‘The key to a great fraud is a great story,’ says Alex Gibney about his exposé documentaries © Pascal Perich
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The day he is talking to the FT, Oscar-winning documentary maker and Dirty Money producer Alex Gibney is fuming about Larry Kudlow. The 70-year-old television pundit and Reagan-era official has just been made President Trump’s new economic adviser. “Oh my God. It’s such a joke — it’s like appointing the tooth fairy as surgeon general,” Gibney says.

The CNBC veteran memorably defended the richest cabinet in recent American history on the grounds that the wealthy “have no need to steal or engage in corruption”.

Gibney would beg to differ. Many of the films he has been involved in, from Enron: the Smartest Guys in the Room to Dirty Money, the six-part Netflix series, investigate corporate scandals, audacious frauds and what he sees as the moral bankruptcy of the one per cent. If there is a theme to his films about money, it is that the rich can manipulate the system to their own advantage, while the rules are for the little people.

The 64-year-old, whose Jigsaw productions company is located right in the heart of Wall Street, learnt the art of raising money as a producer before becoming a director in late middle age. He has since made more than 30 films.

Gibney believes there are good reasons why corporate stories are receiving more attention, from Billions for US cable channel Showtime, about a US attorney confronting a hedge fund chief, to a 2015 film like The Big Short. “Firstly, it’s because even after the crash of 2008, nobody was really held to account,” he says.

He argues that shifts in global power have left governments weak and allowed under-regulated multinational corporations to seize more power and influence. “Cartel Bank”, the Dirty Money episode directed by Kristi Jacobson, tells the story of how one of the world’s largest banks, HSBC, laundered millions of dollars for Mexican drug cartels.

Yet the US Department of Justice deemed HSBC “too big to jail” and the bank got off with a fine, which in Gibney’s book amounts to a slap on the wrist. “What kind of message is that sending to a kid who got five years for stealing a TV set?”

At the premiere of the Enron documentary in 2005 © Reuters

Gibney is too entertaining to be sanctimonious — more agent provocateur than preacher. His investigative documentaries are not so much about the numbers, as the people. Using detailed research, unofficial footage and exclusive sources, he likes to probe the psychology of why good people do bad things.

The China Hustle, of which he was an executive producer, is billed as “the biggest heist you’ve never heard of”. Instead of focusing on a big issue like “What’s going on with the Chinese economy?”, he prefers a smaller tale that stands for the whole. Director Jed Rothstein followed Pennsylvania hedge fund manager Dan David as he pursued Chinese investment opportunities to retrieve his clients’ money after the subprime mortgage crisis.

David discovered however that in order to avoid scrutiny in the years following the crash, some of the Chinese companies going public through reverse mergers, the use of defunct American companies as shells to sell shares on US markets, were inflating their profits and lying about the scale of their businesses. The fraud dealt a severe blow to small investors and US pension funds alike. “Alex holds up a mirror and is unflinching in his exposés of criminality,” says one of his interviewees, Jim Chanos, founder of Kynikos Associates and the short-seller who helped to bring down Enron.

Jim Chanos, the shortseller who helped bring down Enron © Bloomberg

Sometimes it is personal for Gibney, as with his own Dirty Money episode, about the VW emissions scandal, “Hard NOx”. He was enraged when he discovered that his diesel Jetta, instead of being better for the environment, was polluting 50 times more than advertised. “I drive a Volvo now. The Jetta was a good car but we just didn’t notice that the plants were dying as we drove past.”

Gibney wants to embarrass the people who have kept this stuff secret and his films have had an impact. Volkswagen was so worried about the documentary that it settled a diesel emissions lawsuit in the US after a judge rejected the company’s request to delay the trial, on the grounds that the film would prejudice the jury. Making a direct comparison to the Holocaust, the film re-enacted tests exposing monkeys to toxic diesel fumes, which the automaker had co-sponsored.

In the US, VW was fined and two executives are in jail but nothing similar has so far occurred in its home country, Germany. Is Gibney surprised there have been no prosecutions yet in Germany? Is the company bigger than the scandal? “You don’t want thousands of workers to lose their jobs but I’m not convinced the results-driven corporate culture at any cost at Volkswagen has changed.”

Demonstrators in March hold posters with the VW logo and monkeys as they protest against animal testing © AFP/Getty Images

That is always a red flag to Gibney, who believes that the rot sets in the moment corporate ethics slip. At Enron and VW, once cheating was seen as acceptable, the lies were impossible to stop.

“It tends to happen incrementally,” Gibney says. The ruthless culture at Enron led to a state of affairs where “electricity traders are shutting down the Californian electricity grid for fun and profit”. It is not only Gibney’s films that make this kind of point.

The Danish television thriller Follow the Money showed a charismatic chief executive selling the dream of green energy and covering up the company’s fragile finances by pushing his staff to indulge in illegal activities.

“The key to a great fraud is a great story,” says Gibney. “Enron had one and so does Theranos,” he says, referring to the high-tech blood-testing company whose disgraced founder, Elizabeth Holmes, is the subject of a documentary he is making for cable channel Home Box Office.

“In male-dominated Silicon Valley, here was a young woman besting the men at their own game. I wanted to believe it,” says Gibney. But the innovation that promised 70 tests from a single drop of blood was a sham. When market prices are soaring beyond people’s wildest expectations, investors often suspend their sense of disbelief, says Chanos. “It’s when you’ll buy a magic blood-analysing machine from a woman without a college degree who wouldn’t show you the technology.”

The Theranos story was exposed by The Wall Street Journal and Gibney’s films often illustrate how fraud comes to light thanks to reporters, short-sellers and whistleblowers rather than market regulators. “As a nation we don’t believe enough in the importance of regulation like the SEC,” he says.

Elizabeth Holmes, disgraced founder of Theranos © AP

The China Hustle shows how the entire might of the Securities and Exchange Commission busted just two of the Chinese company frauds, but a handful of short-sellers took down about 50.

The short-sellers are the savvy insiders who sniff out businesses that are engaged in fraud, or are overvalued, and who often become rich in the process even if they are not always popular. “But in wild west capitalism you need gunslingers,” says Gibney.

In Dirty Money’s “Drug Short”, directed by Erin Lee Carr, short-sellers exposed Valeant Pharmaceuticals’ price gouging on life-saving drugs and an alleged multimillion dollar fraud the regulator had overlooked.

What is next for Gibney? He would like to make a film about the opioid crisis in America and look at those branches of the philanthropic Sackler family that derived part of their wealth from OxyContin, the addictive painkiller. The tale may serve to illustrate how individuals navigate moral contradictions — a theme that is often at the heart of Gibney’s films.

Sometimes, however, the story is less nuanced. Recalling his 2012 film Park Avenue: Money, Power and the American Dream, he cites the reaction of an investment firm’s chief executive to the possible loss of a tax loophole. “He declared ‘it’s like Hitler’s invasion of Poland’. Can you imagine?” And Gibney bursts into laughter.

This is one of a series of articles published in advance of the appearance of the May 4 edition of FT Wealth.

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