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Federal Bankruptcy Judge Ralph B. Kirscher did not mince many words in a decision released this week in the Yellowstone Club bankruptcy case: Tim Blixseth's "pattern of self-dealing," is what ultimately led to the crash of the exclusive Montana resort. But, that doesn't mean he'll be on the hook for all the club's debts. Some, but not all. And, the club's lender, Credit Suisse, whose loan was at the center of the long, brutal battle over the club's finances, was no saint either. A large issue in the resort's bankruptcy case has been the $375 million loan from Credit Suisse that quickly evaporated after it closed. Not being able to pay that loan back was the crux of the resort's bankruptcy filing in fall of 2008. The club has since emerged from bankruptcy under new ownership. Blixseth was accused of pocketing the Credit Suisse loan for private jets and other lavish purchases and the bank was charged with being irresponsible, flippant even, in making the loan.

Judge: Blixseth Responsible for Yellowstone Club’s Collapse

Federal Bankruptcy Judge Ralph B. Kirscher did not mince many words in a decision released this week in the Yellowstone Club bankruptcy case: Tim Blixseth’s “pattern of self-dealing,” is what ultimately led to the crash of the exclusive Montana resort.

But, that doesn’t mean he’ll be on the hook for all the club’s debts. Some, but not all. And, the club’s lender, Credit Suisse, whose loan was at the center of the long, brutal battle over the club’s finances, was no saint either.

A large issue in the resort’s bankruptcy case has been the $375 million loan from Credit Suisse that quickly evaporated after it closed. Not being able to pay that loan back was the crux of the resort’s bankruptcy filing in fall of 2008. The club has since emerged from bankruptcy under new ownership.

Blixseth was accused of pocketing the Credit Suisse loan for private jets and other lavish purchases and the bank was charged with being irresponsible, flippant even, in making the loan. At one point during the trial, it came out that the fees for the loan were worked out on a coin toss. One of the club’s attorney’s Troy Greenfield put it this way last spring: ““The corporate greed of Credit Suisse and Mr. Blixseth’s sense of entitlement” created a toxic combination.

And in fact, Kirscher’s decision found that, “Contrary to Blixseth’s arguments, the Credit Suisse loan was created so that resort owners, such as Blixseth, could extract large distributions from their development projects, without the need for any personal guarantee. Thus, the overall purpose of the loan was not for development of the Yellowstone Club, but instead, the purpose was to permit Blixseth to take money out of the Yellowstone Club and in fact, the record shows that very little, if any, of the Credit Suisse loan proceeds were used to fund development and construction at the Yellowstone Club.”

The Credit Suisse part of the saga points to the larger story playing out beyond the Yellowstone Club: Large developments were popping up across the region and the lending market was loose. Then, the high-end market everyone was betting on crashed. Credit Suisse made similar loans to a number of other projects that soon went bankrupt, including Promontory in Utah, Tamarack Resort in Idaho, Lake Las Vegas in Nevada, and Ginn Resorts in Florida.

In his Yellowstone Club decision, Kirscher wrote: “In this case, Credit Suisse and the Prepetition Lenders are just as a culpable as Blixseth,” wrote Kirscher. He went on, “If Credit Suisse had wanted to go after Blixseth in the event of a default, it should have included such provision in the Credit Agreement. This it did not do… Blixseth and Credit Suisse have done a lot of finger pointing in this case, but in the end, their conduct prompted Debtors’ bankruptcies.”

As for Blixseth’s claims that the bankruptcy was caused by early litigation from Greg LeMond, the management of the club under his ex-wife Edra or a fallen-through deal with Sam Byrne and CrossHarbor Capital, Kirscher called hooey on all of them.

“Blixseth blames theDebtors’ downfall on the lawsuit filed by the LeMond Plaintiffs, the alleged conspiracy between Edra and Byrne, and Byrne’s failure to follow through with purchase of the Yellowstone Club in 2008. Given the evidence, Blixseth’s arguments are without support,” he wrote.

Attorneys tell Matthew Brown of the Associated Press that Blixseth is likely to have to pay up for $20-65 million of the club’s debt. The club’s total debt still looming is estimated at more than $200 million.

Click here to read the full memorandum of decision filed this week in U.S. Federal Bankruptcy court.

And, click here to read two years worth of New West’s coverage of the case.

About Courtney Lowery

Comments

  1. bearbait says:

    Now the process of getting blood out of a world class turnip begins. Timmy will not pay a dime in his lifetime. He has the resources to keep the lawyers busy for the rest of his life, and he will never pay a dime. Already he has shed a goodly amount of his theft from the poor (that is an oxymoronic description) investors in the YC. He has left Credit Suisse on the hook for most of it. My guess is that they will avoid paying, too. This legal process of herding cats to obtain a payout is mostly a way to keep the legal profession in shined shoes and good haircuts. The day anyone gets into bed with a guy like Blixeth, whose track record is unchanged for four decades, is the day their money flows to him, and in the end, the bled out investor will croak on the side of the Road To Happiness and Blixeth will be drinking fine wine on the bled out investor’s dough.

