Salad Oil Scandal

Salad Oil Scandal

A famous fraud perpetrated by Allied Crude Vegetable Oil in 1963. In this year, Allied Crude began using its inventory of vegetable oil to obtain millions of dollars in loans from banks and other financial institutions. In order to inflate its capital, it began shipping tanks of water into the United States with only a small amount of oil on top of the tanks. Because oil floats on water, inspectors were fooled into believing that the tanks were full of oil, and would then approve additional loans against the non-existent vegetable oil. The scheme became so large that, when it was finally exposed, it created one of the largest corporate scandals of the century. The ensuing panic caused American Express to lose more than half its stock price; Bank of America and Bank Leumi also suffered considerably. Allied Crude's leader ultimately served seven years in prison.