The Fiftieth Anniversary of JFK and the Great Salad Oil Swindle

  Fifty years ago, John F. Kennedy was assassinated on Friday, November 22, 1963 in Dallas, Texas. The assassination not only shocked the nation, but shook the stock market as well. However, very few people have heard about The Great Salad Oil Swindle which nearly crippled the New York Stock Exchange that weekend. Officials at the NYSE took advantage of the closure of the exchange to keep the crisis caused by the swindle from spreading further. Here is what happened at the NYSE while the nation focused on the President’s funeral.

Salad Oil, Cornered and Quartered

The Great Salad Oil Swindle was carried out by Anthony “Tino” De Angelis, who traded vegetable oil (soybean oil) futures which was an important ingredient in salad oil. De Angelis had previously been involved in a swindle involving the National School Lunch Act while he President of the Adolph Gobel Co. When it was discovered that he had overcharged the government and delivered over 2 million pounds of uninspected meat, he and the company ended up bankrupt. Con-men don’t stop being cons, they just try to learn from their mistakes and make more money the next time around. Buying soybean oil futures would drive up the price of his vegetable oil holdings, which would increase both the value of his inventories and allow him to profit from his futures contracts. De Angelis could use these profits not only to line his own pockets, but to pay his staff, make contributions to the community, and in one case, pay the hospital bill of a government official. American Express had recently created a new division that specialized in field warehousing, which made loans to businesses using inventories as collateral. American Express wrote De Angelis warehouse receipts for millions of pounds of vegetable oil, which he took to a broker and discounted the receipts for cash. This proved to be an easy way to get money, so De Angelis began falsifying warehouse receipts for vegetable oil he didn’t have. American Express sent out inspectors to make sure that De Angelis had the vegetable oil that acted as collateral, but what they didn’t know is that many of the tanks were filled mostly with water with a minimum of oil floating on the top to fool the inspectors, or that some of the tanks were connected with pipes to other tanks so the oil could be transferred between tanks when the inspectors went from one tank to the other. If American Express had done their homework, they would have realized that De Angelis’s reported vegetable oil “holdings” were greater than the inventories of the entire United States as reported by the Department of Agriculture. Unsatisfied with the American Express loans, De Angelis was able to get additional loans from Bunge Ltd., Staley, Proctor and Gamble, and The Bank of America. By the time the swindle collapsed, De Angelis had gotten loans from a total of 51 companies.  

No Salad Today

When De Angelis got a large order from Spain, he started speculating in the futures market to increase his profits, but when the order was reversed, he decided to prop up the market rather than cut his losses. De Angelis pulled out all the stops. He forged warehouse certificates, stole warehouse certificates, kited checks and warehouse certificates, opened a new brokerage account at Ira Haupt & Co., and even attempted to bribe employees of other companies. You can’t hold up the market forever. Eventually, the whole house of cards collapsed. Inspectors were eventually tipped off about De Angelis’s fraud. Allied Crude was supposed to have $150 million in vegetable oil as collateral, but only had $6 million. When the inspectors found water in the tanks, and not oil, the gig was up. The futures market crashed. Soybean oil closed at $9.875 on Friday, November 15, at $9 on Monday and $7.75 on Tuesday, November 19, wiping out the entire value of the De Angelis loans. As you might guess, De Angelis’s company had been losing money all along, and the loans were used to cover these mounting losses. De Angelis’s goal was to sell out at the top and cover all of his losses, but of course, his plan didn’t work out that way. The crash of the soybean oil market in November 1963 is shown below. On Friday, November 22, the NYSE organized a bail out of Williston & Beane, and the firm was allowed to reopen at noon on Friday. Ira Haupt & Co. was a bigger problem. It collectively owned $450 million in securities and owed various banks over $37 million that it could not pay. At 1:41 pm, as soon as word that JFK had been shot flashed on the floor of the New York Stock Exchange (NYSE), began to sell off. The Dow Jones Industrials, which was recorded at hourly intervals in 1963, had been at 735.87 at 1 pm on November 22, ultimately declined to 730.18 by 2 pm. Over the next seven minutes, the market traded 2.2 million shares and lost an additional nineteen points, erasing around $11 billion in capitalization, before NYSE officials halted trading at 2:07 pm to stop the panic selling. The market rested, and the next day, JFK’s body lay in repose at the White House. On Sunday JFK’s was taken to the rotunda of the Capitol for public viewing. Over 250,000 people viewed the casket as a line stretched for 40 blocks, or 10 miles. Some people waited over 10 hours in the freezing cold to pay their last respects. On Monday, the casket was transferred to the National Cathedral where his funeral mass was broadcast to a stunned nation. Kennedy was buried in Arlington Cemetery, where the eternal flame was lit over his grave. The stock market remained closed on Monday and reopened on Tuesday, November 26, when the market traded over 9 million shares, closing the day at 743.52, moving up 4.5% from the previous day’s close. The table below provides the hourly performance of the DJIA on November 22 and 26, 1963