ONE-OH-THREE; CREATIVE BOOK KEEPING

I think it was no coincidence that Herman Melville’s last novel, “The Confidence-Man: His Masquerade”, was published on April Fools Day, 1857. And in that strange and odd little book is one of the most troubling and depressing lines ever written by an American; “…in new countries, where the wolves are killed off, the foxes increase.” It is an idea which can give you nightmares if you think about it too much.Anthony De Angelis had little physical resemblance to either a wolf or a fox. Truly dangerous humans have that unpleasant ability to not look dangerous, nor to think themselves as such. Norman C. Miller noted that “Under (Anthony’s) folksy exterior…lie the vast self-confidence and the fierce ambition of a Caesar.” And one time analyst for CNBC Ron Insana described Anthony in his book “The Message of the Markets”, “As his bank account grew fatter, (Anthony) grew too - to a remarkable 240 pounds that hung heavily on his 5'5" frame.” All his life Anthony had a ravenous appetite.For five years Anthony deceived the inspectors from American Express Warehousing with a simple slight of hand to produce fraudulent inventories for his Constable Hook tank farm. He had then used the phony receipts as collateral for advances from the brokerage houses of Ira Haupt and Williston & Beane for purchases of vegetable and fish oil futures. That drove the price of the oils up, which drove the price of the futures up again. But somehow Anthony was always behind the curve. He even began to claim product in some 30 tanks on Constable Hook which he did not own, some of which actually held fuel oil and some of which did not even exist.

When the inspectors asked to see the new tanks Anthony’s boys drove them around Constable Hook until they were confused enough to verify tanks they had already inspected. It was the old shell game played out on an industrial scale. Allied eventually claimed to have more salad oil stored at Constable Hook than existed in the entire United States; but Anthony was still running to catch up.In early November of 1963 Anthony found himself facing a $120 million bill for delivery of 1.2 billion pounds of soy bean oil he had no place to store. Not that it mattered, because he didn’t have the cash to pay for delivery, and could not raise it. And when Anthony explained his problem to the employees of Ira Haupt they immediately did two things; first they got on the phone and began desperately trying to find someone to buy 1.2 billion pounds of oil. They failed. And secondly they took a hard look at Allied’s accounts, and what they saw did not make them happy. Their firm was on the hook for $18.6 million in futures contracts that Anthony De Angelis could not meet. Anthony was bankrupt. And if he was out of business so was Haupt, and so was Williston & Beane and maybe so was American Express.At last the brokerage houses sent their own inspectors out to Constable Hook. They had AMEX receipts for $45.6 million of vegetable oil which were supposedly stored there. They dropped their own tape measures into the tanks and read the tape themselves. What they found was about $1 million of oil.

On November 19, 1963 Anthony De Angelis filed for bankruptcy, but when he was unable to come up with a $20,000 bond for court costs, the judge denied Allied Crude Vegetable Oil Refining Corporation even the protection of Chapter 11. The entire company and all assets were sold at public auction for $3.5 million. Authorities put the total Anthony owed at $175 million.Some 51 companies had made loans to Anthony or one of his companies for oil he did not have. Sixteen companies were forced into bankruptcy. J.R. Williston barely survived. Ira Haupt did not. American Express survived because of their profitable credit card business, and because an Oklahoma stock fund manager bought 5% of the company for just $20 million, a bargain even in 1963. The profits from this deal made Warren Buffet his first million dollars. The entire stock market was saved from a disaster caused by Anthony's scam because the assassination of President John Kennedy gave the NYSE an excuse to close early that Friday afternoon, November 22, 1963. All over Wall Street the captains of industry breathed a sigh of relief and then tried to figure out how to avoid a similar disaster next time they fell for a confidence man.And Anthony De Angelis; what ever became of Anthony? On June 4, 1965 a judge gave Anthony a choice; tell the F.B.I. what became of all the money or serve ten years in prison for four counts of fraud and conspiracy. Anthony revealed a $500,000 Swiss bank account, but he also took the Fifth Amendment 58 times. He was sentenced to ten years in Federal Prison at Lewisburg, Pa.In 1970 Congress finally created the Securities Investor Protection Corporation, another one of those government/private corporations Wall Street is convinced are misbegotten. It gave investors in the stock market the same protections available for banking customers for their savings or checking accounts. No investor lost another dime in a Wall Street brokerage house failure...until the geniuses of finance decided again that they were too smart to fall for a confidence man, and tore down the regulatory walls in the 1990’s.In July of 1972 Anthony De Angelis was released from Lewisburg. He had lost 170 pounds while in jail and credited prison with saving his life because of it. But the Anthony who came out of jail was still looking to wheel and deal. Almost immediately Anthony got involved with a scam involving the Ozark County Cattle Company of St. Joseph, Missouri. Anthony complained that he preferred jail. “There you had peace. It was tranquil. You come outside and try to make a living and all the big guys try to shoot you down.” Anthony was arrested and sent back to jail. He was not heard from again until 1992 when the following story ran on the Associated Press wire:“Rochester, New York. Anthony De Angelis, the infamous commodities swindler of the 1960s, was sentenced to 21 months in prison…Federal judge Michael Telesca also fined the 78 year old Mr. De Angelis and sentenced him to three years probation, during which he is banned from the food processing industry….(and)must make restitution to Maple Leaf Foods (after he used a forged check to purchase $1.1 million worth of meat from them)…Based on his criminal history the judge said Mr. De Angelis uses his wit, charm and business ability to manipulate situations that suit him best. Although he has been a great teacher while incarcerated…he has been a very poor pupil in learning to change his ways…”.Said Anthony, after the collapse of his Salad Oil empire in 1963, “It's not beyond the realm of possibility for me to make up these losses. If given the opportunity, I could make a million or five million dollars a year, simple as anything."“He had neither trunk, valise, carpet-bag, nor parcel. No porter followed him. He was unaccompanied by friends. From the shrugged shoulders, titters, whispers, wonderings of the crowd, it was plain that he was, in the extremest sense of the word, a stranger.”
“The Confidence-Man: His Masquerade” Herman Melville. 1857

