Part 1: The Great Salad Oil Swindle

I. A Mirage of Success 

In the autumn of 1963, Anthony “Tino” De Angelis—once a low-profile commodities broker from the Bronx—appeared to be building a mini-empire in the vegetable oil export business. Through his company, Allied Crude Vegetable Oil Refining Corporation, De Angelis was not only profiting from the U.S. government’s Food for Peace program but had established trade relationships with major financial institutions, including American Express, Bank of America, Chase Manhattan Bank, and Bank Leumi. With impressive sales volume, government contracts, and an aura of patriotic contribution, Allied seemed unstoppable. 

But behind the curtain was one of the greatest frauds in American financial history. Over $150 million in phantom inventory—represented by fraudulent warehouse receipts for non-existent vegetable oil—would bring down trading firms, ruin reputations, and shake confidence in the very systems designed to uphold financial probity.

Table of Players in the Drama

Entity / Individual	Role in the Swindle	Function / Position
Anthony “Tino” De Angelis	Mastermind of the fraud	A self-made Bronx butcher turned commodities kingpin. Jovial, corpulent, and outwardly generous—he sponsored youth bike races and lived in a modest Bronx apartment, even as he orchestrated one of the largest financial frauds in U.S. history. His charm and volume masked a manipulative genius who leveraged oil, reputation, and the illusion of scale to deceive Wall Street. Tino’s ambition was epic, his downfall cinematic.
Josephine Salto	Tino’s loyal aide and typist of fraudulent receipts	De Angelis’s secretary and quiet co-conspirator. Salto sat at the center of the paper illusion, calmly typing warehouse receipts from blanks while knowing they bore no connection to physical oil. Her testimony would later reveal the casual efficiency of the fraud—the way trust and paperwork were weaponized. She operated not with flair, but with quiet loyalty and unquestioning execution.
Howard L. Clark	Executive who led AmEx through the scandal	President of American Express at the time of the swindle. Clark found himself defending the brand’s reputation amid legal ambiguity and public outrage. While AmEx could legally distance itself from its warehousing subsidiary, Clark acknowledged the moral responsibility to creditors. His calm public statements, and the company’s $60 million settlement, helped preserve AmEx’s standing—and laid the foundation for its Buffett-era recovery.
Warren Buffett	Strategic investor amid scandal fallout	Then a rising Omaha investor, Buffett saw clarity where others saw smoke. In early 1964, he made a bold move: investing heavily in American Express when its stock was battered by the scandal. Trusting the resilience of the brand and the core business, Buffett’s contrarian bet became legendary. It remains a case study in separating temporary headlines from long-term value—a theme central to his investing philosophy.
Allied Crude Vegetable Oil Refining Corp.	The central operating company of the swindle. The company was owned by De Angelis.	Created fraudulent oil inventory used as collateral for loans and futures positions
American Express Warehousing, Ltd.	Custodian of warehouse inventory; issuer of receipts	Subsidiary of American Express; certified non-existent oil and hired Allied-affiliated custodians
American Express Company	Parent firm of the warehousing subsidiary	Brand reputation lent credibility to warehouse receipts; ultimately paid $60M in settlements
Harbor Tank Storage Co.	Additional storage firm that issued fraudulent receipts	Used by De Angelis to extend the scam; received forged subleases and custodians
H.C. Wainwright & Co.	Financial backer and broker	Accepted warehouse receipts and participated in trades backed by false inventory
Bunge Corporation	Exporter and commodities dealer	Intermediary in trades linked to Allied’s inventory; financial exposure through trade chain
Soya Corporation	Trading partner	Involved in futures and export positions connected to Allied’s fraudulent assets
Ira Haupt & Co.	Primary commodities broker for Allied	Extended margin loans based on falsified receipts; collapsed under $18.6M in exposure
Williston & Beane	Wall Street brokerage indirectly caught in collapse	Merged with Walston & Co. due to capital depletion linked to systemic fallout
Walston & Co.	Absorbing firm	Took over Williston & Beane amid post-swindle restructuring
Commodity Exchange Authority (CEA)	Regulator with limited enforcement power	Raised internal concerns but failed to act decisively; claimed lack of authority
New York Produce Exchange	Industry exchange where futures were traded	Encouraged Tino’s volume for business reasons; halted trading when collapse hit
U.S. Senate / Congress	Indirect actors; policy shifts impacted market perception	Suspension of wheat deal with USSR triggered panic in commodity prices

