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June 6, 2024, 11:14 a.m.
Reporting & Production

Scenes from the trial of Ozy’s Carlos Watson

Ozy’s Instagram account is calling for supporters to pack the courtroom as “Justice Watchers.”

The nation’s attention was recently focused on a courtroom in lower Manhattan, home to a trial that was endlessly liveblogged, camera ban be damned.

But for news-about-news junkies, there’s another New York trial — this one in Brooklyn — that should be drawing attention. It involves Carlos Watson, the CEO and co-founder of Ozy. Media observers with decent memories will recall being flummoxed by Ozy, a news site that claimed huge audience numbers but which no one could ever remember reading.

It also claimed to be constantly discovering hot new talent, except for how it wasn’t.

Ozy’s run of good fortune ran out in September 2021, when then-New York Times media columnist Ben Smith wrote a damning column outlining questions about Watson’s truthfulness with investors and the general public. It reported an occasion when, while trying to earn an investment from Goldman Sachs, an Ozy exec had impersonated a Google executive on a phone call, going on about how wonderful Watson was and how much YouTube valued its partnership with Ozy. This did not please either Goldman Sachs or Google.

Also unpleased: federal prosecutors in the Eastern District of New York, who indicted Watson on securities and wire fraud charges in February 2023. They allege a wider sweep of “material misrepresentations and omissions regarding Ozy’s historical and projected financial results, debts, and business relationships.” He’s currently on trial.

Watson’s has, understandably, not gotten a Trump level of attention, but I thought it was worth looking at what we can learn from the relatively few stories that have been written about it.

  • Samir Rao — Watson’s co-founder, who pled guilty to charges last year and is now cooperating with prosecutors — described lying to BuzzFeed execs when they were considering acquiring Ozy. Here’s Nika Schoonover for the Courthouse News Service:

    Rao said he and Watson wanted to emphasize Ozy’s television and events ventures because they believed those were most interesting to BuzzFeed. To do so, he said, they adjusted the revenue data in the pitch to BuzzFeed to make those elements of the company look more successful than they were.

    Reviewing various drafts of the pitch deck shown in court, Rao pointed to how the initial draft listed television revenue at $6 million in 2019 — but that number changed to $8 million by the third draft. The same was true for events revenue, which jumped from $11 million to $15 million for the year 2020 when the initial and third drafts were compared.

    This was done to “portray the business in as favorable a manner as [Watson] deemed necessary,” Rao said.

    On a separate slide of the pitch deck, Rao was asked about the reported revenue for Ozy’s television show “Black Women Own the Conversation,” a collaboration between Ozy Media and the Oprah Winfrey Network.

    Rao and Watson lied by saying the show had been renewed for a second season and received $1.5 million in revenue for the first season, Rao said.

    “We knew that individually if the show was renewed for a second season, it would make it more valuable in the eyes of BuzzFeed,” Rao said.

  • Rao — whose digitally modified voice played the role of the YouTube exec on that call to Goldman Sachs — detailed the plot more fully. Here’s Schoonover again:

    In previous negotiations with the investment company, Watson and Rao told Goldman executives that YouTube was interested in buying the rights to Ozy’s flagship show “The Carlos Watson Show,” in which Watson interviewed politicians and pop culture celebrities including Joe Biden and John Legend. But Rao said this was a lie, and Watson and he came up with a plan to impersonate YouTube executive Alex Piper on a conference call with Goldman Sachs using a voice modification software…

    When it came time to join the conference call, Rao said Watson was in the room with him and was trying to guide him through it. “He was trying to signal me at first. He was mouthing stuff to me that I wasn’t understanding or receiving,” Rao said. But when that didn’t work, Rao said Watson began to send him text messages that told him what to say.

    “I am a big fan of Carlos, Samir and the show,” one text from Watson read.

    In other texts, Watson reminded Rao to “use the right pronouns,” which Rao explained was because he kept referring to Ozy Media as “we” instead of “they.” “You are NOT OZY,” another text from Watson said, which Rao said referred to his misuse of pronouns.

    When it became clear that Goldman knew what was up, Watson decided to blame the incident on a “mental break” by Rao. He told Smith in 2021 he was “proud that we stood by him while he struggled.”

    “Carlos was now in the mode of trying to manage the crisis,” Rao said. “He said he needed to call members of the board and say that I had a mental break or mental health episode.”

    Rao said he agreed to take sole responsibility for the incident in the eyes of the board because he believed it was the best way to avoid any potential criminal charges at the time. After Watson called multiple members of the board using the “mental break” explanation, Rao said he was placed on a probationary period in which he was still able to work for the company.