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ONE-OH-ONE; CREATIVE BOOK KEEPING

I believe the phrase originated on May 12, 1849. Mr. Thomas McDonald was approached on a New York street by a fashionable dressed man who greeted him as if an old acquaintance. After a few moments’ pleasant conversation the man abruptly asked, “Have you confidence in me to trust me with your watch until tomorrow?” Without thinking Mr. McDonald handed over his gold watch, valued at $110. However, Mr. McDonald did the see the old friend “tomorrow”. He never saw the stranger or his watch again…until July 7th of 1849, when he spotted the man on a street corner in lower Manhattan and had him arrested. According to the New York Herald the villain was quickly identified as William Thompson, lately of Sing Sing, and the paper invited victims of similar thefts to visit his cell at the Tombs to identify the suspect. When they did Mr. Thompson identified himself boastfully as, “I am the Confidence Man.”As is proven by the pervasiveness of “con men” on Wall Street, success in business is no more a measure of personal intelligence or integrity than the ability to snake a sewer pipe or repair an automobile - as the script for the 1940 film “Citizen Kane” pointed out.BERNSTEIN: Thatcher! That man was the biggest darn fool I ever met -
THOMPSON: He made an awful lot of money.
BERNSTEIN: It's not a trick to make an awful lot of money…if all you want is to make a lot of money…That kind of fellow you can fool every day in the week - and twice on Sundays!”And that goes a long way to explain the career of con man Anthony ‘Tino’ De Angelis, the one time so-called “Salad Oil King of New Jersey”. In the words of Roger Lowenstein, Anthony was “…a familiar type in American finance, possessed with a combination of brilliance and moral flexibility that produces a first rate white collar criminal” (“BUFFET” page 80), which also describes many first rate captains of American finance, as well.

Time Magazine described "Tino" this way; “His five-foot-four-inch frame was burdened by 240 fleshy pounds, making him seem wider than he was tall. Thin wire-rimmed black spectacles perched precariously on his round face…His rumpled (ready-made) suits usually looked as if he had slept in them…(He) drove around in a large Cadillac and always ostentatiously carried a thick wad of bills.”Norman C. Miller tried to explain Anthony’s charm as a con man for the Saturday Evening Post; “There is something contagious about (his) guileless, open-handed manner….It infected people far outside of his usual social circles. A variety of big businessmen were happy to have a part in Tino’s expansion plans… It pleased him to distribute largess among his retinue of lieutenants and hangers-on, often in the form of cash”. .”(Miller; http://www.mafianj.com/saladoil/tino1.shtml). In Anthony’s own words, “Here we have a man born and raised in the poor section of New York, (who) rises to the point where he runs ten, fifteen businesses or plants around the country.”While still in his twenties Anthony had “…an exceptional ability in knowing how to process hogs. Some of my methods,” he claimed, “cut the cost of processing hogs enormously.” Anthony opened his own meat packing firm in the midst of the Great Depression and turned a $100,000 profit the very first year. By the end of WWII, like much of the rest of America, Anthony had a pile of capital ready to invest.

He bought controlling interest in Adolf Gobel Company, a deli and sundry wholesaler, and by 1953 he was large enough to be charged by the Federal government with selling them two million pounds of un-inspected meat. Anthony paid the fines and took Gobel into chapter 11, bankruptcy.Then, in 1955, Anthony borrowed from his two biggest customers, Continental Grain Co. of New York and Bunge Corp. of Buenos Aires, to set up “Allied Crude Vegetable Oil Refining Corporation”, and related companies, which owned warehouses and storage tanks on Constable Hook, New Jersey. The business shipped olive and soybean oil world wide, oil produced from soy beans and olives owned by Continental and Bunge. The investors – slash - customers charged Allied 15% interest on the loan, but they also took the soy and vegetable oils which Allied had in storage, as collateral, which meant that Anthony didn’t have to risk a dime of his own money to create the company.As proof that the oil existed in Allied’s storage tanks Anthony hired American Express. The banking firm had recently started a new division, AMEX Wharehousing, in order to take advantage of the budding market of commodities futures. For a fee AMEX provided receipt's which validated the existence of the oil. Everything depended on that verification. But in 1955, when American Express was charging Allied $20,000 a week to verify the soybean and olive oil in Allied’s tanks, the futures market was not regulated. So, when American Express hired “custodians” to verify the product they hired people like John Bongardino (the brother-in-law of Anthony's secretary), and Thomas Ckarkin, who was paid $500 a month by American Express as a custodian, but was also paid by Tino $400 a week as a “messenger”.

How could Anthony afford to pay his employees such salaries? Because the wizards running American Express had given their customer Anthony De Angelis, a $3.7 million credit line. And once he had those receipts with that most hallowed of Corporate names in his hand,Anthony was bankable; he had become part of that amoral world of corporate capitalism, where success is the ultimate gauge of moral superiority and can be purchased on margin.

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NEXT: ONE-OH-TWO; CREATIVE BOOKEEPING