II. A Moment Lost in the Shadow of a National Tragedy

Some of us have heard about this swindle in accounting classes on inventory and perhaps some have heard Warren Buffet mention it over the years because he invested to assist American Express at the time of its crisis because of his confidence in the value of its underlying business and brand. This would later become a hallmark example of his approach to investing.  

The news of the swindle was eclipsed when on November 22, 1963, just as De Angelis’s house of cards was beginning to collapse, President John F. Kennedy was assassinated in Dallas. The shock of this national tragedy reverberated through every facet of American life—including the media. It is no exaggeration to say that the unraveling of the salad oil scandal was buried under the avalanche of Kennedy assassination coverage. Some financial press noted the unraveling, but the story lacked the oxygen it might have had in calmer times. 

This confluence of deception and distraction created a delay in public awareness and regulatory response, allowing De Angelis to sustain the illusion just a little longer. 

III. Anatomy of a Swindle: The Fraud 

The swindle began to form when De Angelis was awarded a contract with Food for Peace, a federal program which sold excess food stocks to poor countries. He discovered that he could obtain loans based upon Allied’s fraudulently inflated inventory of salad oil. Ships supposedly full of salad oil for Allied would dock, and inspectors would certify the cargo, allowing Allied to post the oil as collateral and obtain millions of dollars in bank loans. At the core of the scandal was a simple physical fact that vegetable oil has a specific gravity less than water and therefore floats on water.  

De Angelis exploited this principle by filling storage tanks with water and pouring a thin layer of soybean oil on top. Warehouse inspectors working for a subsidiary of American Express called American Express Warehousing, Ltd. were conned into issuing warehouse receipts for non-existent salad oil. These tanks, located at Allied’s Bayonne, New Jersey tank farm near New York Harbor, were massive industrial units holding tens of thousands of gallons each—from 30,000 to 50,000 gallons per tank. Today, the physical site has changed hands, but remnants of the facility still exist within industrial logistics zones in Bayonne. 

And no one looked beneath the surface. Tank measurement procedures—based on dipstick sounding—were easily manipulated. De Angelis’ men duped American Express with surprising ease. Often, one of them would clamber to the top of a tank, drop in a weighted tape measure, then shout down to an American Express inspector on the ground that the tank was 90% full. Sometimes the tanks were indeed full—with water, topped by a thin slick of oil. Frequently, many were empty. Moreover, the tanks were connected by a maze of pipes; De Angelis’s men sometimes sneaked into the casually guarded tank farm on weekends, pumped oil from one tank to another. One of Tino’s secretaries, Josephine Salto, testified she was handed blank American Express Warehousing receipts and told to type in fabricated figures.  

American Express’s warehouse receipts—unimpeachable in appearance and backed by the blue-chip name—became tradable collateral. Brokers, banks, and exporters used them to issue loans, extend credit, and build positions in commodity futures. These machinations gave Tino an endless supply of oil certificates—and thereby endless borrowing power. At one time he had loans out on three times as much oil as the Bayonne tanks could hold. But De Angelis figured—rightly—that his various and hotly competitive creditors would never get together and compare their overlapping certificates.  

At one point, financiers were holding receipts representing 1.8 billion pounds of soybean oil, when the actual inventory—mostly sludge, water, and traces of oil—was closer to 100 million pounds. The total tank farm capacity at Bayonne collectively could never have held the amount claimed. Government analysts and commodity experts raised concerns that the volume held by Allied amounted to an astonishing one-third of the total volume of salad oil in the US, but their voices were drowned out by market enthusiasm. In all, Allied posted 1.8 billion pounds of soybean oil as collateral to fraudulently obtain $180 million in loans, when the actual stock was a mere 110 million pounds.

