Even among the many memorable people who show up in “The China Hustle,” Carson Block makes an immediate impression. Introduced midway through Jed Rothstein’s dizzying expose of international financial fraud, the author of “Doing Business in China for Dummies” was like many Westerners who seized upon the nation’s exploding economy to set up shop, opening Lovebox, the first self-storage company in the country and even bringing his father into the action by investing in the Orient Paper Company, which was said to be manufacturing green by the second to the tune of $100 million annually. Yet based in America, Block nor his father had actually seen what they bought stock in physically, relying on word from regional auditors for the likes of trusted financial firms such as Deloitte and Price-Waterhouse Coopers that the company was legit. When Block finally was able to do his due diligence, he found a rickety country road before even getting to the Orient Paper Company’s humble headquarters that suggested it was impossible for the company to reach the kinds of production goals they had based their profit projections on, taking out a camera to capture what he was seeing in the flesh.
Although it was eventually Block’s written word that caused ripples in the financial community with a report entitled “Muddy Waters” warning against outsized expectations for companies that hadn’t come close to reaching what they’d been advertised as overseas, the footage he supplies to “The China Hustle,” among others, suggests we should all be concerned about this particular hiccup in a globalized economy where the world may seem smaller than ever, yet the lies about what’s real have been able to grow exponentially when few bother to look beyond their computer screens. Worse yet, as Rothstein ably demonstrates, the real world consequences can be devastating since it’s public pensions and retirement funds that are tied up with investment firms that will ultimately pay the price for these heavily overvalued properties that are bound to burst, and simultaneously dazzles and disgusts in the undeniably entertaining “The China Hustle” in outlining the specious system that has allowed a select group of American brokers to thrive, selling stock for Chinese companies they know look far better on paper than they do in person.
As much ingenuity is shown in perpetuating this con, both the filmmaker and subjects such as Dan David, an investor who has taken to market-based remedies such as shorting stock of companies he’s sure are far less than their billing, show significantly more in bringing the situation into focus for the public in “The China Hustle,” and on the eve of the film’s release, following a celebrated premiere last fall at the Toronto Film Festival, Rothstein spoke about distilling an intentionally overcomplicated financial scheme into an engaging narrative, taking notes from the film’s executive producer Alex Gibney who knew a thing or two from working on the similarly outrageous “Enron: The Smartest Guys in the Room,” and making the film at a time when U.S./Chinese relations are already quite complex.
Sarah [Gibson, the producer] had known Dan [David] and Jon Carnes from “I.O.U.S.A.”, another project [she produced], and they mentioned to her that this whole terrible scandal had happened. She thought it would be a great film and who better to do a financial story than Alex Gibney, who had done the Enron film [“The Smartest Guys in the Room”] and others, so she brought the film with Kennedy/Marshall where she was at to [Gibney’s production company] Jigsaw to see if Alex would direct it. Alex thought it was a great story, but couldn’t direct it because he was already doing another project, but said, “Let me executive produce it and we’ll get one of our directors here to speak with you.”
That ended up being me and I ended up meeting Dan while I think both of us were going to or from somewhere and we met at this TGI Friday’s [at Penn Station]. He told me about this whole scandal, which was really incredible to hear, that had gone on and was going on and that nobody really knew about it. I really understood where he was coming from and I thought that he had a great focus and he had a moral drive as opposed to a dollars and sense drive. He certainly had both. So I thought it was an important story to tell.
Did you know the scope of this from what he told you or was it bigger than what he told you?
It was a little of both. [Dan] certainly helped open my eyes to what was going on, but we did a lot of research outside of that. Of course, we met with other characters who are in the film and met with all sorts of people who are not – journalists who covered this, even some bankers and investors who didn’t want to go on the record, but met with us to help us understand what was going on and the types of frauds that had taken place. Dan was the starting point, not the ending point.
Did the way you receive information actually inform the style of the film? You have this great, occasionally digressive presentation where you’ll occasionally keep the visual of an interview running even if you’ve cut the sound to reflect on what they’re actually saying.
