Ozy The media went from screaming to outrage. Its founder, Carlos Watson, appeared in court

NEW YORK (AP) – For nearly a decade, Ozy Media has projected a picture of recent media success.

The company boasted big-name interviews, an Emmy-winning television show, a vibrant festival of music and concepts, and impressive numbers to exhibit to potential investors – until it collapsed in 2021 amid doubts about its audience size, profitability and fundamental integrity .

These doubts at the moment are at the middle of the federal criminal trial. Founder Carlos Watson and Ozy are fighting charges of conspiracy to commit fraud.

Even after many other public and court hearings for Silicon Valley corporations that went from screaming to damage, it’s hard to forget the moment of Ozy’s downfall, when co-founder Samir Rao impersonated a YouTube executive to talk concerning the company to potential investors.

Lawyers for Watson and Ozy blame any false statements solely on Rao, who pleaded guilty to conspiracy to commit fraud and identity theft. The defense also argued that prosecutors would criminalize common entrepreneurial bloat and single out Watson, a black founder in a tech world where there are disproportionately few African-American executives.

“I am not now and never have been a ‘fraudster,'” he said last 12 months when the costs were brought against him.

Prosecutors and Rao, their star witness, say Ozy straddled the road between hopeful hype and brazen fraud.

“We told so many lies to so many different people,” Rao testified after the struggling company produced rosy financial results in a desperate attempt to lure investors and stay afloat.

The hope was to enable “a diverse audience to consume hopefully a different, more meaningful type of content,” he said. But “survival within the bounds of decency, honesty and truth has evolved into survival at all costs and by any means necessary.”

“New and Next”

Ozy was founded in 2012 on the Millennial-friendly premise of providing a fresh, sophisticated but not cookie-cutter approach to politics, culture and more – what it calls “new and next” – while amplifying minority and marginalized voices.

The son of two South Florida teachers, Watson graduated from Harvard and Stanford, worked on Wall Street, founded and sold a test preparation company and anchored MSNBC. According to Rao, he fathered Ozy after which recruited Rao, a former colleague from the world of finance, after a probability meeting at a Chipotle restaurant in Silicon Valley.

Ozy debuted a web site, newsletters, and with a bang: former President Bill Clinton was one in all the primary interviewees. The company has expanded into podcasts, events and tv programming, winning a 2020 Emmy for Watson’s “Black Women OWN the Conversation” on the Oprah Winfrey Network. The annual Ozy Fest in New York’s Central Park has attracted big names, from John Legend to pre-presidential Joe Biden.

Testimony shows that the corporate acquired many major advertisers, clients and grants. But behind the scenes, prosecutors say, Ozy began to bleed in 2018 and resorted to lies.

“I don’t know where his numbers came from.”

The company told a possible investor that it “ended 2017 with approximately $12 million in revenue,” but gave its accountants a figure of lower than $7 million. The disparities widened through the years, reaching as much as $53 million compared to $11 million in 2020, according to testimony and documents presented throughout the trial.

Meanwhile, Ozy steadily delayed paying suppliers and rent, borrowed against future receipts to obtain expensive advances, and had difficulty paying salaries, former vp of finance Janeen Poutre testified.

The defense portrayed the scramble for money as a growing problem for a successful startup.

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“Ozy Media did not defraud its investors or anyone else,” said company attorney Shannon Frison.

Watson lawyer and Harvard Law School professor Ronald Sullivan Jr. he said his client “believed every number he gave to every investor.” Sullivan suggested that revenue figures may vary depending on whether or not they represent “in-kind” income, equivalent to promoting trading at one other outlet.

Poutre testified that auditors rarely agree to count such revenues and she or he didn’t think Watson was all the time honest.

“I don’t know where his numbers came from. I know where my numbers came from,” she said.

Fake emails and voice masking

The alleged programs went beyond questionable numbers.

In an attempt to get Ozy a bank loan in 2020, Rao falsified the deal by saying that Winfrey’s OWN network had renewed “Black Women OWN The Conversation” for a second season. When the bank needed information directly from the net, Rao arrange a fake email account for the actual OWN executive and used it to provide the bank with “transaction background.”

Rao told jurors that Watson verbally approved the charade. Jurors saw a text message from Watson urging Rao to “be brave and do this,” but “that” was not specified. Ultimately, witnesses said, there was no loan or extension of this system.

Rao’s infamous phone rang the next 12 months when Ozy was searching for an investment from Wall Street giant Goldman Sachs. He falsely claimed that YouTube was paying for Watson’s eponymous talk show. When Goldman’s bankers wanted confirmation, he downloaded a voice-modifying app and talked to them while posing as a YouTube executive.

But the bankers were wary, as the actual YouTube executive soon discovered, and Watson told the board of Goldman Sachs and Ozy that his co-founder had suffered a mental breakdown.

The investment fell through, but Goldman Sachs continued to advertise with Ozy after the episode, Rao said.

Rao told jurors he was taking antidepressants but was not having a mental health crisis when he called. Rao said Watson was present and gave him instructions via text messages.

“I’m a huge fan of Carlos, Samir and the show,” reads one in all the texts, which Rao explained when Watson prompted him with a line for his fake persona to say. Watson then urged, “use the right pronouns. You are NOT OZY” – amongst other messages.

– You’re a liar, aren’t you?

Watson’s lawyer said the Ozy founder stumbled upon Rao’s scam, was outraged and signaled him to hang up.

The defense emphasized that Rao drafted a 2021 letter – ultimately unsent – in which he stated that the phone ruse was entirely his doing. Rao told jurors he wrote it to protect the corporate.

Defense attorneys labeled him an incompetent executive, a confessed fabricator and a confessed criminal who falsely implicated Watson in hopes of avoiding prison for his own crimes.

“So, Mr. Rao, you are a liar, aren’t you?” Sullivan asked during last Friday’s hearing.

“Unfortunately,” Rao replied, “I told many lies during my time at Ozy.”