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“The multi-level marketing industry as a whole is a $160 billion global industry,” director Ted Bruan told Hollywood on the Potomac about his documentary “Betting on Zero“ which had its world premiere in Washington, DC at The National Portrait Gallery during the Double Exposure Film Festival.
Film synopsis: “Allegations of corporate criminality and Wall Street vendettas swirl throughout this riveting financial docu-thriller. Controversial hedge fund titan Bill Ackman is on a crusade to expose global nutritional giant Herbalife as the largest pyramid scheme in history. He argues the company targets working class Latino communities with a ‘business opportunity’ that is nothing more than a scheme. Meanwhile, Herbalife execs defend their product as a genuine opportunity, and accuse Ackman of being an unadorned market manipulator out to bankrupt them in order to make a killing off his billion dollar short position against the company. Amidst the heated rhetoric on both sides, who has the moral standing? Ted Braun’s (Darfur Now) documentary presents a high-stakes chess game between the corporation and the individual that moves between the ethically fluid world of high finance to the personal grounds where the battle plays out with startling immediacy. Probing themes of fraud and greed, “Betting on Zero” is an engrossing deep dive into the moral complexities raised when astronomical sums of money—and no less than the American Dream itself—are on the line.”—Cara Cusumano
Bill Ackman
“Herbalife, Amway, New-Skin are among the most prominent companies that employ a multi-level marketing strategy. They are everywhere,” Braun explained. “The Federal Trade Commission for the last 30 years has approached the industry on a case by case basis. Until Ackman’s ‘short’ position, the FTC had not investigated a company the size of Herbalife before. Until Ackman announced his short, the number of multi-level marketing companies and their profitability has expanded considerably. The FTC hasn’t, until their most recent ruling on Herbalife, had a major action against multi-level marketing companies. They have regulated some of the smaller instances.”
By the Ackman ‘short’ we are talking about short selling on the stock market. A text book description of short-selling is “the sale of a security that is not owned by the seller, or that the seller has borrowed motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit.” Ackman shorted Herbalife, a high risk endeavor. At the head of Herbalife, is Michael O. Johnson, the highest paid CEO in 2011.
Both are strong personalities and because of this, you often felt that both were self motivated. We asked Braun to explain his take on the two. Q: “Is there any difference in character between the two?” A: “Well, the film doesn’t explore the personal differences between the two men in great depth but we do look at the way the two of them characterize the company and their characterizations are quite different. As the film goes to some lengths to explore their motivations, at least as we explored them, their motivations seem to be somewhat different. Ackman connects his explicit attempt to make money for his firm, although he’s going to give his personal profits to charity, out of a sense of obligation to the generations in his family that came before him and by extension to immigrants that come in the future. Michael Johnson’s obligations as the CEO of his corporation are motivated explicitly to protecting the company’s interests and that distinction is something we lay out in the film and something I openly found to be significant. We didn’t delve too deeply into that outside of what they both said publicly. My sense is, as the film makes explicit, that Bill Ackman has publicly connected his immigrant experience to his motivation. Attempting to get the government to intervene and shut down Herbalife seems to be a motivating factor along with, as he said all along, the attempt to make money for his investors.”
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“I didn’t know a lot about short selling,” he added, “and didn’t understand the technicalities of how it worked until I started doing this film. One of the challenges of the film and I think one of the things that it succeeds in doing for a general audience is it clarifies some complex ideas – one of which the idea is the mechanisms to short selling. Another is how a multi-level marketing company functions and the difference between that and ordinary businesses. One of the fun parts of making the film is, for me, finding a way to both understand and then explain to a wide audience how some of these complicated ideas actually work. I shared a general public skepticism of, ‘What is all this betting against the company? Betting a company is going to fail?’ That seems instinctively not a good thing to be doing. As I learned more about the way short sellers work, I came to understand it has a value in the marketplace because it allows for doubt and skepticism as a moderating force in the market along with enthusiasm and exuberance. The fact that people can look at companies and come to the conclusion that they’re either overvalued or fraudulent and figure out a way in the marketplace to legally profit on that judgement, I’ve come to understand it has value and that’s one of the reasons that our government allows short selling to go on.”
Ted Bruan
We were fascinated by the omni presence of Carl Icahn in the battle against Herbalife. “I’m glad you were fascinated by him,” Bruan said. “He was fascinating to me. He is one of the most successful investors on Wall Street of the last 50 years – a legend in that world and one of the wealthiest men in the United States and in the world. His entrance into the battle over the future of Herbalife transformed the nature of Ackman’s short and is part of the film that took on a very personal dimension. It was a kind of personal battle between these two men that shifted the questions and discussion about Herbalife from those that Ackman had raised which had to do with the nature of it’s business model into a more dramatic question of which of these two titans of Wall Street was going to prevail. That was interesting. It shifted the nature of a discussion and shifted the actual dynamic of the battle and certainly provides the film with a very colorful sequence of action. It does take personal grudges to a whole new level and I think has in some respects clouded the public conversation about the questions Ackman has raised and the defense that Herbalife has put forward to protect itself and instead of the public engaging to look into those questions, a lot of the public discussion has gotten caught up in characterizing a grudge match between these two Wall Street titans.”
