'The China Hustle': Film Review | TIFF 2017
Jed Rothstein's involving doc chronicles a vast fraud that is underexposed in the general-interest media.
Not that America's ever likely to have a government willing to do it, but remind me again why we can't just seize the assets of the entire banker/broker/speculator class and sentence them all to lifetimes teaching math in public schools? Docs like Jed Rothstein's excellent The China Hustle present us with such frequent occasions for outrage that, in the interest of fairness, it's time for a few top documentarians to assemble a five-minute disclaimer to run in front of each new exposé. Call it Bankers: Why the World Needs Some of Them, Only Not Nearly So Many, and Not Nearly So Evil, and by the Way, They Ought to Make a Little Less Money Than Your Plumber Does. The good news for Rothstein is that his film unveils massive fraud in ways that, though stoking our righteous anger, shouldn't alienate many of those one-percenters who believe they're doing good in the world.
Those would be people more or less like Dan David, who starts off the film warning that "there are no good guys in this story, including me." David runs a hedge fund in Pennsylvania that, like plenty of investors, was wiped out by 2008's meltdown. Looking around for ways to make his clients' money back, he landed on China.
Chinese growth had been such that, as the film puts it, it was the one market on the planet everyone was sure would keep going up. But foreigners weren't able to invest directly in Chinese companies. Enter the reverse merger, in which a defunct American company still registered with U.S. authorities (like one responsible for an abandoned mine, the doc suggests) is taken over by a foreign entity. This shell company becomes a proxy for, say, a paper mill in Hebei Province, and then any American who believes in Madoff-sized return on investment can buy a piece of it.
You see where this is going. Over the course of this brisk and easy-to-follow film (no derivatives to explain here), we see how suspicious American investors realized that a slew of Chinese companies were vastly overstating their assets, revenues, and future prospects. Self-made muckrakers (some of them operating under pseudonyms online) actually staked out factories, for instance, to see that facilities had nowhere near the traffic their supposedly massive product shipments would require. Some of these Americans, like David, started shorting the companies' stock and trying to publicize the lies they were built on. (If the lessons of The Big Short have faded from memory, fear not: Rothstein offers an easy-peasy illustration of shorting.)
The movie's main conflict is between the fraud-exposers (David, Carson Block's firm Muddy Waters, et al) and the American firms that made so much money on all the trading that they stayed happily blind to it. Those would be firms like the fratboyish Roth Capital Partners and the upper-crusty Rodman & Renshaw, whose CEO was retired general Wesley Clark. Clark is presented as a figurehead-for-hire here, happy to sell his prestige to the firm but unwilling to take any responsibility for its failings. Interviewed for the film, Clark puts on a dignified face before seeming to realize nobody's buying it: "I don't think I want to be in the film," he says uneasily. "Let's just cancel this session, okay?"
If only it were that easy for the ordinary Americans who were convinced to invest in this junk. (Or whose pension funds did so without their knowledge.) We meet three of those toward the doc's end — men who quite reasonably thought they could believe what investment bankers told them. But as China Hustle explains, bankers and auditors just took companies' word for how much money they made, and lawyers who worked on these reverse mergers (like Loeb & Loeb's Mitchell Nussbaum) hardly look to be any more concerned with informing potential investors.
A scene or two after we meet those Regular Joe investors, we hear from the president who came to power by swearing to be their voice. "We're cutting regulation," he boasts. Whether that's in the little guy's financial interest or not is left to the viewer to decide.
Production companies: Jigsaw Productions, Kennedy/Marshall Company
Director-screenwriter: Jed Rothstein
Producers: Sarah Gibson, Ryan Suffern
Executive producers: Mark Cuban, Todd Wagner, Ben Cosgrove, Jeff Cuban, Stacey Offman, Alex Gibney, Frank Marshall
Director of photography: Tom Hurwitz
Editors: Keith Reamer, Brian Goetz
Composer: Saul Simon MacWilliams
Venue: Toronto International Film Festival (TIFF Docs)