Goldman Sachs, Ozy Media and a $40M conference call gone wrong
nytimes.com
nytimes.com
First of all, wow. That takes a lot -- a lot -- of chutzpah. And a lot of arrogance too.
Second, Ozy's board of directors described this reckless con as a "mistake." Apparently the impersonator is still at Ozy. (Wait... What?)
Third, I'm reminded of the later stages of the residential mortgage market bubble, in which the zeitgeist was captured by the phrase "extend and pretend." The zeitgeist now may be best described as "fake it and pretend."
Again, wow.
And it's not just high profile entrepreneurs. Everyone knows people like this, they're all around us, climbing the corporate ladder. Mediocre performers, but boy can they "look the part", flash a big gorgeous smile, and talk in ways that sound pleasing to leadership but are ultimately empty words.
Coincidentally, this also characterizes Ozy's content, which is unbelievably vapid and safe, but delivered with an unearned tone of gravitas. At least TED(x) talks were sometimes good because of the sheer number of them. Ozy content is never good.
Does putting up a great face necessarily mean the content must be garbage and the whole package cannot be just as great?
I predict a no federal jail, or a few months, like a Martha Stewart. She will write her bio.
She will be on the talk circuit the minute the trial is over, and talk about being a victim.
I don't think she will wear the black turtleneck ever.
My wish is they start to fining white collar criminals much more, especially the wealthy ones. Federal prison time for wealthy criminals seems like a vacation. Get them where they worship---their money. Every time I hear the fine, I cringe. Is that all? I would like to see all societal fees/fines tied to assets. She shouldn't feel able to capitalize on the crime either.
Then again I have never understood the logic of making a poor man pay the same fine, as the poor man.
I wouldn't be so sure. That whole "woke" thing is turning on white women and gay men rather quickly. Granted it's mostly middle-aged white women up to now, but Elizabeth Holmes has become a symbol of some excesses that are unpopular all over.
This is an incredibly vile thing to wish upon anyone.
I hope you take some time to reflect what a long prison sentence actually implies in the US and consider whether or not that’s actually an appropriate punishment for what only amounts to a financial crime.
Woah woah woah.
If we want to claim that any tech salary is hard working and struggling, then I suggest you spend a summer digging ditches for the DOT, coal mining, or working in a factory.
In the US, programmers make about 2.5x the median salary (2019) [0]. The entire US median in 2019 was $35,000.
So remember to look down for perspective too, not just up.
[0] https://www.ssa.gov/OACT/COLA/central.html https://money.usnews.com/careers/best-jobs/computer-programm...
As for the struggling part, if you control for cost of living the picture is going to look a lot different.
Fishing? 3.0 Bituminous coal underground mining? 3.0
Framing contractors? 4.5 Soft drink manufacturing? 4.8
Leather and hide tanning and finishing? 7.1
Computer systems design and related services? 0.1
Fatal injury rates fall along the same lines [1], and programmers commit suicide at less than 1/2 the rate of high risk occupations [2].
There's a difference between going home mentally exhausted, and being unable to go into work because your body is that injured.
Or to put it another way: if you were offered your equivalent salary, would you go fish Alaskan king crab or join a logging crew tomorrow?
[0] https://www.bls.gov/web/osh/summ1_00.htm (Table 1) https://www.bls.gov/iif/oshwc/osh/case/cd_r4_2019.htm (Table R4)
[1] https://www.bls.gov/iif/oshwc/cfoi/cftb0332.htm (Table A-5, Fatal incident counts by occupation) https://www.bls.gov/charts/census-of-fatal-occupational-inju... (Occupations with the highest rates)
[2] https://www.cdc.gov/mmwr/volumes/69/wr/pdfs/mm6903a1-H.pdf (Suicide Rates by Industry and Occupation, 2016)
Having said that, would you settle for "diligent"?
Which isn't to say that we aren't putting in work, or doing our best, or burning the candle, or creating amazing things.
You can do all of those things, and still not have as difficult a job as someone else. Because all work isn't the same.
And so I take a chunk of umbrage at whinging about the unfairness that we make so little while doing so much. "... struggle through and at best maybe make a decent living..." is a pretty damned entitled way to see the world.
We'd also have to exclude all the workers that aren't in abusive conditions, like self owned artisan shops, plumbers etc. And exclude gig economy workers who don't literally work themselves to death and only work "a lot" for little pay.
