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Update, 4/30, 4:45 p.m.: Day two of the trail started with questioning of Michael Doyle, Tim Blixseth's long-time attorney, on the issue of when and how the decision was made to make the $209 million payout to Tim Blixseth from the Credit Suisse loan a "loan" rather than a "distribution." But for the better part of the day Missoula attorney and creditors committee chairman Steve Brown was on the stand, with Blixseth attorney Michael Flynn trying to prove that Brown is hopelessly conflicted because he represented - and "technically" still represents - Blixseth in various other legal matters, including the LeMond litigation. Flynn is seeking to have the case against Blixseth dismissed because of this issue. Judge Ralph B. Kirscher has said he will rule on that after the week-long trial is over. While Brown does appear to have a conflict, it's not clear what it has to do with the core issues in the case. Yellowstone Club founder Tim Blixseth took the witness stand in a Missoula courtroom Tuesday, asserting that he did nothing wrong in connection with a $375 million loan from investment bank Credit Suisse. "I started the club with a pick-up truck and a hammer," Blixseth said in explaining why business procedures were informal and thus certain key transactions were not documented until long after the fact.

Tim Blixseth Defends Yellowstone Club Deals

Update, 4/30, 4:45 p.m.: Day two of the trail started with questioning of Michael Doyle, Tim Blixseth’s long-time attorney, on the issue of when and how the decision was made to make the $209 million payout to Tim Blixseth from the Credit Suisse loan a “loan” rather than a “distribution.” But for the better part of the day Missoula attorney and creditors committee chairman Steve Brown was on the stand, with Blixseth attorney Michael Flynn trying to prove that Brown is hopelessly conflicted because he represented – and “technically” still represents – Blixseth in various other legal matters, including the LeMond litigation.Flynn is seeking to have the case against Blixseth dismissed because of this issue. Judge Ralph B. Kirscher has said he will rule on that after the week-long trial is over. While Brown does appear to have a conflict, it’s not clear what it has to do with the core issues in the case.

Yellowstone Club founder Tim Blixseth took the witness stand in a Missoula courtroom Tuesday, asserting that he did nothing wrong in connection with a $375 million loan from investment bank Credit Suisse.

“I started the club with a pick-up truck and a hammer,” Blixseth said in explaining why business procedures were informal and thus certain key transactions were not documented until long after the fact.

Blixseth was the first witness in a high-stakes trial that pits the bankrupt club and the committee representing unsecured creditors against Blixseth and Credit Suisse. The committee alleges that the 2005 Credit Suisse loan was a “fraudulent transfer” because the bulk of the proceeds did not benefit the club but in fact went to Blixseth and his then-wife Edra. The committee and the club also allege that the Blixseth breached his fiduciary duty by taking about $200 million of the loan for himself, and that Credit Suisse aided and abetted him in doing that.

“The Credit Suisse loan is very odd, very peculiar,” said creditors committee attorney Tom Beckett in his opening argument. He cited its “enormity,” the fact that is was a term loan rather than the credit line that’s usually used in development loans, that is was made without a “fair market value” appraisal (and thus had to be made out of a Cayman Islands subsidiary of Credit Suisse since U.S. law requires such an appraisal), and that there was “a huge distribution of cash to the owner.”

Atttorney Troy Greenfield, also representing the club, said Credit Suisse itself has referred to this loan product as a “gravy train,” and “that gravy train ran wildly off the rails.” Credit Suisse made similar loans to a number of other development projects that soon went bankrupt, including Promontory in Utah, Tamarack Resort in Idaho, Lake Las Vegas in Nevada, and Ginn Resorts in Florida.

“The corporate greed of Credit Suisse and Mr. Blixseth’s sense of entitlement” were a toxic combination, Greenfield said. And, in a pungent illustration of the fast-and-loose dealing in high-end real estate in 2005, Greenfield said — and Blixseth confirmed in his testimony — that a dispute over whether the Credit Suisse fee should be 2% (about $7.4 million) or 3% was resolved by Blixseth and lead Credit Suisse banker Jeff Barcy flipping a coin in the middle of a road at the club.

