Warren Buffett’s investment philosophy has evolved significantly over the years, influenced by a remarkable story intertwined with a scandal involving salad oil, a fraudulent businessman, and the iconic American Express Company. This pivotal moment not only reshaped Buffett’s approach but also highlighted the importance of reputation and long-term value in investing.
The Villain: Tino DeAngelis
Tino DeAngelis, a notorious figure with a checkered past, began his career in the meat industry, allegedly engaging in black market activities during World War II. His businesses faced multiple legal challenges, including a $100,000 settlement for exporting substandard cooking fat. Eventually, he founded Allied Crude Vegetable Oil Refining Corporation (Allied), which would become the center of a major financial scandal.
The Visionary: American Express
At the time, American Express (Amex) was a leader in travel and financial services, but its credit card division struggled. Under the leadership of CEO Howard Clark, Amex focused on revitalizing its money-losing credit card operations, including its subsidiary, American Express Field Warehousing Company (AEFW), which relied heavily on profits from DeAngelis’s company.
Birth of the Oracle: Buffett’s Early Investments
In the mid-1960s, Warren Buffett, having dissolved his initial partnerships and formed Buffett Partnership Ltd. (BPL), was already a millionaire. His investment style, influenced by Benjamin Graham, involved purchasing undervalued companies. This philosophy would be put to the test with his significant investment in Amex in 1964, marking a turning point in his strategy.
The Infamous Tip-Off
In June 1960, Donald Miller, CEO of AEFW, received an anonymous tip about possible fraud at Allied. The whistleblower revealed that tanks purported to be filled with oil were actually containing water. An inspection initially found no evidence of wrongdoing, but DeAngelis’s complex network of deceit was soon to unravel.
The Swindle and Its Fallout
By 1963, Allied was heavily investing in oil futures, artificially inflating prices based on false demand projections. When the scam was eventually exposed, Allied filed for bankruptcy, and Amex faced potential liabilities due to AEFW’s connection with DeAngelis.
Clark’s decision to address these liabilities head-on proved pivotal. He announced Amex’s commitment to covering any excess liabilities, understanding that the company’s reputation was at stake.
Buffett’s Calculated Gamble
As the scandal unfolded, Amex’s stock price plummeted, dropping from $61.81 to $35.31. Buffett, recognizing the long-term value of Amex despite the short-term chaos, conducted extensive research to gauge the impact of the scandal on the company’s reputation. His findings reassured him that consumer trust remained intact.
By mid-1964, Buffett made a bold move, investing $3 million in Amex, which became BPL’s largest holding. This decision would yield extraordinary returns, as Amex’s stock soared to $92.50 just two and a half years later.
The Lesson: Reputation Matters
The Great Salad Oil Swindle revealed the critical importance of corporate integrity. While DeAngelis’s history of unscrupulous behavior ultimately led to his downfall, both Buffett and Clark demonstrated that maintaining a strong reputation and making ethical decisions can foster long-term success.
Buffett’s investment strategy underwent a transformation, focusing on acquiring fundamentally sound businesses with capable management and allowing them to operate independently. This approach has since defined his legacy as one of the greatest investors in history.
Conclusion: Buffett’s Enduring Wisdom
Warren Buffett’s experience with American Express during the salad oil scandal solidified his belief in the value of reputation and long-term thinking. His famous mantra—“be fearful when others are greedy and greedy when others are fearful”—continues to guide investors today.

I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.