You might be right, but the slice left is so small I am not sure it's a useful distinction in most conversations. Perhaps qualifying ditch digging and coal mining as "extreme working" and "hardcore struggling" would be a better fit.
People with it easy: 2.5x median and working in an office, which includes programmers
People with it hard: making little and doing backbreaking labor
People with it medium: everyone else
So we shouldn't say people in the easy category are struggling, and for perspective we should think about people in the hard category. But we can't say one way or the other about people in the medium category.
I wouldn't say programmers have exceptionally high mental discomfort; we certainly don't have high physical discomfort. And we're well compensated, relatively speaking.
In contrast, we have oil field workers(?): uncomfortable physical and mental work, but well compensated. Or meat processors: uncomfortable physical and mental work, poorly compensated.
By that metric, it seems like we're doing pretty well.
In short:
- i earn 1.5x the average salary/wage in my country
- that figure is approximately 1500 euros per month
To afford a house in my region of the country [1], i'd need to save up around 100'000 euros, which is the equivalent of 67 months' wages, or ~134 months with the ability to save 50% of what i make. It'd take me over 11 years to afford my own house, something for which i really don't have an answer - most people just rent apartments instead (also we're talking about countryside properties here, not the ones in cities).
Of course, it's not all bad, but how much money people in various careers make and how much PPP holds true in a globalized economy varies greatly, as expressed in that blog post of mine. Some countries are just poor and the people in them aren't well paid. Some companies are profitable but aren't incentivized to pay developers anything above what they can get away with - which is also why many of the WITCH companies have regional offices in my country, as we're one destination for outsourcing. As for how hard these careers are, it depends: some people are miserable working in software, but at the same time at least it isn't back breaking work.
Links:
[0] https://www.volkswagen.lv/lv/models/golf-8.html
[1] https://www.ss.lv/lv/real-estate/homes-summer-residences/lim...
Maybe you’ve been lucky enough to only have jobs with high pay, low stress, and good work life balance, but I’m sure you’ve seen enough tech burnout stories to know that tech jobs are not always easy. The factory worker and the engineer have vastly more in common with each other than they do with Elizabeth Holmes or Adam Neumann.
At first glance, that seems to implicate both the CEO and the COO/cofounder in the fraud. Even if you buy the story that the COO was experiencing a mental break, I wonder what the CEO's excuse was? Must be pretty good, since his board apparently was fine with it...somehow.
(One rather suspects the FBI and the SEC will be less impressed.)
If you search for the CEO's name on Google Images, you get a wall of photos with the exact same broad, fake smile. What a character. It's amazing what some people can get away with.
My guess is the board is made up of investors who don't want to see their money disappear when the leadership gets criminal convictions. That is why they brushed it under the rug.
If execs and top leadership simply walked the talk it will do far greater good.
I struggle to understand how these board members think they’re fulfilling their duties. When you learn management is committing crimes in order to raise funds it doesn’t seem reasonable to then take management’s explanation at face value after they’ve been caught.
What if this had worked? What if Goldman hadn’t noticed anything unusual and had coughed up the $40 million? Wouldn’t Goldman have been embarrassed when this story came out? Well, no, because this story never would have come out! [...] Once you’ve been tricked into investing in a high-flying startup, the only rational move is to hope that they succeed, clean up their act and go public at a higher valuation. You’d never go around saying “we were tricked”; that just destroys value.
Similarly, if you are an investor and board member of a hot startup, and you find out that the co-founder impersonated a customer to try to trick someone into investing, what are your incentives? If you make a big deal about it and throw around words like “fraud,” it will be hard for the startup ever to raise money again, which might make your own investment worthless. If you say, meh, unfortunate one-time event, no harm no foul, then maybe the company’s vision will end up working out and you’ll be able to sell at a profit. If you invest in a startup you are buying an option; your goal, as a board member, is not to extinguish the option value too soon. Just, you know, let it ride, see where this goes.
A help into their accounts might help here.
From the article: "When YouTube learned that someone had apparently impersonated one of their executives at a business meeting, its security team started an investigation, the company confirmed to me. The inquiry didn’t get far before a name emerged: Within days, Mr. Watson had apologized profusely to Goldman Sachs, saying the voice on the call belonged to Samir Rao, the co-founder and chief operating officer of Ozy, according to the four people."