With a complex story like this, it’s a way to have the characters say their bit, but then almost like a deejay, freeze for a moment and just explain it if it’s so complicated. They would say something and I’d say, “Well, let’s just talk about that for a second more in plain English to help people understand this whole process,” which is part of the problem with the whole “China Hustle” – not the film, but the actual event — is the complexity of it that made it very hard for people to follow and understand what was going on. That complexity creates the opacity that enabled some of these frauds to take place. There’s so many layers and people involved.
I just made that up. [laughs] I didn’t make up what shorting is, but I made up a way to describe it in the simplest terms. I thought, “What is something that everyone can understand that’s not a brand name? And could be drawn simply?” Shorting is very hard to understand. The first time it was explained to me, I didn’t quite get it. I thought you had to borrow a stock and then sell it. That whole notion is really hard to wrap your head around, so I wanted to explain it in the simplest possible terms and again wanting to use that technique to stop and go back over it to really help people understand what it was that these guys were doing. It’s important to understand at least the rudimentary elements of it. Shorting can be very dangerous too, so it’s true that they’re making money off of these problems, but they’re also taking big risks. If you invest a hundred dollars in a stock, and the stock tanks, then you lose a hundred dollars. But if you take a short position and your bet goes the wrong way, you could be on the hook for many multiples of your initial investment. There’s technically no limit and it certainly could go up and up and up and you could be on the hook for the difference, so I wanted people to understand the risky, precarious nature of what these guys were doing.
You do your own narration as well, which is a hallmark of Alex Gibney’s work. Was that his suggestion?
That was actually partly the result of Alex’s input. Alex challenged me to put myself into that position a little more and I think it was the right call. I hadn’t really narrated [before], maybe a few little short things I did, but for this story, it was the right way to tell it. Alex gave a lot of input on it and woke me up to how to make this difficult-to-understand story a little more approachable, [one way of which is] to tell it with a light first-person [voiceover] and that’s what I ended up doing.
Matthew Wiechert, the Roth Capital employee, becomes one of the most intriguing characters in the film since he plays on both sides of the fence and there’s this initial footage of him where he’s obscured, but visible, so it looks like he wasn’t intended to be made anonymous – did he want anonymity at first or did the style of the film actually evolve over time?
No, I wanted to try and convey his story as if it were contemporaneous, as if you were meeting someone who was talking about something they were doing and as the story caught up with them, you actually understand that they’re telling you something in reflection. So it was really a storytelling device [to shoot the interview in that particular way] – by the time we met him, he’d have already been long gone from Roth and short selling, but I’d been wanting to tell the story in a way that let the story unfold. Part of that was for a time he was selling these things and I wanted to get a nonspecific case of what it was like to sell those things – a general description of what that was like and in the first person, so I differentiated a little in the way that we shot it.
Were your subjects bringing you some of the footage from China or were you capturing it yourself?
They did. Some of it was stuff that we took ourselves, but a lot of that was their footage.
You’re making this at an interesting time for U.S./Chinese relations generally. Was the story informed by the broader economic stories coming out of the region?
It certainly brings the question of Chinese/U.S. economic relations to the forefront and I think that’s a good thing for us to focus on. The trade wars that are maybe heating up are not specifically related to the problems in this film, but it brings up this issue of the lack of cooperation between, for example, our regulators, which is a big part of this story of how the China Hustle happened. A big takeaway for me is this systemic question of having a 21st century global economy where capital can flow at near-instantaneous speeds around the globe, but the regulations and rules that govern how these markets function across borders aren’t there. They’re still stuck in the 20th century. So do we want to have economic relations with China? Of course, we do – in my opinion, certainly we should. It’s a growing economy and a big part of the world. We should be engaged, but we should be engaged in a way that’s more beneficial for everybody and be more transparent and ensures more accountability. I don’t think we’re there yet and the trade conflict that’s happening now seems like it might hinder that, but I guess we’ll see.
Since premiering at Toronto, has anything happened to slow down the China Hustle?
Dan’s running for Congress, on a platform that has to do with increasing accountability and oversight on some of these issues. Hopefully, people will become aware of this and to me, it’s not a film about heroes and villains. There are some good guys and bad guys. But mostly, it’s about this system that we’ve created that allows this exploitation to take place and [asking if] we can all demand a better system. What do we have to do to demand that and what would it look like? And I hope that conversation gets started by this film and that we all take a look at the global financial system and the way we’re policing it or not policing it and try to do better so we have a fair playing field.