IV. AMERICAN EXPRESS: THE ILLUSION OF COMPLIANCE

American Express was not complicit in the fraud—but it was deeply embedded in the illusion. The warehousing division, a subsidiary under pressure to turn a profit, had long been underperforming. American Express Warehousing, would store, inspect and vouch for the oil that commodities dealers commonly used as collateral for their bank loans. It was a rewarding business—De Angelis paid American Express Warehousing up to $20,000 a week—but terribly risky. If anything went wrong, American Express’s subsidiary was responsible for making good on its warehouse certificates.

In 1963, the subsidiary was handed an ambitious target from its parent company – to turn a $500,000 profit. De Angelis—ironically meaning “of the angels”— represented the miracle. Receipts issued for stored oil (on paper), high volumes, and seemingly government-backed trade meant a creditworthy and a procedurally sound business. Approvals were documented. Receipts were in order. Legal departments, internal auditors, and risk officers signed off. Every layer of review functioned mechanically. Risk was diffused, normalized, and celebrated.

V. SYSTEMIC COMPLICITY

American Express was not alone. H.C. Wainwright & Co., Bunge, Soya Corporation, multiple Chicago banks, and Haupt & Co. were entangled. Bunge served as an exporter and trading intermediary. Haupt, a brokerage firm, acted as both creditor and futures position facilitator for Allied. Williston & Beane, a respected Wall Street brokerage, was also drawn into the spiral—ultimately forced into a merger due to capital shortfall. Haupt’s role was pivotal: it absorbed increasingly risky positions for De Angelis based on forged receipts.  

The fraud was maintained by the complicity of silence, incentive alignment, and procedural rationalization. By mid-1963, De Angelis had contracted to buy 20,000 tank cars of oil—an astonishing 1.2 billion pounds., worth about $120 million. With every 10-cent shift in price, he stood to gain or lose $12 million. 

For a time it seemed that the gamble would pay off. The market soared, thanks to De Angelis’ big buying and an assist from geopolitical speculation. Russia was clamoring to buy U.S. wheat, and when reports hit Wall Street that the Soviets’ sunflower crop had also failed, rumors flared that the Russians would soon be shopping for U.S. vegetable oil. In six weeks during the autumn of 1963, soybean oil climbed from $9.20 per pound to $10.30. But on Nov. 15 the market cracked—and so did Tino.  

On that day, the U.S. Senate broke off debate on the Russian wheat deal, and prospects looked dim. In the next 48 hours, soybean oil tumbled to $7.60. The commodities exchanges began pressuring Ira Haupt—by far the biggest broker for De Angelis—to put up another $14.1 million in margin to cover Tino’s vast contracts. The Haupt brokers frantically called Tino for the money. But Tino could not make it. 

Now Haupt was on the hook to the exchanges. The firm desperately undertook to cover Tino’s contracts, for which it was responsible. In all, it borrowed some $30 million from U.S. and British banks. But when the soybean market failed to rise, Haupt went under. 

The New York Produce Exchange halted all trading in cottonseed oil. Tino’s major company. Allied Crude Vegetable Oil Refining Corp., tumbled into bankruptcy. Wall Street’s Williston & Beane unable to absorb the fallout, was obliged by a capital shortage to merge into a stronger firm, Walston & Co. Tino’s dazed creditors finally began peering into those Bayonne tanks. Instead of finding 1.8 billion pounds of oil for which they held receipts, they found scarcely 100 million pounds—a shortage worth $130 million. 

The banks involved filed towering claims against American Express Warehousing, contending that it must make good on the oil that its subsidiary vouched for. Though the question of how much responsibility it has for the debts of its subsidiary was open to legal dispute, American Express President Howard L. Clark bravely declared that the company was “morally bound to do everything it can.” Claims against American Express, filed by 43 companies, totaled more than $100 million. American Express ultimately agreed to a settlement of $60 million. 

Warren Buffett, recognizing that the scandal did not threaten the core business of American Express—particularly its travelers check and financial services operations—made a significant investment in the company in early 1964 through his partnership. He purchased roughly 5% of American Express shares at a time when its stock price had plummeted due to the scandal. This decision later became one of Buffett’s hallmark examples of investing amid fear, trusting the underlying brand.

