Book Review: The Neat Salad Stone Oil Swindle
The Great Salad Oil Swindle, yesteryear Norman C Miller, Published yesteryear Coward McCann New York, 1965, Library of Congress Catalogue Number 65-20407
Tina De Angelis together with The Great Salad Oil Swindle are remembered today every bit an of import milestone inwards the career of Warren Buffett. American Express was the biggest (dollar) victim of the swindle together with their stock cratered. Influenza A virus subtype H5N1 together with so unknown small-town hedge fund director called Warren Buffett purchased 5 percentage of American limited for 20 1000000 dollars - together with scored a 10 bagger.
However, this is non a mass almost Warren Buffett. The unknown Buffett doesn't fifty-fifty charge per unit of measurement a mention. It's a mass almost fraud together with fraudsters together with the dupes that permit them to thrive.
And that is a story that is plenty relevant today.
===
1963 was a dissimilar world. Agricultural commodities were king. Twenty yard tonnes of tallow (hard fatty from meat ofttimes used inwards making soap) cost an amount sufficient to bankrupt many Wall Street firms - directly it costs an amount equal to a one-half dozen expert bonuses. Selling nutrient to Espana involved negotiating amongst the Opus Dei (a conservative Catholic sect controversial inwards purpose for backing authoritarian right-wing governments). And where American Express insisted that all divisions brand at to the lowest degree $500,000 inwards profit.
But it was surprisingly similar inwards diverse ways every bit well. People worked inside their narrow domain together with when it didn't brand feel they didn't stone the boat. People could hold upwardly bought-off yesteryear surprisingly modest net turn a profit streams. And when it all went incorrect they went dorsum to trouble concern every bit usual without much introspection every bit to their stuff-ups.
Moreover the actually large stuff-ups together with frauds could together with so (as now) hold upwardly avoided amongst mutual feel (something that is surprisingly uncommon).
Background
Tino De Angelis was a Bronx boy, boy of Italian immigrants, who found a project inwards the meat together with fish marketplace together with chop-chop found success. Mostly that came through circumventing regime rule or ripping off regime programs. His commencement fortune was black-market meat amongst war-time rationing - though he was never prosecuted. The vegetable oil trouble concern for which he later on became famous (and which is the discipline of this book) arose from quirks inwards the Food for Peace program, a programme which was ostensibly almost aiding the beaten upwardly economies of Europe but was only every bit much almost subsidizing farmers.
Tino's commencement fellowship was Gobel, a meat-packing concern which had frequent plenty clashes amongst the government, the commencement major ane beingness over the sale of 18,900,000 pounds of smoked meat to a schoolhouse luncheon program. [The weights were wrong...]
Later Gobel was prosecuted yesteryear the SEC for overstated profits - together with so understated losses together with for borrowing coin against inventory that didn't exist. The mass doesn't acre it out so clearly but Gobel either overstated revenue or understated its expenses producing imitation profits. Fake profits would commonly hold upwardly held inwards the residual canvas every bit imitation cash yet that was also slow for auditors to let on so the imitation cash was converted into imitation inventory. Just to add together insult Gobel borrowed coin against non-existent inventory.
Nobody went to prison theatre for that but the Justice Department later on prosecuted Tino for perjury together with destroying evidence, yet the prosecution instance brutal apart at case when the primal witness recanted.
Tino together with so entered the trouble concern of exporting vegetable oil from the US. Most of the "oil crushers" were inwards the Midwest together with exported via the Great Lakes or Mississippi, but Tino established the Allied Crude Vegetable Oil Refining Corporation (Allied) at Bayonne New Jersey in a port facility amongst some reconditioned crude oil refining tanks. He had to hold upwardly in that location - it was closer to Manhattan together with the coin together with status of Wall Street.
The (privately held) Allied seemed to hold upwardly profitable together with accrued large taxation bills, yet similar at Gobel the net turn a profit was an illusion - it was spent on endless inventory together with some overstated flora - together with similar at Gobel the inventory was illusory.
Like at Gobel in that location was an undertone of ripping off the government, some of which was done through "Food For Peace" program. An early on illustration was the (subsidized) transportation of a 1000000 tonnes of feed grain to Republic of Austria for feeding pigs. The population of Republic of Austria was 7 1000000 so this is 140 kg (over 300 lbs) per man, adult woman together with child. As an official investigating later on observed everyone inwards Republic of Austria would receive got been genuinely sated on pork chops. [The grain was together with so sold at real depression prices on the dark marketplace to East Federal Republic of Federal Republic of Germany - the together with so cold-war enemy. This is an extension of the war-time rationing cheats De Angelis grew rich on.]
