Carlos Watson’s Trial Exposed: Was It Rigged from the Start?

Clouded by Conflicts and Questions, Carlos Watson’s Conviction

The Rise and Fall of Ozy Media

There are several issues that concern me in the Carlos Watson case.

Watson co-founded and led Ozy Media, a start-up media company that attracted big-name investors and significant partnerships. It produced digital newsletters, TV shows, podcasts, and events.

Its rapid success ended in a dramatic downfall, resulting in the company closing, and for Watson, federal charges and a high-profile trial which he lost

Judge Eric Komitee sentenced Watson on December 16 to nine years and eight months in prison.

As Watson awaits the Bureau of Prison’s assignment to a prison where he will report on March 28, and as he awaits word on his appeal and a writ of mandamus, this is an appropriate time to review the case.

Ben Smith’s Role in Ozy’s Collapse

It was a media-driven destruction of Watson and his company, Ozy Media. That may not be important.

But the NY Times’ Ben Smith put Ozy to bed and Watson in prison. Or so it appears. Smith’s multi-part exposé on Ozy Media for The New York Times marked the end of Ozy.

When the giant of the media world, The New York Times, comes at your company—one dependent on investors and advertisers—and calls it a fraud, the company is toast. Smith hammered out stories with a unique hatchet style, appearing as a scalpel, and Ozy closed.

A Civil Lawsuit Raises Ethical Questions

Behind the scenes in the open-and-shut, black-and-white decimation of Ozy Media was a little-known civil lawsuit brought by Watson against Smith, where he makes some remarkable accusations of a conflict.

The lawsuit fell by the wayside under the enormous pressures and cost of defending a criminal investigation, an indictment, and ultimately a trial and conviction of Carlos Watson.

But if the allegations contained in Watson’s lawsuit against Smith are true, behind the byline and the glory of an investigative journalistic achievement –  Smith’s cratering of a rising media company, his exposure of it as a fraudulent enterprise, leading to the indictment and conviction of its CEO—is an alleged underbelly of financial conflicts, insider access, and strategic timing that raises questions not about Watson or Ozy but about Smith, BuzzFeed, a competitor, and the New York Times.

If the allegations are true, Smith made about $7 million for his takedown of Ozy.

Smith quit the New York Times right after pocketing his millions. It would be curious indeed if the most prominent media giant, the NY Times, could be used like a whore to make one of its writers’ more money in a single takedown, more than he would have made in 30 years, working for the Times.

Let’s say for now, it doesn’t matter. Let’s move on to issue #2.

Judge Komitee’s Financial Ties to Ozy’s “Victims”

After the gavel fell on Watson’s conviction, something remarkable came out about Judge Eric Komitee, the man who presided over Watson’s eight-week trial.

He was in bed with the victims of the Ozy case. I don’t mean he was a casual investor; this wealthy judge, whose net worth appears from his financial disclosures to be as much as $102 million, made most of that tidy sum from three victims in the Ozy case.

Yeah, you read that right. The judge got rich off of the victims in the Ozy case.

It’s funny. The reporter got rich from destroying Ozy, if the allegations are true, but the judge was already rich.

Judge Komitee got rich from the alleged victims in the Watson case – long before the case.

Komitee was a manager and general counsel for a hedge fund and still sits on one of the boards for that hedge fund company, with tens of millions personally invested in four associated hedge funds.

It seems astonishing that Komitee did not recuse himself. The witnesses who testified against Watson from Google and Goldman Sachs were his partners and friends.

He did not bother to tell anyone about that during the trial. He is trying to deny its relevance now.

A journalist who made millions off the takedown and a judge who made millions off the companies supposedly victimized by Ozy are a curious set of bookends in the case.

There is more. Sometimes, they say a deal has “hair”  to express that a business deal is not clean. This case has some hair, or it appears to be hair. Maybe it’s a wig.

Samir Rao: The Cooperator Who Got Away

Take this for example.

Judge Komitee sentenced Watson to nearly a decade in prison. But the guy who committed the actual crimes, the  “substantive crimes”—the government’s star witness, an admitted fraudster, Samir Rao—walked away with probation.

How?

Because his cooperation agreement permitted him to change his story to precisely what the prosecution wanted, and the judge and the prosecutors rewarded him.

Rao changed his story from “Watson was innocent and I did the crimes” to “Watson (like the proverbial devil) made me do it.”

Watson made him forge and lie, create fake emails, and use voice-altering equipment to impersonate others to scam money and keep his executive job and number 2 position in the company secure.

Rao went from a brilliant young Harvard super wiz kid who had a mental health breakdown to a bumbling, imbecilic zombie controlled by Watson. Only one of the stories is true. The one he first told the FBI and his family, and the one he told after he was offered a chance at no prison by being a cooperator.

Maybe he was Watson’s useful idiot, but one thing is for sure. He committed crimes – securities fraud and wire fraud – and aggravated identity theft – and he got off the hook.

The case shows us how to turn justice into a reward system for criminals.

 The Conspiracy Charge: A Legal Shortcut

There is another issue. It is a little nuanced. The U.S. Attorney’s Office for the Eastern District of NY had no evidence to charge Watson with securities fraud, wire fraud or aggravated identity theft.

So they had to charge this differently to let Rao off the hook. Rao committed the actual crimes. Watson did not.

So, the prosecutors charged Watson with conspiracy to commit securities fraud and conspiracy to commit wire fraud, an alleged conspiracy with Rao. The prosecutors decided not to charge Rao with the actual wire fraud and security fraud charges.  How could they? They can’t charge the cooperator with worse charges than the main target.