VI. THE AFTERMATH

The reverberations of the incredible soybean scandal continued over years that followed. This was, at that date, one of the most prodigious swindles in modern times, reaching out from the grimy waterfront of Bayonne, New Jersey, and involving big commodities dealers in Buenos Aires, recipients of U.S. foreign aid in Karachi, and a numbered bank account in Zurich. By June of 1965, sixteen companies had been bankrupted. Eleven firms controlled by De Angelis had gone under, as had two respected Wall Street brokerage houses and the warehousing subsidiary of American Express Co. Embarrassed bankers from London to San Francisco had been taken for many millions. So had De Angelis’s customers, notably the Isbrandtsen Shipping Line, and such worldwide commodities dealers as Continental Grain Co. and the Bunge Corp. 

American Express saw its stock plummet. Although through the bankruptcy it distanced itself legally from its warehousing subsidiary, the reputational harm impacted its core trust-based businesses, including traveler’s checks and financial services. Few regulatory reforms followed. De Angelis faced charges for conspiracy and fraud, facing up to 185 years in prison. His network of enablers mostly faded into obscurity. 

A Time magazine article from June 4, 1965 entitled “The Man Who Fooled Everybody” claimed that “a wide variety of companies and individuals have filed a total of 160 damage claims contending that Tino De Angelis took them for $219 million. Compared with that, Charles Ponzi, Lowell Birrell, Eddie Gilbert and Billie Sol Estes were ‘pikers.’ Only Ivar Kreuger, the Swedish match king who in the 1920s defrauded investors of $500 million, ever topped Tino. More than that, De Angelis presents the classic example of how a man can exploit a complicated situation and use the credulity of high financiers for tremendous gain.”  

But Lyceum finds it a fitting example to apply the work and the findings of Daniel Kahneman.

Part 2: The Cognitive Collapse of Compliance

When Compliance Becomes Complicity: Behavioral Risks in Corporate Oversight 

Introduction: Reading the Classic Case Through a Behavioral Lens

The Great Salad Oil Swindle, presented in Part 1 above offers a vivid historical narrative of deception, illusion, and institutional failure. But beneath the dramatic events lies a deeper story—one of cognitive error and behavioral vulnerability. 

Part 2 interprets the swindle not just as a failure of process, but as a collapse of human cognition in high-trust environments. We draw from the landmark work of psychologist and 2002 Nobel laureate Daniel Kahneman (1934-2024) and applications of his 2011 award-winning, comprehensive presentation of his life’s work, Thinking, Fast and Slow. Part 2 offers a behavioral governance framework for understanding how otherwise sound individuals and institutions fall into traps of assumption, ease, and misplaced confidence. Boards and executives, auditors and risk officers—all functionaries of oversight—succumb not to malice but to illusion. What appears to be compliance may instead become complicity. 

This article contributes to Lyceum’s emerging approach to behavioral governance—helping directors and executives recognize how even strong oversight systems can fall prey to invisible biases. 

Background on Daniel Kahneman (1934-2024) 

Daniel Kahneman was a psychologist whose research revolutionized our understanding of decision-making, judgment, and risk. Although a psychologist, he was awarded the Nobel Prize in Economic Sciences in 2002. Kahneman demonstrated how people often make irrational decisions due to cognitive biases—even in the highest functioning environments. In 2011, he published Thinking, Fast and Slow, a sweeping synthesis of his life’s work, which became essential reading for leaders, economists, and behavioral scientists. 

Kahneman’s central thesis is that human thought operates on two systems:  

• System 1, which is fast, intuitive, and emotional, and  
• System 2, which is slower, more deliberative, and logical. These systems constantly interact, but under pressure or complexity, System 1 often dominates, leading to systematic errors in judgment. 

Behavioral Patterns & Kahneman Framework Mapping 

1. System 1 Thinking: The Fast, Intuitive, Emotional Path to Illusion

Kahneman’s Insight: System 1 operates automatically and effortlessly. It relies on heuristics—mental shortcuts—that are usually effective but can lead us astray. Because System 1 feels right, we rarely pause to question its conclusions. It’s the system that tells us a brand we recognize is trustworthy or that a neatly typed receipt is legitimate. 

