“He comes across as this nice, likable family guy,” said Brian Freeman, a California lawyer who plunked down about $US40,000 for a ramshackle home that was in such bad shape he was issued fines.
“He’s famous and I thought, ‘He’s not going to ruin his entire reputation.’ Obviously, in hindsight, I feel like such an idiot.”
The Morrises face a half-dozen lawsuits, including one in federal court, and more will probably follow. Lawyers in Indianapolis are fielding calls from disgruntled customers and angry renters, and Indiana’s attorney general has opened an investigation. In response to a Freedom of Information request, the Federal Trade Commission said it had received 21 consumer complaints.
The couple insisted they were not to blame for the properties’ problems.
“We were a victim, too,” Clayton Morris, 42, said during an interview with his wife at a coffee shop near their suburban New Jersey home.
The couple said they had lost hundreds of thousands of dollars on homes that they and their relatives bought from a property-management company that was one of their business partners in Indianapolis. The company, Oceanpointe Investments, was the seller of the homes the Morrises’ clients bought and, according to the couple, it was supposed to do the renovations and manage the properties.
The Morrises said that Oceanpointe, which many Morris Invest clients said they had never heard of until after buying the homes, is the real villain and liable for any damages. Few, if any, problems have arisen in other cities, they said. Oceanpointe blames the Morrises, saying they are responsible for the promises made to investors.
Also caught in the middle are the renters who lived in some of the homes. They say that poor upkeep resulted in collapsing ceilings and frequent plumbing problems. Furnaces often did not work properly, leaving homes freezing cold in winter. One renter in a pending landlord-tenant case blamed poor living conditions for the premature birth of girl who died an hour after delivery.
The Morrises said they were not aware of the extent of the problems.
“We didn’t know any were living in abject conditions,” Natali Morris, 40, said.
The unfolding affair demonstrates the allure that real estate speculation still holds for individual investors roughly a decade after one of the worst housing crises in US history.
It can be problematic when such investors look to charismatic personalities for investing tips. Many of the financial gurus pushing investors into real estate play off fears of economic insecurity, according to Philip Garboden, a professor of affordable housing at the University of Hawaii at Manoa.
In a research working paper financed partly by the federal Department of Housing and Urban Development, Garboden wrote that amateur investors were vulnerable to exploitation by those who “evangelise” the process and tend to play down the risks of investing in “low-end” urban real estate.
“These are very incestuous networks,” Garboden said. “They know the contractors. The property manager. The whole system thrives on keeping every dollar invested in that network.”
Investment gurus, he said, tend to have a common message: Investing in real estate can help guide the average investor to financial independence.
Making the pitch
Clayton Morris’ sales pitch did not lean heavily on his career in broadcast journalism. But he did not keep it a secret, either. He alluded to his new career in a lighthearted seven-minute video send-off that Fox News put together that showed Morris competing in an obstacle course competition and grilling burgers outside the Manhattan studio.
Real estate investing, he said in marketing materials, had given him the financial security to quit his 9-to-5 broadcast job. “I’m a big fan of this radical idea that everyone should be able to achieve total financial freedom,” the biography on one of his websites says.
With his wife — a former anchor for CBS Interactive — he wrote a book, How to Pay Off Your Mortgage in 5 Years.
But the couple’s new venture did more than offer advice: It was a one-stop shopping experience for investors who wanted to buy rental homes — by dipping into their retirement savings, if necessary.
An email sent to one client who signed up last year summed up the pitch: “Are you working LONG hours but never quite able to get ahead? Are you worried about making COSTLY mistakes with a vacant rental property? Are you intimidated by the thought of DOING IT ALL yourself? Stop worrying, and let us take care it!”
The Morrises pulled in hundreds of customers from across the United States and as far away as Israel and South Korea. They helped sell nearly 700 homes in Indianapolis alone.