    As Rao said at the end of his testimony: “My ambition, my desire to be successful, my desire to be seen as tough enough or good enough to succeed in this world completely took over my moral compass.”

    Bloomberg’s Patricia Hurtado quotes Rao assigning Watson blame for that shift: “A lot of that mindset had to do with Carlos’s deep belief that failure was not an option and we had to do whatever it took.”

    While Ozy boasted it had a huge audience for its website, newsletters and videos, the truth was grimmer, Rao said. For years he said he and Watson struggled to keep the company afloat. While Ozy told Goldman that it had booked $5.71 million in revenue from YouTube, in reality, the number was “zero,” Rao said.
  • Former Ozy VP of finance Janeen Boutre testified as to the extent of its financial troubles. Here’s The Daily Beast’s Justin Rohrlich:

    Ozy was hemorrhaging cash, stiffing vendors, not paying its rent, and struggling to make payroll — sometimes missing it altogether. So, to raise funds, [Assistant U.S. Attorney Dylan] Stern continued, Watson and his alleged accomplices “defrauded his victims out of tens of millions of dollars.”

    “I felt like I was in a pressure cooker, trying to solve something that wasn’t there,” CPA Janeen Boutre said when she took the stand around noon. “The financial strength wasn’t there. So, every day you go into work, you just have more questions than answers.”

    Ozy was “always light on cash,” Boutre testified. “We would anxiously await funding…Sometimes it didn’t come.” Other startups she had worked for may have had cash flow problems, but “not like this,” Boutre said…

    Ozy’s books showed revenues doubling one year, and tripling the next, which was the exact opposite of reality, according to Stern. Among other things, Watson told potential financiers that Oprah Winfrey herself had invested in Ozy.

    “This was a lie,” Stern said.

  • Meanwhile, U.S. District Judge Eric R. Komitee does not seem to be happy with Watson’s defense team, which includes Harvard professor Ronald Sullivan, particularly over its treatment of evidence. He described one incident as “only the latest instance of the defense’s failure to comply with its discovery obligations and court orders.” Prosecutors have filed a motion saying they have “significant authenticity concerns” over some of the defense evidence, including allegedly years-old contracts with metadata suggesting they were created last month.
  • Reporter Heather Schroering, who has liveblogged parts of the trial on Twitter, noted something interesting:

    This being 2024, AI has also come up.

What’s up with Ozy these days? What were once its media operations seem to have pivoted into a PR campaign on Watson’s behalf. There’s a 104-minute documentary titled “The Troubling Case of Carlos Watson: When They Come For You.”

From a quick search of the transcript, it mentions Ben Smith at least 30 times, including this quote: “I think Ben Smith felt like Carlos was a threat because of his charisma, because of his relationships, because he had a vision that didn’t just involve chasing after tabloid news or creating mindless clickbait content that would lure an audience into a sense of complacency, which is what BuzzFeed had to offer its audience.” (It also makes the same silly claims about having “discovered” AOC, Dua Lipa, Trevor Noah, and Amanda Gorman that I refuted years ago.)

Ozy’s Instagram account is calling for supporters to pack the courtroom as “Justice Watchers.” Its website has been turned into a sort of extended apologia for Watson where he can blame racist prosecutors1 and Ben Smith for his troubles. It features several first-person statements of Watson’s fundamental goodness, including from — I kid you not — his fifth-grade teacher (“I found Carlos to be a very bright boy, an outstanding student who took his academic responsibilities very seriously…He had lots of energy and a love for team sports”) and his executive assistant (“the Carlos that I know is kind, loving, caring, articulate, thoughtful, compassionate, and brilliant”).

We’ll see if a jury settles on any different adjectives. The judge in the case has said he expects the trial to run until the end of July.

Photo of the Theodore Roosevelt United States Courthouse, where Watson’s trial is taking place, by Douglas Palmer used under a Creative Commons license.

  1. Watson’s team argued he was being selectively prosecuted because of his race, a claim the judge rejected. For more, check out this video retort by Roland S. Martin titled “Roland DESTROYS Carlos Watson’s Attempt to portray himself as the John Shaft of Black entrepreneurs.” It currently has 110,393 views, versus 13,869 for “The Troubling Case of Carlos Watson.” []
Joshua Benton is the senior writer and former director of Nieman Lab. You can reach him via email (joshua_benton@harvard.edu) or Twitter DM (@jbenton).
POSTED     June 6, 2024, 11:14 a.m.
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