WTF?! This is immaterial on the company's value (it may be successful despite), but how is the individual in question still employed at the company?
I've gone through some low points, but never have I attempted to impersonate another company's executive in order certify traffic claims and secure funding.
Jesus.
> The notion of temporary insanity argues that a defendant was insane during the commission of a crime, but they later regained their sanity after the criminal act was carried out. This legal defense is commonly used to defend individuals that have committed crimes of passion. The defense was first successfully used by U.S. Congressman Daniel Sickles of New York in 1859 after he had killed his wife's lover, Philip Barton Key.
Of course the first successfull use would be a politician.
It certainly doesn't just place the individual back in their old job.
It does not necessarily follow that your company is inherently fraudulent or worthless. Lots of terrible people run financially solid companies.
Would I invest a dime? Hell no. But it doesn't mean that it's not a valuable company.
And I try and be pendantic, as "(Proven bad thing), so (worse thing that doesn't logically follow)" appears to be the paintbrush of our times.
The company is worthless unless the founders realize their vision, and investors who were already suckered into funding it don't want to rock the boat, because it will make their entire investment evaporate.
This males me wonder what else will develop from this now that they've gotten the attention they very much wanted to avoid.
Just how thirsty are Goldmans to do deals in this space is the thing I want to know.
Investing and charity does seem to be merging in quite a puzzling way. Saying that this company has been "so successful" after the founders have been caught committing fraud (not in the legal sense) is inexplicable.
I worked in finance. If this happened at a company that I recommended, I would have lost my job (I actually know a fund manager who had a well-publicised 5% position in a company that failed, they had institutional money only so the reaction was swift...50% drop in AUM, investors demanded they fire 75% of the analyst team...this does happen in finance). I guess not everyone has to play by those rules.
Ironically, it sounds just like old media. Pay a few good 'ol boys to put out the stuff I like and agree with. I will lose all my money but...who cares?
That their first instinct was to frame the excuse as empathy for an employee struggling with a “mental health episode” says it all. They know their audience.
Their YouTube Channel [1] makes it immediately obvious they do not have anything close to a consistent viewership audience of millions. Anyone who invested in this should fire their entire due diligence staff. Existing investors are the main idiots here, with Goldman only redeeming themselves at the last minute. YouTube doesn’t have much skin (no pun intended) in the game. Nobody is gonna pursue this further because it will look bad.
For a company that claims to have 25 million newsletter subscribers?
Surely, no matter how out of touch they are, these old investors understand that not a single teen and college studens actually watches Ted Talks every day, reads Vox, listens to the NYT Daily on their way to classes, and has the Open Society Foundations RSS feed on their phone, right? They understand no one actually gives a F** about "media companies that challenge the status quo, shake things up, and go deep on the issues that matter most". Come on! The most "media" they watch is Linus Media Group, the Daily Show, and John Oliver. Only slightly exaggerating. It's impossible for them to be this out of touch!
Also, IME generally people start reading more seriously, such as the NY Times, etc., when they're older; we need data on how such a media company performs in markets relative to some standard for realistic expectations. I'm sure the NY Times has few readers among high schoolers, but that doesn't indicate future problems
Their "Carlos Watson Show" channel looks a lot more legit (though nowhere near the numbers they're claiming): https://www.youtube.com/channel/UCyF0994XbriKL_Vss0fTUMw
and they also produce podcasts, news articles, and newsletters that presumably have some subscribers: https://www.ozy.com/pg/podcast/ https://www.ozy.com/pg/news-and-politics/ https://www.ozy.com/newsletters/
Best part of 100k subscribers - and views for the videos 1 week ago: 223, 223000, 249, 188, 82, 232, 570, 123, 14000, 102.
I guess they forgot to buy followers for the Carlos Watson Show instagram account, 1,075 followers. Although it does get about as many likes and comments as the posts on the 'corporate' Instagram account with its 655k followers.
- https://www.youtube.com/watch?v=CdazNWPT-aM
I bet Ozy has next-to-zero organic traffic to any of its properties.
Wow, that positive spin is a stretch.
When you read this paragraph the only plausible scenario is that the CEO was actively involved in this whole idea of faking the conference call:
After the meeting, someone on the Goldman Sachs side reached out to Mr. Piper, not through the Gmail address that Mr. Watson had provided before the meeting, but through Mr. Piper’s assistant at YouTube. That’s when things got weird.