Rao admitted actual wire fraud and securities fraud, and aggravated identity theft. He did the forging, the impersonations, the faking of the phone calls. If the allegations are true, Watson only conspired with the perpetrator, Rao. Rao did the crimes.

But the feds wanted Watson, the high-profile CEO. Rao was a little bitty insignificant tinsel puff of a man, an inchoate man, a man without substance. No headline in this fool.

Prosecutors charged Watson (and Rao) with conspiracy —a crime that doesn’t require proof of harm or even execution. It’s like attempted fraud.

Judge Komitee, when defending his conflict, admitted that the victims he got rich from did not lose a dime because of Watson or Rao. A conspiracy to commit fraud without a charge of actual fraud is then not an actual success at defrauding anyone. A conspiracy charge is almost always a secondary charge to the real crime – the fraud.

The prosecutors had the rascal who did the crimes, and allowed him to change his story and blame Watson. They had a huge story of prosecutorial success and accomplishment – the takedown of an uppity media magnate not some sickly demented deviant rascal who betrayed his company and the people who depended on him.

No, Samir Rao is no story. Carlos Watson is. Just think New York Times.

Now maybe Watson is guilty. But prosecutors in Brooklyn bypassed the harder burden of proving substantive fraud crimes by shaping a conspiracy narrative that leads to equally heavy sentences.

Unfair Trial: A Circus in the Courtroom

If you read the media reports, Carlos Watson’s trial was a straight forward case of fraud, and he got a fair trial.

Yet the transcripts, the docket, and eyewitnesses inside the Brooklyn federal court of Judge Komitee reveal a very different picture.

It seemed like a show trial—a circus. Maybe Watson is guilty or maybe innocent, but the way the judge conducted the trial, how would anyone know?

It was not only the shortcut conspiracy process that got him there with the prosecution buying the star witness with a promise of freedom, but it was also obvious that the judge seemed determined to ensure Watson was convicted.  At first I thought he just liked the young prosecutors.

Then you find he got rich off Watson’s supposed victims and is still in partnership with them and it makes sense.

The trial itself was day after day, as the transcripts show, the case of a judge with his thumb on the scales of justice. I could write a whole book about it. It is startling to read the transcripts – especially the sidebars

We will get into it later, but as a cherry atop the insane injustice sundae was Komitee’s jury instructions.

Jury Instructions Tilt the Scales of Justice

A flimsy case where, throughout, the prosecutors and Komitee conflated conspiracy with the actual crimes and pulled numbers out of their hats, ended with bizarre jury instructions.

The judge mixed up the law, instructing jurors that wire fraud and securities fraud were essentially the same thing. They aren’t, but you would not know it from what Komitee told the jury.

We will examine that later.

I learned a good lesson about federal trials from this. it is not so much the trial itself, it is what the judge excludes as evidence from the trial through motions in limine and sua sponte rulings during the trial – always in favor of the prosecution and the tilt he ever so slightly puts on the jury instruction that can ensure victory to the prosecution so they don’t really need all that much evidence.

There isn’t a trial. The die was cast in the bookends – the motions in limine before the trial that exclude all kinds of full context evidence, and the jury instructions at the end to ensure the jury convicts.

In the high-profile trial of Carlos Watson, Judge Komitee added one more guarantee for the prosecutors.

Whenever they stumbled or failed to ask a question or make an objection, observers (it’s all in the transcripts) Judge Komitee rushed in.

He interrupted the attorneys hundreds of times to ask witnesses questions the young prosecutors forgot to ask.

You see that now and again when a judge asks an occasional clarifying question. I stopped counting at 100 and oddly all the questions Judge Komitee asked were to help the prosecution’s theories. Someone should do an analysis. Just a patient analysis in context. When Judge Komitee interrupted the lawyers on either side, it was to help the prosecutors.

But there was something even more bizarre. About 35 times, by my count, Judge Komitee sustained his own objections. How do you describe this bizarre scene? Normally, it is up to the attorneys to make objections and the judge to rule. But Komitee was so involved in winning this case for his friends at Goldman Sachs and Google, that whenever the prosecution failed to object, Komitee, supposedly the judge, made objections for them, and then he said sustained.

It seemed surreal. But read the transcripts. It really happened. Komitee admitted he did this, but he said he also objected to questions on the defense’s behalf.  So I did an analysis. Thirty six times by my count he objected. Of these 36 objections that the judge made and sustained, 32 favored the prosecution. They were important setbacks for the defense. Four times he objected for the prosecution. They were innocuous objections that seemed more to bring the prosecution round to a different kind of questioning – which sometimes the judge did for them.

And the coup de grace was Komitee’s flawed jury instructions. By omitting the requirement to prove Watson intended to harm, the instructions allowed the jury to convict based on deceit alone—without intent—making wire faurd and securities fraud indentical.

If the conduct Watson allegedly committed was true, he would have been guilty of conspiracy to commit securities fraud but not conspiracy to commit wire fraud. Watson clearly had no intent to harm anyone who invested or lent Ozy money.

By changing the jury instructions for wire fraud to mimic securities fraud – which does not require intent to harm, but only deception, Judge Komitee releived the prosecution of  the burden of having to prove two crimes.

Judge Komitee made them both the same.

Why does it matter? Conspiracy to commit wire fraud comes with a harsher sentence.

The Broader Implications of Watson’s Case

A media-induced prosecution with a save-my-ass cooperator with conspiracy-only charges and no actual crime, with a conflicted judge who ran a show trial and  gave the jury patently false instructions — that’s enough hair to call it a gorilla. The Second Circuit has the matter now.

To be continued…

Frank Parlato

Frank Parlato is an investigative journalist, media strategist, publisher, and legal consultant.

Frank Parlato

Frank Parlato is an investigative journalist, media strategist, publisher, and legal consultant.

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