Illustration of System 1 at Work 

Here is an illustration of System 1 at work from Thinking, Fast and Slow. To appreciate the autonomy of System 1, as well as the distinction between impressions and beliefs, take a good look at the figure below. 

This picture is unremarkable: two horizontal lines of different lengths, with fins appended, pointing in different directions. The bottom line is obviously longer than the one above it. That is what we all see, and we naturally believe what we see. If you have already encountered this image, however, you recognize it as the famous Müller-Lyer illusion. As you can easily confirm by measuring them with a ruler, the horizontal lines are in fact identical in length. 

Now that you have measured the lines, you—your System 2, correctly informs your new belief: you know that the lines are equally long. If asked about their length, you will say what you now know. But you still see the bottom line as longer. You have chosen to believe the measurement, but you cannot prevent System 1 from doing its thing; you cannot decide to see the lines as equal, although you know they are. To resist the illusion, there is only one thing you can do: you must learn to mistrust your impressions of the length of lines when fins are attached to them. To implement that rule, you must be able to recognize the illusory pattern and recall what you know about it. If you can do this, you will never again be fooled by the Müller-Lyer illusion. But you will still see one line as longer than the other. But alas, not all illusions are visual. There are illusions of thought, which Kahneman calls cognitive illusions. 

In the Swindle:

• Trust in American Express receipts based on brand reputation and formality
• Market excitement driven by geopolitical rumors and De Angelis’s big trades
• Auditors accepting shouted tank measurements without direct verification

Interpretation: These actors relied on System 1 shortcuts, allowing familiar symbols of credibility to substitute for verification. They didn’t stop to question because the situation didn’t feel alarming. Familiarity bred confidence, not caution.

2. System 2 Thinking Failure: Delayed or Suppressed Analytical Thought
   Kahneman’s Insight: System 2 is responsible for deep thinking, complex calculations, and critical assessments. It requires effort and attention. The problem is that System 2 is lazy—it often accepts System 1’s conclusions without challenge, unless explicitly activated by contradiction or conflict.

Illustration of the Lazy System 2

One of the main functions of System 2 is to monitor and control thoughts and actions “suggested” by System 1, allowing some to be expressed directly in behavior and suppressing or modifying others.

To illustrate System 2 failure, Kahneman uses this classic riddle:

A bat and ball cost $1.10.
The bat costs one dollar more than the ball.
How much does the ball cost?

A number came to your mind. The number, of course, is 10: 10¢. The distinctive mark of this easy puzzle is that it evokes an answer that is intuitive, appealing —- and wrong. Do the math, and you will see. If the ball costs 10¢, then the total cost will be $1.20 (10¢ for the ball and $1.10 for the bat), not $1.10. The correct answer is 5¢. It is safe to assume that the intuitive answer also came to the mind of those who ended up with the correct number—perhaps they somehow managed to resist their own intuition. 

How closely does System 2 monitor the suggestions of System 1? The failure for System 2 to kick in and check is remarkable because the cost of checking is so low: a few seconds of mental work (the problem is moderately difficult), with slightly tensed muscles and dilated pupils, could avoid an embarrassing mistake. 

The bat-and-ball problem is our first encounter with an observation that is one of the themes of this swindle case: many people are overconfident, prone to place too much faith in their intuitions. They apparently find cognitive effort at least mildly unpleasant and avoid it as much as possible. 

In the Swindle: 

• No verification of Allied’s implausibly large oil holdings 
• Mechanical risk and legal reviews substituting for genuine questioning 
• Regulatory deferral by the Commodity Exchange Authority 

Interpretation: Everyone followed procedures, but no one engaged in effortful analysis. System 2 was never switched on. Instead, boards and executives mistook compliance for cognitive assurance. 

3. Substitution Effect: Answering the Wrong Question
   Kahneman’s Insight: When faced with a difficult question, our brain often substitutes it with an easier one—without realizing it. We don’t ask, “Is this collateral real?” We ask, “Does this paperwork look official?” It’s an unconscious trick that saves effort but leads to errors. 