/s
When I was a student (but under a contract nonetheless) I was once threatened with termination because I took off my shoes while at my desk on a Friday at around 6pm (everyone left at 4pm, but I wanted to finish something that bugged me the whole week). Another guy next to me noticed it (trust me, there was no foul smell ;)) and it filed a report on misbehavior. What ensued was one of the most bizarre episodes I ever experienced with regards to "corporate life" (although I was in academy but w/e).
I got several emails from people that were somehow involved in that chain of command condemning the action; plus I had to go through two serious conversations regarding the incident, one with my direct supervisor and another one with the director of the whole faculty (!), where he took his time to explain to me how no one would like to employ somebody who displays such unprofessional behavior, etcetera ... Turns out that, for some people, it is a big deal if you take off your shoes, while sitting at your desk, on your office, on a Friday night. ¯\_(ツ)_/¯
Fast forward to today and (quoting the great Mark Levine):
"The CEO of the company gave a potential investor a fake email address for a big customer, and then the COO digitally altered his voice to impersonate that customer on a call with the investor [...]"
but
"[...] the board decided not to investigate because ... they were satisfied that this was just a one-time thing, a little oopsie, everything else that the company does is completely aboveboard, and anyway no harm no foul"
Whew! We all play the same game, right? Just not under the same rules.
Of course this arrangement seems unfair; this may be a good argument for going cashless.
Apparently it was a security violation, and I was warned never to do something so dangerous again.
They pretend to follow PCI[1] in a few ways while breaking it in orders of magnitude more ways. Explaining this to them is a nightmare.
I've seen so many post-its with login/pw just everywhere, unlocked machines, hints that were the password, one-word obvious dictionary passwords- but if you bring in a personal cell phone/book that's a serious and terminable offense!
Side-note: the worst offenders kf post-its woth sensitive info are people with offices, like someone doesn't clean their offices every night (see further down).
I once proved a point I could easily remember a complete CC# with all PII, walk out and write it down in the bathroom, yet still have rules saying you cant even bring so much as a book in with you. Which makes sense for following laws but not when you let random people walk in (HR, random favorite employees, whatever) with them even straight up notepads and pens.
Someone could also easily walk in with a voice recorder on and just record all day and go home. So the rules did nothing practically, was probably more of a way to get rid of undesirables.
All while the company is recording with ceiling-mounted cameras which went against their contracts (was to be visual only per compliance but wasn't), with public-facing IP without even a password(for the sole reason of wanting to make it easier to view the feeds from their cellphone), and hosted on a windows PC with Norton 360(PCI compliance after all!).
Once someone high enough up is making stupid decisions they are defended mindlessly and to the death. Pointing out the reasoning behind the decisions and ways to reach those goals without just pretending to will always fall on deaf ears.
Also many businesses seem to purposefully turn a blind eye to this[2], they do only enough KYC to CYA, etc.
I've seen businesses follow PCI and recommended FTC best practices only to contract out their janitorial services, who then subcontracted to someone else.
[1] https://www.pcisecuritystandards.org/pci_security/maintainin...
[2] https://www.ftc.gov/tips-advice/business-center/guidance/sta...
edited to add stuff
But, if they are holding a lot of equity in this company, they are also incentivized to brush it under the rug until they can offload their position. It wasn't clear to me if they had invested yet and were looking to invest more, or if they have no stake yet.
If they don't have a stake they probably just won't take one after this due diligence revealed even more than they bargained about the company.
The Board not only brushed off brazen fraud by the co-founders, its members went to the press to defend them. Minority investors, including employees with share awards, would have a case for damages.
Google, on the other hand, had one of their higher-ups impersonated to lie about platform statistics. I don't think they'll let this slide, if only to prevent other people from doing the same.
A better (more apt) Matt Levine quote might've been about the recent story of a Softbank exec taking his shoes off and resting his feet on the lap of some speechless Fifa exec on a private plane.
(I think it was repeated the next day or so in column on Monzo founder's similar anecdote about the same exec's toenail-picking, if you want to find it.)
I can't believe Goldman would even take their calls after that -- not that Goldman aren't greedy bastards, but that a company that pulls crap like that are very unlikely to be a good investment in the long run.
