Ex-TV host Carlos Watson convicted in trial over collapse of startup Ozy Media

NEW YORK (AP) — Former TV personality Carlos Watson was convicted Tuesday in a federal financial conspiracy case about Ozy Media, an ambitious startup that collapsed after another executive impersonated a YouTube executive to hype the company’s success.

Brooklyn federal prosecutors announced on the social platform X that a jury found Watson guilty of all three charges against him: conspiracy to commit securities fraud, conspiracy to commit wire fraud and aggravated identity theft.

Prosecutors alleged that Watson conspired to deceive investors and lenders in order to keep the cash-strapped company alive.

Watson pleaded not guilty and denied the allegations. Watson testified that Ozy’s cash squeezes were standard startup speed bumps and that materials given to investors noted that the information wasn’t audited and could change — “like ‘buyer beware,’” he said.

The defense blamed any misrepresentations on Ozy co-founder and chief operating officer Samir Rao, who has pleaded guilty.

Watson, a cable news host who’d worked on Wall Street and sold his own education-related startup, conceived of Ozy in 2012. The company produced shows and gave “Ozy Genius” awards to college students. It interviewed former President Bill Clinton, won an Emmy Award and produced an annual music-and-ideas festival that President Joe Biden attended in 2017, when he was a former VP.

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But prosecutors said that underneath Ozy’s hip public profile, the company was tottering financially from 2018 on. It routinely ran short of money to pay vendors, rent and even employees and took out expensive loans against future receipts to cover its bills, former finance Vice President Janeen Poutre testified.

The prosecution and its key witnesses said Ozy, with Watson’s blessing, began floating increasingly audacious lies to try to snag a lifeline from investors.

“Survival within the bounds of decency, fairness, truth, it morphed into survival at all costs and by any means necessary,” Rao told jurors, saying that Watson had sanctioned all his falsehoods.

Ozy gave much bigger revenue numbers to its prospective backers than to its accountants, with the discrepancy widening to $53 million versus $11.2 million for 2020, according to testimony and documents shown at trial.

Prosecutors said that the company claimed deals and offers it hadn’t really secured — for example, that Watson told a prospective investor that Google was willing to buy Ozy for hundreds of millions of dollars. Ozy’s lawyer said Watson never made that claim.

Google CEO Sundar Pichai testified there was no such offer, though he did contemplate hiring Watson and providing $25 million to help Ozy move on if he took the Google job.

To woo potential corporate suitors and lenders, Rao forged some terms of contracts with a network for one of Ozy’s TV shows. Then, when a bank wanted to check with the network, Rao set up a fake email account for an actual network executive and sent a message offering information. The bank loan didn’t happen.

Rao went on to pose as a YouTube executive on a phone call with investment bankers, in a bizarre effort to back up a false claim that Rao had made about YouTube paying for another Ozy show. The bankers got suspicious, their potential investment evaporated and the real YouTube exec soon learned of the ruse.

Watson’s lawyers hammered on Rao’s admissions about his own conduct to try to portray him as a liar trying to avoid prison by pleasing prosecutors. Rao is awaiting sentencing.

Watson, who hosted multiple Ozy shows and podcasts, told jurors he concentrated on the company’s content, staff, vision and partnerships more than on “making sure that every decimal is in the right place.” He said he traveled about four days a week and left finance and operations largely to Rao and others.

“I couldn’t be as hands-on as I probably wanted to be,” he testified.

Ozy rapidly unraveled after The New York Times revealed Rao’s faux call in a September 2021 column that also questioned the start-up’s claims about its audience size.