    More than a century ago, in Oregon, a guy from Portland with a lot of money from investments and publishing approached an experienced stockman from Jacksonville, Oregon, about the P Ranch, the huge place on the west side of Steens Mountain that Peter French had put together for Doc Glenn from California. French had been killed, and Glenn had died, and French was married to Glenn’s daughter, the widow who now wanted to sell. Hanley from Jville had experience, and Corbett, from Po’tland, had the money. They were in a business relationship for over twenty years, and at the end, Corbett had the experience, and Hanley had the money. Funny how that works out for those guys from Southern Oregon, like Blixeth. He is the living guy who can pull off a Corbett-Hanley Deal every time. We could call it the Sucker-Blixeth Deal. Blixeth has the experience, and Sucker has the money, and in time, the situation reverses itself. LaMond, et al, are living proof.

  2. Nancy says:

    Hopefully people will live long enough to see some money out of him. Not likely.

    On another note…..It’s been going around that Tim is actually missed at the YC. Current management is actually worse which is difficult to believe. There is apparently more self serving sponges than before. Who would have thought? I’ve only heard this from a few current yc’ers but it is quite possible. The members need to form a group to ensure employee satisfaction. Apparently the employees still haven’t seen raises after 3, no 4, no, going on 5 years??? Is this possible? The last I knew their mileage compensation was taken away and still no raises which means they are actually making less than they were a few years ago…..other than upper management of course. The YC can thank a terrible economy for holding onto some dedicated employees.

    Blockhead was never right on much or anything really but he would have been right on management going downhill.

  3. Shamus McQuade says:

    Blixseth reminds me of a lot of developers I have run into over 30 years. They owe everybody, never pay their bills on time, stiff their consultants, weasel their way through life, scamming, scheming and hurting other people for their own self aggrandizement, ego and gluttony of money and power. As former consultant and business owner from NY. I sold my business in early 2007 because the endless chasing money from developers like Blixseth, taxes, bloated insurance rates, corruption at every turn, and to sell my business while I at least had some good value in it. In the end it worked out, however for other people it did not. I saw the whole house of cards starting to fall through the likes of people like Blixseth all the way down to those who could never pay or afford mortgages to upset a financial system that we see today, along with politicians at HUD, Fannie Mae and Freddie Mac who were entrusted by the people to oversee these federal agencies, who have lined their own pockets with money and votes by furthering inept management at those agencies. In the end this is what we get, the entire nation in big trouble. Not to mention this kind of behavior fuels and reinforces the conviction, of the current administration, quest in eliminating the “greedy” capitalist system, under B. Hussein Obama. And who is stuck in the middle… you and I the small business owner, working person, families who pays taxes, sweats it out at each payroll and make sure out bills are paid. Blixseth’s verbal flogging by the judge does not affect people like him. They have no conscience to be affected. The damage that he has caused has affected other people and those people should be paid. In my opinion this kind of behavior is the same as going into a bank with a gun. It is criminal and punishment should be applied equally.

  4. Roscoe says:

    Nancy:

    The employees haven’t had a raise in several years partially becasue of the economy. Some of YC’s close neighbors have survived in part becasue of pay cuts to employee’s salaries. I can’t imagine anyone in this current economic situation realistically expecting a raise.

  5. Vigilante says:

    Wait until you see the mess unfold with Blixsth’s former buddy Dolan at the Club at Spanish Peaks…the next chapter in the novel of “Greed”…..saddle up it time to run’em out!

  6. Blockhead Returns says:

    Nancy,

    How the heck are you. So sorry the employees are not happy! In the end CS was guilty, Tim pays back an amount, Edra is bankrupt and faces more charges for bank fraud. Sam Byrne? He sold 35% to Ron Burkle, how silly can one be. He too faces many questions on his loans on Porcupine Creek but will escape justice just like all the greedy lawyers he has working for him. YC is now in the hands of a person who is more or less a shark in bankers clothes. Good luck to everyone. Does anyone know if Edra and Jack are still together? We heard Edra now lives in Sweden with her daughter to avoid extradition to the USA.

    I still believe Tim got the short end thanks to a greedy ex-wfie, a corupt investment banker and a lynch mob of local lawyers who were very greedy! What is going on with the Cs lawsuit from all resorts?

  7. bearbait says:

    Blixeth and short ends to sticks is his life: he never got the short end, however. It was HE who handed out short ends. And sometimes no sticks at all. He will never change, and how he ever got out of Douglas county intact, upright, is beyond me. I guess life really is not fair.

  8. Yes we can't says:

    Blockhead you are still one-eyed fawning over Tim…the first paragraph says quite clearly Tim is guilty. The fact he only has to pay a partial amount back does not make him innocent as you portray.

    “Tim Blixseth’s “pattern of self-dealing,” is what ultimately led to the crash of the exclusive Montana resort. ”

    You can rationalize and blame all you like, but in the end the court has found Tim Blixseth the central root cause of the collapse.