“It was his name and his promise,” said Larry McLeskey, one of nearly two dozen individual investors suing Clayton Morris in the federal lawsuit. McLeskey, who lives in Michigan, said that he and his wife, Kay, lost $US40,000 after selling a home in Indianapolis. “No one was taking care of the home.”
Danny Gomes, a real estate agent from Redding, California, sued Morris Invest separately after, he said, he lost $US52,000 on an Indianapolis home he bought last year, just days after it was largely destroyed in a fire. The house is now boarded up, its back half all but gone.
Gomes said he learned about the fire only several months later, when the city sent him a notice warning that the property was unsafe and needed to be boarded up.
Until then, he believed the house was being rehabilitated, work he paid for when he bought it. One of Clayton Morris’ employees, who is also Natali Morris’ sister, told Gomes she would be his “point of contact for the rehab process,” according to an email provided to The New York Times.
Gomes said it was only after he learned about the fire that he discovered Morris Invest was simply getting a referral fee for sending customers to Oceanpointe.
“When it hit the fan,” Gomes said, “they said they were just the middleman.”
‘Happy as a clam’
As the Morrises tell it, they were blindsided just like everyone else. The couple, who have three young children, said they were frustrated with all the anger directed at them. They have put their own home up for sale, in part out of concern for their safety.
They place the blame squarely on Oceanpointe and its founder, Bert Whalen.
The Morrises said they met Whalen in 2014, when they bought a few homes in Indianapolis and used Oceanpointe to fix up and manage them. By 2016, Clayton Morris was referring one or two investors a week to Whalen’s firm. The Morrises said they eventually formalized the relationship, sending buyers to Oceanpointe and earning a fee on each sale.
Clayton Morris said it was not until spring 2018 that he became fully aware of the problems his customers were having with Oceanpointe. The relationship formally ended in May.
The Morrises said they would not have gotten involved with Whalen had they known that Indiana regulators moved to deny a renewal of his real estate license in December 2015. A state regulator determined that he had failed to disclose convictions for operating a car and motorboat while intoxicated and, on at least one occasion, had not turned over rent money he had collected for a property owner. His real estate license was permanently revoked in January 2018.
Despite the break with Oceanpointe, the Morrises said they had many satisfied customers. Renovation work was done on 60 per cent of the 700 homes sold in Indianapolis, Clayton Morris estimated.
“There are hundreds of people who are as happy as a clam,” he said.
There are many, however, who are not.
For clients dissatisfied with the work on their properties, Clayton Morris said Oceanpointe had agreed to indemnify Morris Invest against all lawsuits and investor claims. The Morrises’ lawyer sent a letter to Whalen in October, seeking to enforce the indemnification agreement. The couple declined to provide a copy of the agreement.
John Tompkins, a lawyer for Whalen, blamed Morris Invest, which he said collected a $US6,500 referral fee on every property.
Whalen’s businesses “have done everything required by their investment agreements and contracts,” Tompkins said.
He disputed the suggestion that the indemnification agreement held Oceanpointe solely responsible for problems with the selling of the homes.
“The problems that have come up relate to Morris exclusively,” Tompkins said. “The misunderstandings of those buyers related to misstatements by Morris and his sales personnel.”
A New Venture
The Morrises have largely gotten out of the real estate business in Indianapolis. They are focused mainly on Detroit, where they have sold more than 200 homes, largely without the kind of complaints they face in Indianapolis.
Morris Invest, though, is no longer their top priority.
The Morrises are now selling an online financial advice and planning program: Financial Freedom Academy. The program offers a “proven system for building wealth, guaranteed,” according to its website.
The site describes a conversation that Clayton Morris said transformed his life: He was seated next to a real estate investor on a trip to New Zealand several years ago, and learned the man and his wife were on a two-month vacation after making money acquiring homes, fixing them up and renting them out.
“From that moment on, I made it my mission to follow in his footsteps,” Morris says on the site.
The New York Times