In the Swindle: 

• Actors substituted the complex question, “Is there real oil here?” with the easier question, “Do these documents look official and in order?” 

Interpretation: The substitution made the fraud possible. Reviewers were comforted by orderly receipts and brand names, avoiding the cognitive and even emotional discomfort of digging deeper. 

4. “What You See Is All There Is” (WYSIATI)
   Kahneman’s Insight: This is one of Kahneman’s most important and unique contributions—the idea that people form judgments from whatever information is available and rarely seek missing data. Kahneman’s concept of WYSIATI suggests that people form impressions and decisions based only on the information they have—without questioning what might be missing.  

In the Swindle: 

• Few questioned whether the tanks had been independently inspected or cross-verified across institutions. 
• Receipts were visible. Collateral was assumed. The absence of conflicting data was interpreted as confirmation of truth. 

Interpretation: The absence of conflicting data was not a reassurance of truth—it was a reflection of narrow framing. Kahneman’s WYSIATI principle explains that decision-makers fail to consider what they don’t see. In this case, missing information—like physical inspections or third-party audits—was never sought. The available data (receipts, relationships, price trends) was treated as the complete picture, reinforcing a false sense of certainty. 

5. Cognitive Ease: When Familiarity Feels Like Truth
   Kahneman’s Insight: Cognitive ease is the feeling of fluency and clarity. When information feels easy to process, we judge it as more truthful and safer. Familiar fonts, neat paperwork, and recognizable brands all contribute to this illusion of truth. 

In the Swindle: 

• Trust in the appearance of paperwork and reputable names 
• Acceptance of fluently processed, well-presented information 

Interpretation: Because the paperwork was consistent and visually fluent, actors were less likely to question its contents. Cognitive ease silenced skepticism. 

6. Attentional Failure: The Costs of Distraction
   Kahneman’s Insight: Attention is a scarce resource. We cannot attend to everything at once, and when distracted, we miss critical cues. Kahneman shows how attentional blindness can cause major errors—even among experts. 

Illustration of Distracted Blindness – The Invisible Gorilla 

Kahneman posits that intense focusing on a task can make people effectively blind, even to stimuli that normally attract attention. The most dramatic demonstration was offered by Christopher Chabris and Daniel Simons in their book The Invisible Gorilla. They constructed a short film of two teams passing basketballs, one team wearing white shirts, the other wearing black. 

The viewers of the film are instructed to count the number of passes made by the white team, ignoring the black players. This task is difficult and completely absorbing. Halfway through the video, a woman wearing a gorilla suit appears, crosses the court, thumps her chest, and moves on. The gorilla is in view for 9 seconds. Many thousands of people have seen the video, and about half of them do not notice anything unusual. It is the counting task—and especially the instruction to ignore one of the teams—that causes the blindness. No one who watches the video without that task would miss the gorilla. Seeing and orienting are automatic functions of System 1, but they depend on the allocation of some attention to the relevant stimulus. The authors note that the most remarkable observation of their study is that people find its results very surprising. Indeed, the viewers who fail to see the gorilla are initially sure that it was not there—they cannot imagine missing such a striking event. 

This should certainly scare multitaskers, or the parents of teenage multitaskers, but the gorilla study illustrates two important facts about our minds: we can be blind to the obvious, and we are also blind to our blindness. 

In the Swindle: 

• Public and regulatory distraction during JFK’s assassination 
• Weekend oil transfers performed unnoticed 

Interpretation: These moments of inattention allowed the fraud to continue. Neither regulators nor the media were focused, and the system lacked redundancy to catch what individuals missed. 

7. Anchoring: First Impressions That Won’t Let Go
   Kahneman’s Insight: Anchoring refers to our tendency to rely too heavily on the first piece of information we receive. This anchor skews all subsequent judgments. Even arbitrary figures can frame our understanding. 

In the Swindle: 

• Belief in Allied’s success anchored by high trade volumes and rising oil prices 
• Institutional memory tied to Allied’s earlier government contracts 

Interpretation: Initial performance and relationships framed future evaluations. Even when inconsistencies emerged, decision-makers remained tethered to the initial story. 