Also similar Gobel in that location was extensive borrowing against phantom inventory.
Most of the mass is almost how the borrowing took place. The primal yet was that American Express had a warehousing trouble concern which issued receipts confirming that commodities (oil, grain, vegetable oil together with other commodities) had been delivered to warehouses together with were stored safely. Finance was offered yesteryear at to the lowest degree l banks against these receipts. [This form of finance, including finance for cargoes on ships, is mutual plenty together with usually goes nether the rubric of "trade finance".]
In this instance the warehouses were on the Hudson river, used to comprise petrochemicals together with were directly filled amongst sea-water topped amongst a sparse layer of vegetable oil. In each tank in that location was a tube built over the testing hole - together with that tube which went to the bottom of the tank was also filled amongst vegetable oil. Depth-tests of the vegetable oil showed the tanks were full.
Over $100 1000000 worth of these receipts were issued. Allied also stole an American Express receipt mass together with forged additional receipts. Many of the forged receipts were held yesteryear brokers (especially Ira Haupt & Co) every bit collateral for futures contracts buying silent to a greater extent than vegetable oil.
Influenza A virus subtype H5N1 lesson of the book: corrupting people is cheap peculiarly when they are only a modest cog inwards a large wheel. It is real hard for say a warehouseman to accept an honest project if it involves a 60 percentage drib inwards his salary. [Corollary - you lot receive got to cutting Wall Street bonuses a long agency earlier you lot brand corruption unattractive...]
The collapse of Ira Haupt & Co
The forgotten purpose of the scandal is the collapse of a modest Wall Street broker - Ira Haupt & Co. Ira Haupt paid $18 1000000 inwards margin calls on behalf of Allied (secured yesteryear fraudulent warehouse receipts) together with thence the futures central had no loss. Ira Haupt yet was bust.
Because the Chicago commodity exchanges had no loss they behaved holier-than-thou taking no responsibleness for their (moderate) duplicity. But the New York Stock Exchange was terrified. The text has resonance fifty-fifty today:
The collapse of Haupt yet led to the institution of the commencement Wall Street fidelity fund. It was settled amongst the quaint total of $25 million.
This mass is refreshingly jargon-free. And the human foibles that brand swell scandals possible haven't changed much. Nor has their vulnerability to mutual sense.
When Allied collapsed the stocks of vegetable oil at Bayonne together with inwards futures contracts were to a greater extent than than a year's supply. To avoid this ane you lot only needed to inquire the correct questions.
John
PS. Several prices amuse me. Soya oil was typically almost 7.5-8c per pound (say almost $180 per tonne). Influenza A virus subtype H5N1 Cadillac cost $6000 - almost 33 tonnes of oil. Influenza A virus subtype H5N1 New York storey suitable for a mistress [the stair out inwards the book] cost almost $15000 (or 83 tonnes of oil).
Soya Oil is now about 40c per pound. The Cadillac costs $75000 or almost 85 tonnes of oil. The New York storey costs perchance http.5-2 1000000 or over 1700 tonnes of oil. New York apartments measured inwards vegetable oil receive got been 20 baggers.
This accords amongst other observations. Australian farmers receive got gone from beingness the richest people inwards the basis to having difficulty sending their children to metropolis schools. Warren Buffett (befitting someone his age) tends to compare businesses to the yield on farm Blue Planet whereas nobody else on Wall Street would receive got whatever persuasion what the yield on farm Blue Planet is.
--
PPS. The mass - purchased on Amazon - came amongst 2 bookmarks. The commencement was a figurer punch carte du jour (the commencement I receive got seen inwards to a greater extent than than a decade). The 2d a trouble concern card.
J. Victor Herd was an of import individual inwards New York insurance inwards the 1950s to 1970s. He warranted a long obit inwards the New York Times. The Continental Insurance Companies may receive got ane time been headquartered downtown but are directly firmly inwards Chicago (as purpose of CNA). This is only some other illustration of the reject of "Downtown".
The trouble concern carte du jour is old school. There is an address but no telephone number (his secretarial assistant would receive got worked out whether you lot were worth his time) but only after you lot looked upwardly the telephone number inwards the white pages together with were directed through the switchboard. (Correction, in that location is a telephone number amongst an surface area code beingness LL...)
I am non certain when they retired the musket-soldier image. These are directly collectables on Ebay.
J
Tina De Angelis together with The Great Salad Oil Swindle are remembered today every bit an of import milestone inwards the career of Warren Buffett. American Express was the biggest (dollar) victim of the swindle together with their stock cratered. Influenza A virus subtype H5N1 together with so unknown small-town hedge fund director called Warren Buffett purchased 5 percentage of American limited for 20 1000000 dollars - together with scored a 10 bagger.
