigated the suspension, and desperately tried to get their holdings out of the companies.
The entire debacle was overshadowed by the assassination of U.S. President John F. Kennedy
John F. Kennedy assassination
John Fitzgerald Kennedy, the thirty-fifth President of the United States, was assassinated at 12:30 p.m. Central Standard Time on Friday, November 22, 1963, in Dealey Plaza, Dallas, Texas...
on November 22, 1963. Hours before Kennedy was shot, NY Stock Exchange president G. Keith Funston was attempting to avoid a massive crash caused by the 20,700 customers of Ira Haupt, who feared their holdings were now worthless. Because of the trading the brokerage firm did on De Angelis' behalf, they owed various banks over $37,000,000 that it could not pay. The Kennedy assassination provided the panic that Funston was trying to avoid. In 27 minutes, the Dow dropped 24 points (about 5%) and 2.6 million shares were sold off; the exchange closed 83 minutes early that day.
During investigations it was learned that De Angelis had hidden over $500,000 in a Swiss bank account and this led to a charge of contempt, since he had declared bankruptcy. He also could not explain large cash withdrawals from Allied. Eventually the details were sorted out, and Amex was forced to take a massive loss when they made good on their warehouse contracts. The two trading firms were eventually snapped up by larger players, and De Angelis ended up with a seven year jail term. Interestingly, keen observer and investor Warren Buffett
Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is...
took advantage of the stock plunge of American Express and bought 5% of the company for $20 Million (US).
In 1972, De Angelis was released. He was soon involved in another scam, this time a Ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
involving Midwest cattle. This attempt collapsed before it really got started.
The swindle was documented in detail by Norman C. Miller
Norman C. Miller
Norman Charles Miller was an American journalist who worked for the Wall Street Journal.-Biography:Miller was born in Pittsburgh and attended Pennsylvania State University, where he earned his Bachelor of Arts in 1956. Miller won a Pulitzer Prize for Journalism in 1964 for his coverage of the...
in The Great Salad Oil Swindle
Great Salad Oil Swindle
The Great Salad Oil Swindle is a book by Wall Street Journal reporter Norman C. Miller about Tino De Angelis, a New York-based commodities trader who bought and sold vegetable oil futures contracts around the world. In 1962, De Angelis started a huge scam, attempting to corner the market for...
(Baltimore, MD: Coward McCann Books, 1965). The book is based on Miller's coverage of the story in the Wall Street Journal, which won a Pulitzer Prize in 1964.
External links
- http://www.mafianj.com/saladoil/tino1.shtml A web page about the mafia in New Jersey contains an excerpt from Norman Miller's article.