They aren't elaborating but it seems clear that the company has been buying fake traffic for everything they do, which is a core issue.
> Here’s another thing about being a private company. What if this had worked? What if Goldman hadn’t noticed anything unusual and had coughed up the $40 million? Wouldn’t Goldman have been embarrassed when this story came out? Well, no, because this story never would have come out! Even if someone had told Goldman after the fact “hey that call with YouTube was fake,” what would they have done about it? They could call Ozy and demand their money back but presumably Ozy spent it. They could sue, but how much would they be able to recover? Once you’ve been tricked into investing in a high-flying startup, the only rational move is to hope that they succeed, clean up their act and go public at a higher valuation. You’d never go around saying “we were tricked”; that just destroys value.
> Similarly, if you are an investor and board member of a hot startup, and you find out that the co-founder impersonated a customer to try to trick someone into investing, what are your incentives? If you make a big deal about it and throw around words like “fraud,” it will be hard for the startup ever to raise money again, which might make your own investment worthless. If you say, meh, unfortunate one-time event, no harm no foul, then maybe the company’s vision will end up working out and you’ll be able to sell at a profit. If you invest in a startup you are buying an option; your goal, as a board member, is not to extinguish the option value too soon. Just, you know, let it ride, see where this goes.
https://www.bloomberg.com/opinion/articles/2021-09-27/impost...
The idea is all the traffic is fake. Does that somehow get exposed by the YouTube call in a way that otherwise is not possible?
“I’ve never heard an explanation of Ozy that made sense to me,” said Brian Morrissey, the former editor in chief of Digiday, a publication covering digital media and the tech industry, who now writes The Rebooting, a newsletter focused on media businesses. He said he was struck by the company’s claims, adding, “then you do the gut check, and never once in my life has a piece of content from Ozy crossed into my world organically.”
That the majority of their YouTube videos get 10's or 100's of views. But then you can see that just by looking at the channel.
I really hope that this behaviour doesn't become any more normalized than it already has. Success is not worth anything, and, while some rules may be pointless, not every rule (and norm) is an obstacle you have to hack around on your way to success.
WHAT!? Even if I were to accept the mental health claim, that's only going to cover the lapse in judgement. I don't think it's reasonable to deflect on their being an intent to mislead Goldman by literally impersonating a senior YouTube executive to boast about your company. Simply saying "we were not" is really not a defense here.
1. Attack the messenger.
2. Shut down inquiry by reframing a brazen fraud attempt as a medical issue.
3. Deny everything.
Fraud, fraud, fraud. Elizabeth Holmes would be proud.
https://www.bloomberg.com/opinion/articles/2021-09-27/impost...
I'm getting extremely sick of the media continually trying to imply that the "line" between gross, outright fraud, and overly optimistic deadline setting is somehow "blurry". It's not. I've worked for startups my entire career, and while yes, I've seen execs many times spin things in a positive light, I have never seen anything approaching the clear, blatant fraud as was the case with Theranos, or as is the case here with this bizarre "Ferris Bueller's Day Off" impersonation skit.
Elizabeth Holmes didn't just overpromise on a future vision and then fail to deliver. She actively lied about the current state of her product, saying her product did something when it unambiguously did not. To contrast, I have many issues with Elon Musk, and he certainly over promises, and I certainly DO believe that some of his tweets ("funding secured" anyone?) have crossed the line, but I don't ever recall him saying "I have a rocket that can fly" but instead just throw a rocket out of an airplane and videotape it, which is basically what Nikola did when they rolled their truck downhill.
[Hillary] Clinton herself is here at Ozy Fest, in a flowing sky-blue caftan and white linen pants, looking like she was choppered in from East Hampton. For 45 minutes, she is the president of this little plot of Central Park, astride the ritziest Zip code in New York City, a bubble within a bubble within a bubble. Her interlocutor is billionaire philanthropist Laurene Powell Jobs, the sixth richest woman on the planet and a primary investor in Ozy Media, whose name comes from the Percy Bysshe Shelley poem 'Ozymandias'
https://www.washingtonpost.com/lifestyle/style/inside-ozy-fe...
"Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away."An easier example for my concern is Theranos. How many legit companies didn't get funded because Theranos was lying and getting funded? How many viable alternatives were killed?