8. Groupthink & Social Proof Bias: The Safety of Consensus
   Kahneman’s Insight: Although Kahneman doesn’t use the term groupthink, his research supports the idea that social confirmation governs much of our behavior. If everyone else believes something, we are less likely to challenge it. 

In the Swindle: 

• Collective silence from banks and brokers 
• Mutual reliance on the belief that others had done their diligence 

Interpretation: Group validation became a substitute for independent inquiry. The illusion of consensus amplified confidence in the face of fraud. 

Behavioral Governance Lessons 

These patterns suggest four major areas where our behavioral governance must evolve:

I. Trust, Symbols, and Illusions of Safety

• Behavioral Principle: System 1 heuristics and cognitive ease 
• Governance Insight: Never let reputation or documentation substitute for verification 

II. Risk Blindness and the Substitution of Process for Judgment

• Behavioral Principle: Substitution effect and System 2 failure 
• Governance Insight: Build moments of cognitive engagement into governance processes 

III. The Danger of Herding and Group Bias 

• Behavioral Principle: Social proof, anchoring, groupthink, echo chambers 
• Governance Insight: Design structures that enable independent thinking and contrarian challenge

IV. Attention Allocation and the Illusion of Control

• Behavioral Principle: Attentional failure, illusion of control 
• Governance Insight: Scrutiny must be systematized, not left to circumstance 

Conclusion: Beyond Fraud—Toward Behavioral Governance 

The Great Salad Oil Swindle remains a case not just of deceit but of distorted cognition. Fraudsters like De Angelis exploit more than legal or procedural gaps—they exploit our minds, our shortcuts, our comfort with illusion. 

Kahneman’s research helps explain why. It shows how even experienced decision-makers fall prey to the architecture of fast thinking and invisible bias. 

By reading the case through this lens, we equip today’s boards and executives to detect, diagnose, and disrupt these hidden vulnerabilities before compliance becomes complicity once again. 

Part 3: Circle of Leaders Exclusive

Behavioral Governance Self Diagnostic Tool

Your Exclusive Tool: The Behavioral Governance Self-Diagnostic 

As a Circle of Leaders member, you’re receiving the Behavioral Governance Self-Diagnostic Tool, designed to help you reflect on how System 1 thinking, cognitive ease, group bias, and other behavioral patterns may be subtly operating within your board’s decision processes. 

Use this tool:

• As a personal lens to audit past decisions
• In a board retreat or committee session
• To open a dialogue with peers about the hidden dynamics in oversight

Click here to download and print

Bibliography – Source Materials for This Case 

1. Miller, Norman C. The Great Salad Oil Swindle. New York: Coward-McCann, 1965.
   Pulitzer Prize-winning exposé by Wall Street Journal reporter Norman C. Miller, providing the most detailed narrative of the Allied Crude fraud and its ecosystem of institutional failure.
2. Miller, Norman C. “Salad Oil Swindle Cost Wall Street $150 Million!” Saturday Evening Post, April 25, 1964.
   A vivid early account by Pulitzer Prize-winning reporter Norman C. Miller, offering contemporaneous insights into the scope and emotional shock of the scandal as it broke across Wall Street
3. “The Man Who Fooled Everybody.” Time Magazine, June 4, 1965.
   Magazine retrospective examining the scale of the fraud, De Angelis’s background, and comparisons to other historical financial crimes.
4. “Warren Buffett vs. the Salad Oil Swindler.” The Reformed Broker, November 2013.
   Commentary on Buffett’s contrarian investment in American Express during the fallout of the scandal.
   
5. Investopedia. Entry on the Salad Oil Scandal.
   Brief overview of the financial mechanics of the scandal and its impact on Wall Street institutions.
6. U.S. Congressional Hearings (1964–1965), Commodity Exchange Oversight and Trade Finance Practices.
   Referenced for regulatory context and gaps in enforcement.
7. Internal Lyceum Analysis and Narrative Framing (2025).
   Case structured and analyzed by Lyceum using archival research, behavioral governance frameworks, and historical materials.
8. Kahneman, Daniel. Thinking, Fast and Slow. Farrar, Straus and Giroux, 2011.