“Herbalife has between 3 and 4 million members worldwide,” he noted. “They have approximately a half a million members in the United States. The fate of the company affects all of those people and their families. That’s a significant number of individuals. It’s all these loftier level debates and decisions that have a huge impact on the lives of ordinary Americans and millions of people worldwide. One of the things I was interested in the film and one of the things I think the film is particularly good at is drawing the connections between those very remote actions and very colorful Wall Street squabbles and a lot of little ordinary seeming lives. I hope the people that see the film are able to draw up some of those connections themselves and understand a little better.”
Although it had nothing to do with his film, we asked Braun to give us his take on other filmmakers like Michael Moore and their efforts to expose corruption. On Moore, he had this to say: “As a filmmaker he probably over the last 25 years has done as much to engage the general American public in interesting documentary film-making as any one person. He’s really had a trans-formative effect on the public’s perception of documentaries and their interest in it. As a filmmaker, I acknowledge that with a great sense of appreciation and gratitude. His films are determinedly and doggedly driven by a very particular point of view. That can be very bracing whether you agree with it or disagree with it – it’s really something to bone up against and dump against very strongly. The feature documentaries that I’ve made work a bit differently. I choose to work in a different vein. I appreciate his work and some of his films in particular I really admire. As a whole, I think he’s made an enormous difference in the documentary community and I think he’s a lightning rod because he pisses a bunch of people off and rallies others. He’s provoked some very important discussions as a result of some – that’s admirable.”
Braun did meet with Michael Johnson and then head of corporate communications Barb Henderson at great length as well as with Alan Hoffman who is their head of global and corporate affairs. We wondered if people on the top of the Herbalife ever felt guilty about the people on the bottom. “All of the public statements about their operation I have sensed nothing but enthusiasm for the enterprise. If there’s remorse about the company and it’s effect on the people who don’t succeed I haven’t heard it expressed by executives at Herbalife.”
On a low scale priority of questions, we asked Braun if he ever tried Herbalife products, like the shakes? “When I met with Michael Johnson at Herbalife headquarters, I had a shake with him and with Barb Henderson. Yes, I have tried the product at corporate headquarters. Q: Was it good? Did you have chocolate? Strawberry? What did you have? A: “I can’t honestly remember. I can’t remember what flavor shake it was.” There’s that.
Halfway through the documentary, we noticed a familiar face – that of former Sec. of State Madeline Albright who is a paid consultant to Herbalife. “I think as part of her consultancy she sat down for a filmed interview with Michael Johnson to discuss her thoughts about the product and about the company,” explained Braun. “That’s what she was doing. I think you can see in the context of the film that that piece of video is brought in as part of a presentation Bill Ackman is making about how Herbalife protects itself from criticism and by the time I got to that point in the making of the film and by the time Ackman gets to that point in the presentation you have a sense that this is a company with some questionable practices. For the former Secretary of State to align herself as a defender of the company it does raise questions. I think the film invites you to ask, ‘What is it that she sees in the company?’ She is a paid consultant. That’s certainly a connection that Ackman wants people to make. I’ve seen the film with audiences, there are a lot of people who groan at that moment in the screenings of the film. It’s a shocking piece of footage.”
What does Braun hope to accomplish with the film? “I didn’t set out to make this film with any particular agenda. I didn’t know either party particularly well, but I was really curious at this odd inversion. We had a Wall Street titan putting on a white hat and going on a moral crusade. That doesn’t happen everyday. That was unexpected. You had this company that says it’s about people’s chance to realizing the American dream and be healthy and stay fit. They’re being accused of a pyramid scheme. Everything about it was upside down and I wasn’t setting out to make a point about anything. I was setting out to follow what was sure to be a fascinating unfolding battle at the end of which there might be some clear picture about who’s really right here.”
“I suppose if there’s anything, I hope it will be that viewers have a little clearer sense of what this is about and can peer through the personalities and the public drama of all of this with a sharper eye towards the facts and a little clearer sense of where justice lies. It’s all the accusations that are being hurled back and forth. The fact that the FTC finally acted in the middle of this past summer in July and they came out with a very, very strongly worded complaint against Herbalife in which they accused them of four counts of fraud and deceptive business practices and weighed out how they were operating illegitimately, I think it provides a kind of answer to a lot of those questions that the film asked. I hope that audiences will take that away and look at this company and look at short selling and look at multi-level marketing companies with a little clearer eye.”
