ARI SHAPIRO, HOST:
The digital media company Ozy is having a meltdown right in public view. A New York Times expose found Ozy engaged in deceit toward investors and alleged the outlet lied about its performance. Ozy's co-founder and CEO, Carlos Watson, has called the New York Times article a hit job. And this is close to home because Watson sits on NPR's board of directors. NPR media correspondent David Folkenflik is here to sort through this.
DAVID FOLKENFLIK, BYLINE: Hey, Ari.
SHAPIRO: So Ozy Media claims that millions of people consume its content regularly, a claim we will get to in a moment. But for those who are not familiar with the company, tell us about them.
FOLKENFLIK: Well, they've been seen - or at least presented themselves - as a millennial, Gen Z media outlet led by a charismatic co-founder and CEO, Carlos Watson. And I think it's fair to say they presented themselves as the future of digital news media, with strong online content. And they've - they proliferated with connections with broadcasters as well. They claim to be ahead of the curve in identifying rising stars, like Alexandria Ocasio-Cortez and Trevor Noah. And in the process, Watson and his colleagues raised tens of millions of dollars from big-name investors, including Laurene Powell Jobs, a former top lawyer at Google, Axel Springer, the publisher, and others.
SHAPIRO: Now, this New York Times report included some wild details.
SHAPIRO: What did they allege?
FOLKENFLIK: I think the most colorful and troubling in some ways was that in making a presentation to Goldman Sachs, which was poised to make a $40 million investment in Ozy, the co-founder and chief operating officer, Samir Rao, faked being a senior YouTube executive. Why'd he do that? Well he - as the executive, he was making these wildly unrealistic claims of traffic that Ozy was supposedly getting through YouTube. And one of the things that The Times' Ben Smith documented was a pattern of what he found to be wildly unrealistic claims of digital audiences in other ways as well - through their web traffic, for their email newsletters and other venues, too.
SHAPIRO: So that story dropped early this week, made a big impact. What has the fallout been?
FOLKENFLIK: Well, before the article itself, months ago, Google pushed for an investigation by federal authorities - Google, the parent company of YouTube - saying, look, this is a misrepresentation. This is very serious. The FBI was given that material. We don't know what happened next. Watson did confirm that, in fact, Rao did represent himself as a YouTube executive on this conference call. He claims Rao had a mental breakdown and took leave from the company to tend to himself. Rao has been silent throughout all this. Subsequent to the article, there's an announcement of the board that they would - they had commissioned an outside legal review by a big-time law firm, which they didn't do months ago when they first learned about this. There's a resignation of a top news executive, Katty Kay, who'd come from the BBC. Investors have distanced themselves. One said today they were dropping out. And there's been cancellations - cancellations of an Ozy TV series on the A&E channel, cancellation of a festival due to begin soon as well and other appearances by Watson.
SHAPIRO: And what has Carlos Watson said about this?
FOLKENFLIK: He's publicly defended the company's claims about its audiences. He started out as a junior figure, ironically at Goldman Sachs, but this company these days seems built to propel him in some ways as a personality and star. A lot of claims about him seem to be either fabricated or taken from Ozy's own promotional materials. And, for example, if you look at his claims that his talk show was Amazon Prime's first major talk show, that's not true at all. They had to take down that claim.
SHAPIRO: As we mentioned, he sits on NPR's board. What is NPR's position?
FOLKENFLIK: Carlos Watson's been on the board since 2016. NPR confirmed that he was just reelected to a new three-year term that's supposed to start in November. And NPR says the board's governance committee is closely monitoring. And we should acknowledge he had earlier relationships. He frequently appeared on "Weekend All Things Considered" for a stretch and cross-published Ozy's pieces.
I should also note, NPR's executive team and news executives didn't review this segment before you and I came to air. That's part of our protocol to keep our coverage free of corporate influence.
SHAPIRO: So what does this mean for the future of Ozy Media?
FOLKENFLIK: As I said, YouTube has asked the FBI to investigate. We don't know what the status of that is. Watson says no requests have been made of the company by FBI or other federal investigators yet. I think it's also telling how easy it is for smaller digital media companies to make grandiose claims and skate by, at least until they fly too close to the sun.
SHAPIRO: NPR media correspondent David Folkenflik, thanks for your reporting.
FOLKENFLIK: You bet. Transcript provided by NPR, Copyright NPR.