However, this is non a mass almost Warren Buffett. The unknown Buffett doesn't fifty-fifty charge per unit of measurement a mention. It's a mass almost fraud together with fraudsters together with the dupes that permit them to thrive.
And that is a story that is plenty relevant today.
===
1963 was a dissimilar world. Agricultural commodities were king. Twenty yard tonnes of tallow (hard fatty from meat ofttimes used inwards making soap) cost an amount sufficient to bankrupt many Wall Street firms - directly it costs an amount equal to a one-half dozen expert bonuses. Selling nutrient to Espana involved negotiating amongst the Opus Dei (a conservative Catholic sect controversial inwards purpose for backing authoritarian right-wing governments). And where American Express insisted that all divisions brand at to the lowest degree $500,000 inwards profit.
But it was surprisingly similar inwards diverse ways every bit well. People worked inside their narrow domain together with when it didn't brand feel they didn't stone the boat. People could hold upwardly bought-off yesteryear surprisingly modest net turn a profit streams. And when it all went incorrect they went dorsum to trouble concern every bit usual without much introspection every bit to their stuff-ups.
Moreover the actually large stuff-ups together with frauds could together with so (as now) hold upwardly avoided amongst mutual feel (something that is surprisingly uncommon).
Background
Tino De Angelis was a Bronx boy, boy of Italian immigrants, who found a project inwards the meat together with fish marketplace together with chop-chop found success. Mostly that came through circumventing regime rule or ripping off regime programs. His commencement fortune was black-market meat amongst war-time rationing - though he was never prosecuted. The vegetable oil trouble concern for which he later on became famous (and which is the discipline of this book) arose from quirks inwards the Food for Peace program, a programme which was ostensibly almost aiding the beaten upwardly economies of Europe but was only every bit much almost subsidizing farmers.
Tino's commencement fellowship was Gobel, a meat-packing concern which had frequent plenty clashes amongst the government, the commencement major ane beingness over the sale of 18,900,000 pounds of smoked meat to a schoolhouse luncheon program. [The weights were wrong...]
Later Gobel was prosecuted yesteryear the SEC for overstated profits - together with so understated losses together with for borrowing coin against inventory that didn't exist. The mass doesn't acre it out so clearly but Gobel either overstated revenue or understated its expenses producing imitation profits. Fake profits would commonly hold upwardly held inwards the residual canvas every bit imitation cash yet that was also slow for auditors to let on so the imitation cash was converted into imitation inventory. Just to add together insult Gobel borrowed coin against non-existent inventory.
Nobody went to prison theatre for that but the Justice Department later on prosecuted Tino for perjury together with destroying evidence, yet the prosecution instance brutal apart at case when the primal witness recanted.
Tino together with so entered the trouble concern of exporting vegetable oil from the US. Most of the "oil crushers" were inwards the Midwest together with exported via the Great Lakes or Mississippi, but Tino established the Allied Crude Vegetable Oil Refining Corporation (Allied) at Bayonne New Jersey in a port facility amongst some reconditioned crude oil refining tanks. He had to hold upwardly in that location - it was closer to Manhattan together with the coin together with status of Wall Street.
The (privately held) Allied seemed to hold upwardly profitable together with accrued large taxation bills, yet similar at Gobel the net turn a profit was an illusion - it was spent on endless inventory together with some overstated flora - together with similar at Gobel the inventory was illusory.
Like at Gobel in that location was an undertone of ripping off the government, some of which was done through "Food For Peace" program. An early on illustration was the (subsidized) transportation of a 1000000 tonnes of feed grain to Republic of Austria for feeding pigs. The population of Republic of Austria was 7 1000000 so this is 140 kg (over 300 lbs) per man, adult woman together with child. As an official investigating later on observed everyone inwards Republic of Austria would receive got been genuinely sated on pork chops. [The grain was together with so sold at real depression prices on the dark marketplace to East Federal Republic of Federal Republic of Germany - the together with so cold-war enemy. This is an extension of the war-time rationing cheats De Angelis grew rich on.]
Also similar Gobel in that location was extensive borrowing against phantom inventory.
Most of the mass is almost how the borrowing took place. The primal yet was that American Express had a warehousing trouble concern which issued receipts confirming that commodities (oil, grain, vegetable oil together with other commodities) had been delivered to warehouses together with were stored safely. Finance was offered yesteryear at to the lowest degree l banks against these receipts. [This form of finance, including finance for cargoes on ships, is mutual plenty together with usually goes nether the rubric of "trade finance".]
