Alex Gibney: A Lesson in Fraudster Psychology

Alex Gibney has been making films about fraud in one way or another ever since his directorial debut in 1980, “The Ruling Classroom,” which documents a social-studies experiment at a California middle school that simulates American society and ends in corruption. 

Since then, he has won accolades galore for his documentaries that examine the inner workings of fraudsters’ minds and lays bare for the public the extent of such wrongdoing in our society. His subjects range from the rise and fall of energy company Enron in the “Enron: The Smartest Guys in the Room” to the downfall of Theranos founder Elizabeth Holmes in “The Inventor: Out for Blood in Silicon Valley,” to the opioid epidemic in “The Crime of the Century.”  

Gibney is this year’s recipient of the ACFE Guardian Award, and he talked Tuesday to President and CEO Bruce Dorris, J.D., CFE, CPA, at the 33rd Annual ACFE Global Fraud Conference. While the award has traditionally been presented to a journalist, Gibney’s body of work falls squarely under the criteria required to receive this honor. That’s to say, someone whose determination, perseverance and commitment to the truth has contributed significantly to the fight against fraud. 

“I stumbled into an obsession with the psychology of fraud and many of my films center around it,” he said.  

Over the years, Gibney has learnt a thing or two about that psychology and how it applies to all of us. When he first started out making such films, he thought he could clearly separate the bad guys from the good ones. But it wasn’t that simple. It turns out that “we are all a little bit naughty under the wrong circumstances,” and that often good people can cross an invisible moral line by ignoring wrongdoing when they should have spoken up. 

That may be why Americans are so fascinated with these stories but have conflicting feelings about them. Gibney recalls the publicity tour for his documentary on Enron and how fascinated people were with Lou Pai, the Enron executive who cashed in on millions of dollars in stock just before the company collapsed and evaded federal prosecution. “I think the subtext to the question was: ‘Where do I go to be more like Lou Pai,” laughs Gibney. 

But more intriguing is how annoyed people seem to be with Sherron Watkins, the internal whistleblower whose brave efforts to warn about the Enron accounting scandal fell on deaf ears.  

Noble Cause 

That reaction may seem odd, but it could partly be due to fraudsters' skills in spinning a good tale. And in the corporate world, good story telling goes hand in hand with a belief in a noble cause, making the ends justify the means, at least in their eyes.  

 “It makes the fraudsters hard to catch because they lie with conviction,” Gibney said. “One of the key things about deception is self-deception. There is a moment when you really believe in the lie.” 

That attitude marks the first signs of corruption as it means people are willing to bend and then break the rules to achieve their objectives. This applied to Elizabeth Holmes who may have wanted to revolutionize health care through Theranos’ blood testing machine, and used it on real patients when she knew it was unworkable. It is a similar story for Enron CEO Jeff Skilling, who believed that unfettered free markets were a catalyst for social good, justifying the need to fudge financial numbers to achieve his goals.   

“What I see in executive suite [fraudsters] is that sense of belief in a mission which is not the good news. That is actually the bad news,” he said. “So, if you see someone that believes fervently in their cause, trust but verify.”