US judge rejects Ozy Media founder's recusal request over hedge fund investments
By Nate Raymond
Nov 19 (Reuters) -A federal judge on Tuesday rejected a request by Ozy Media and its founder Carlos Watson to step aside from their case and throw out their securities fraud convictions, saying they had made "frivolous" allegations that the judge was financially conflicted from hearing the case as a result of his hedge fund investments.
U.S. District Judge Eric Komitee in Brooklynwrote that the bid by Watson,a former cable news anchor and investment banker, was "long on innuendo but decidedly short on substance."
Komitee said Watson and his company belatedly sought his recusal over investments publicly disclosed before they had been charged in 2023 and "remained silent about these alleged conflicts until after they were convicted at trial."
Watson and Ozy in a recent motion had sought Komitee's recusalciting $6 million to $30 million he had invested in funds managed by Viking Global Investors, as detailed in the judge's 2023 financial disclosure report.
Komitee, who was appointed to the bench in 2019 during Republican President-elect Donald Trump's first term, had served as general counsel for Viking before joining the bench, and Watson and Ozyargued his disqualification was warranted based on those investments, as well asstakes worth $10 million to $60 million in funds managed by two other investment firms.
Through those hedge funds, Komitee held indirect beneficial ownership worth $126,000 to $1.1 million in 2023 in four of the victims of the alleged fraud at Ozy Media: Goldman Sachs, Google owner Alphabet Inc, LiveNation Entertainment and JPMorgan Chase, according to the motion.
Komitee said even if the motion were not untimely, his recusal would still be unwarranted as he never had a direct or indirect interest in any party in the case and none of the four victims lost money or were entitled to restitution.
While judges are required to recuse themselves when they have a financial interest in a case by statute and under the Code of Conduct, Komitee said his investments also fell in a safe harbor covering stakes in mutual or common investment funds that are invested in a diverse collection of stocks.
Andrew Frisch, a lawyer for Watson, said he would take the issue to the 2nd U.S. Circuit Court of Appeals.
"The consequence of wealth in the judiciary is important to this case and to all of us," he said. "The question for the court of appeals is whether an objective person knowing all of the recently revealed facts would reasonably question the judge's impartiality."
Ozy, a California-based news and entertainment company, imploded in 2021 after news reports questioned its audience numbers and revealed that a top executive had impersonated an executive at Alphabet's YouTube during a call with Goldman Sachs bankers in which he claimed that the streaming site had agreed to pay for exclusive rights to an Ozy show.
Federal prosecutors alleged Watson and Ozy falsified information about Ozy’s finances and audience size, fabricated contracts and inflated earnings projections to court investors.
Watson and Ozy are slated to be sentenced by Komitee on Dec. 13 after they were each convicted in July of securities fraud conspiracy and wire fraud conspiracy. Watson was also convicted of identity theft.
The case is U.S. v. Watson. U.S. District Court, Eastern District of New York, No. 23-00082.
For the United States: Jonathan Siegel, Gillian Kassner, and Dylan Stern of the U.S. Attorney's Office for the Eastern District of New York
For Watson: Andrew Frisch of the Law Offices of Andrew J. Frisch
Read more:
Convicted Ozy Media founder argues US judge conflicted due to hedge fund investments
Ozy Media founder Carlos Watson convicted in New York fraud trial
Ozy Media founder engaged in 'massive fraud,' prosecutor says as fraud trial closes
Reporting by Nate Raymond in Boston
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