In this instance the warehouses were on the Hudson river, used to comprise petrochemicals together with were directly filled amongst sea-water topped amongst a sparse layer of vegetable oil. In each tank in that location was a tube built over the testing hole - together with that tube which went to the bottom of the tank was also filled amongst vegetable oil. Depth-tests of the vegetable oil showed the tanks were full.
Over $100 1000000 worth of these receipts were issued. Allied also stole an American Express receipt mass together with forged additional receipts. Many of the forged receipts were held yesteryear brokers (especially Ira Haupt & Co) every bit collateral for futures contracts buying silent to a greater extent than vegetable oil.
Influenza A virus subtype H5N1 lesson of the book: corrupting people is cheap peculiarly when they are only a modest cog inwards a large wheel. It is real hard for say a warehouseman to accept an honest project if it involves a 60 percentage drib inwards his salary. [Corollary - you lot receive got to cutting Wall Street bonuses a long agency earlier you lot brand corruption unattractive...]
The collapse of Ira Haupt & Co
The forgotten purpose of the scandal is the collapse of a modest Wall Street broker - Ira Haupt & Co. Ira Haupt paid $18 1000000 inwards margin calls on behalf of Allied (secured yesteryear fraudulent warehouse receipts) together with thence the futures central had no loss. Ira Haupt yet was bust.
Because the Chicago commodity exchanges had no loss they behaved holier-than-thou taking no responsibleness for their (moderate) duplicity. But the New York Stock Exchange was terrified. The text has resonance fifty-fifty today:
[T]he stock central officials feared amongst expert argue that if they did non assist Haupt, in that location mightiness hold upwardly a widespread loss of confidence yesteryear investors inwards the integrity of brokerage firms. Haupt's 20,700 customers had left stocks worth to a greater extent than than $450 1000000 inwards the safekeeping of the firm. Almost $90 1000000 of these stocks had been purchased partially on credit and, every bit was exclusively proper, Haupt had pledged these stocks to banks for loans. Customers also had left $5.5 1000000 inwards cash on deposit amongst Haupt.Haupt was bailed out, a bail-out largely forgotten because it happened the weekend President Kennedy was assassinated.
The collapse of Haupt yet led to the institution of the commencement Wall Street fidelity fund. It was settled amongst the quaint total of $25 million.
This mass is refreshingly jargon-free. And the human foibles that brand swell scandals possible haven't changed much. Nor has their vulnerability to mutual sense.
When Allied collapsed the stocks of vegetable oil at Bayonne together with inwards futures contracts were to a greater extent than than a year's supply. To avoid this ane you lot only needed to inquire the correct questions.
John
PS. Several prices amuse me. Soya oil was typically almost 7.5-8c per pound (say almost $180 per tonne). Influenza A virus subtype H5N1 Cadillac cost $6000 - almost 33 tonnes of oil. Influenza A virus subtype H5N1 New York storey suitable for a mistress [the stair out inwards the book] cost almost $15000 (or 83 tonnes of oil).
Soya Oil is now about 40c per pound. The Cadillac costs $75000 or almost 85 tonnes of oil. The New York storey costs perchance http.5-2 1000000 or over 1700 tonnes of oil. New York apartments measured inwards vegetable oil receive got been 20 baggers.
This accords amongst other observations. Australian farmers receive got gone from beingness the richest people inwards the basis to having difficulty sending their children to metropolis schools. Warren Buffett (befitting someone his age) tends to compare businesses to the yield on farm Blue Planet whereas nobody else on Wall Street would receive got whatever persuasion what the yield on farm Blue Planet is.
--
PPS. The mass - purchased on Amazon - came amongst 2 bookmarks. The commencement was a figurer punch carte du jour (the commencement I receive got seen inwards to a greater extent than than a decade). The 2d a trouble concern card.
J. Victor Herd was an of import individual inwards New York insurance inwards the 1950s to 1970s. He warranted a long obit inwards the New York Times. The Continental Insurance Companies may receive got ane time been headquartered downtown but are directly firmly inwards Chicago (as purpose of CNA). This is only some other illustration of the reject of "Downtown".
The trouble concern carte du jour is old school. There is an address but no telephone number (his secretarial assistant would receive got worked out whether you lot were worth his time) but only after you lot looked upwardly the telephone number inwards the white pages together with were directed through the switchboard. (Correction, in that location is a telephone number amongst an surface area code beingness LL...)
I am non certain when they retired the musket-soldier image. These are directly collectables on Ebay.
J
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