Ex-business partner of former ‘Fox and Friends’ host indicted for running real estate scheme – NJ.com

The ex-business partner of former “Fox and Friends” host Clayton Morris was indicted by a federal grand jury in New Jersey earlier this week for allegedly orchestrating a scheme to defraud real estate investors by selling them rental properties with the promise to rehab and rent them, and failing to do so, the U.S. Attorney’s Office announced.

Herbert Whalen, 45, of Indianapolis, Indiana, was indicted on one count of conspiracy to commit wire fraud and three counts of wire fraud.

The indictment says that Whalen and a co-conspirator used the alleged scheme to enrich themselves and fund their lifestyles. Whalen and his “co-conspirators caused millions of dollars in losses,” according to the indictment.

Morris, who recently moved to Portugal, has not been charged with a crime, but according to the Indianapolis Star, Whalen and Morris sold at least 700 homes together in Indianapolis over a two-year period that Whalen’s companies went on to manage.

A spokesman for the U.S. Attorney’s Office said the investigation is ongoing.

Authorities said a New Jersey company marketed properties online that promised to rehab the homes, secure tenants and offer property management services. Instead of selling the properties directly to investors, they were directed to wire payments to a title agency, that then allegedly wired investor funds to entities that Whalen controlled, according to the indictment.

In reality, according to the indictment, many of the properties were allegedly not repaired and rehabilitated, and were not ready for occupancy.

To conceal this, Whalen allegedly directed Oceanpointe employees to draft fake leases, making it appear to investors that Oceanpointe properties were rented, even though they remained vacant, according to the indictment.

When investors inquired about seeing the rental properties, Oceanpointe employees covered up the windows of the properties to conceal the poor conditions. Whalen’s Indianapolis’ properties have amassed nearly 1,800 code violations since 2015, racking up $700,000 in fines, according to the Indianapolis Star.

In an effort to silence certain investors, Whalen and a co-conspirator allegedly paid fraudulent rent payments from a pool of funds in order to make the business seem legit and to evade detection of the fraud., according to the incidtment.

The indictment alleges Whalen defrauded a South Orange resident, as well as a New York resident.

According to the indictment, the Essex County resident wired $40,480.50 in August 2016 to purchase a rental property in Indianapolis, nearly $14,000 of which allegedly was then wired to Whalen’s company, Oceanpointe Investments, according to the indictment.

Less than a year later, the co-conspirator allegedly emailed the South Orange resident a fraudulent lease stating that a tenant was renting the property. In a telephone call in June 2018, Whalen allegedly falsely told the person that “every house you own has been occupied,” even though the property was vacant, according to the indictment.

Morris and Whalen came under scrutiny last year after the Indianapolis Star and the New York Times outlined the alleged scheme. Two New Jersey residents are currently suing Morris and Whalen in state Superior Court alleging Morris attracted investors through his podcast, blog and YouTube videos, where the self-described real estate expert advertised his turnkey rental property investment strategy.

According to one of the lawsuits, after being enticed by Morris’ YouTube videos, Jihua Liu, of Avenel, soon began the process of buying a property through Morris in April 2018 for $50,000 and was told the rehabs would happen “within 10 to 12 weeks.” But ultimately, the property was not rehabbed.

Liu said in an interview with NJ Advance Media last year that his experience was “nowhere near what they advertised or promised.”

Morris has maintained he did not know about the problems.

“Clayton Morris and Morris Invest identify with the many investors who lost money through home-renovation, property-management, and other failures by Oceanpointe and its various corporate entities and employees,” David Hensel, Morris’ attorney, said in an emailed statement to the IndyStar last year. “Clayton Morris and his family purchased properties and were similarly damaged by Oceanpointe’s misconduct. The Morris family and Morris Invest have lost hundreds of thousands of dollars. Clayton and Morris Invest deny all allegations of wrongdoing.”

Morris’ wife, Natali Morris, told NJ Advance Media in an email in June that the family is moving to Portugal on temporary visas to allow their children to attend schools overseas amid “a hard few years in our business.”

Natali Morris said in June that they “cannot and do not intend to run from this.”

Joe Atmonavage may be reached at jatmonavage@njadvancemedia.com. Follow on Twitter @monavage.

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