The Salad Oil Scandal Of 1963

Although regulators and the public have demanded government regulation, “historically, the corporate tendency has been to react to fraud after the fact than to be proactive in its prevention. In most cases, blame is directed at accountants and auditors” (Davia). This reactive rather than proactive stance has and continues to foster the opportunity for fraud in corporate America. This was much the case with what has come to be known as The Salad Oil Scandal of 1963. A large-scale inventory fraud that would impacted the financial markets much wrse than many have come to realize.

The same November weekend in 1963 that President John F. Kennedy was assassinated the New York Stock Exchange was nearly crippled. While most of the country was suffering the effects of an assassinated President, Allied Crude Vegetable Oil Refining Company was stirring the pot or tank f you will, of fraud and greed. Had it not been for an employee from the companies Bayonne, New Jersey facility the scandal may have gone unnoticed. A simple phone call from who is now referred to as "the voice" (Gramm) suggesting the inspection of particular tank on the property. What this call set into motion essentially blew the lid off of the

Unfortunately because Allied was not a public company they were not required to file audited financial statements to the SEC. However, this is where American Express comes into play. Because they failed to perform the proper due diligence related to the investment with Allied they ultimately neglected to properly pursue the matter. While American Express’s auditors, Price Waterhouse did in fact find water in the tanks of Allied’s inventory, DeAngelis was able to convince them that the water was simply a result of faulty stream pipes. Furthermore, samples of the compromised inventory were sent to Allied’s chemists rather than an independent and unbiased