No one disputes that the Credit Suisse loan agreement allowed Blixseth to take up to $209 million cash out for himself. Technically, that sum was a loan from the club to BGI, Blixseth’s wholly-owned holding company, and Blixseth in turn borrowed some $190 million of that personally from BGI. But the club and the creditors committee allege these were in effect sham loans that Blixseth never intended to repay — and cite as evidence the fact that the promissory notes for those loans were not secured and were created many months after the fact.

Indeed, the questioning by attorney Thomas Hutchinson, representing the club, focused on showing that the reason Blixseth took the funds as a loan rather than a simple dividend payment (which would have also been allowed under the loan agreement) was to avoid paying part of it to the minority shareholders in the club, including former cycling great Greg LeMond. LeMond sued over this in 2006 and Blixseth eventually settled with him for $38 million – about half of which has been paid.

Blixseth, soft-spoken but grim-faced on the stand, countered that taking the money as a loan rather than a dividend provided more security for the loan, and that it was required for accounting reasons.

Blixseth’s real defense, though, is that the club was fine until 2008, and that its bankruptcy was a result of a conspiracy by his ex-wife Edra and Sam Byrne of CrossHarbor Capital Partners. “It was Edra Blixseth’s obsession to control the Yellowstone Club that caused this bankruptcy,” said Blixseth attorney Michael Flynn.

But U.S. Bankruptcy Judge Ralph B. Kirscher has effectively excluded that defense, ruling that this trial has to focus on the events and circumstances surrounding the 2005 loans, and not what happened in the couple’s divorce and in the March, 2008 collapse of a deal for CrossHarbor to buy the club for $407 million.

Credit Suisse, for its part, argues that it is not responsible for Blixseth’s actions, and that the loan was fine and did not render the club insolvent – as evidenced by the fact that CrossHarbor was willing to buy it three years later for an amount that would have paid off the debt.

The trial continues tomorrow and is expected to last about a week.

About Jonathan Weber

Comments

  1. Frodo says:

    Wow, Tim Blixseth is really starting to resemble ‘Gollum’ from Lord of the Rings…too much time pursuing the precious

  2. Ann says:

    I wonder if he’s related to Barney Frank? Also Who’s pickup and hammer did he ‘borrow’?

  3. Dave D says:

    Tim Blixseth certainly never had a hammer and would not be caught dead in something so pedestrian as a “pick up truck”.

  4. Mehmnet says:

    For Christ’s sake, he’s paying the BEST LAWYERS.

    They have gone over every nook and cranny of the history of the deal and it all comes down to the DELIVERANCE testimony: “I don’t remember anything”.

    Tim is a stupid crook, his lawyers are clever crooks, which translates into no one getting any money back.

    TIME TO MOVE ON!!!

  5. bearbait says:

    Step right up, folks. See the dancing girls, the bearded lady, the thin man. Step right up! We have the legal eagles, the judicial giant, the human eel defendant, the bottle blondes and the mysterious man in black. Step right up.

    Before you enter, be sure to buy a bottle of Tim’s Exilir, the recipe given to him by an old Indian chief. Had a beautiful daughter, Morning Star was her name. Ah, a bodaciius beauty she was. Morning Star Ponzi, of the Slickerman Tribe. Tim’s Exilir will cure what ails ya, and make you money to boot. Step right up!! Court decisions are not final. Anyone may appeal. Ah, yes, the testimony is great, tainted with the truth…..ocassionally.

    See the flim-flam man tell how he started with a beat up pickup truck and hammer, and nobody knows how many millions of OPM dollars, brought to him by the GYC Taylor Burn land trade supplicants…helped those indigent elk find a place to run with wolves. Step right up. Hear the the guys with the slicked back hair and the sharkskin suits play wordball with the judge….the Circus is in Town!!!!! Come to the Sideshow of the year. And buy some Tim’s Elixir…(.sotto voce: here’ a dime, kid, go somewhere and shut up)…..Step right up!!!!! Hear the one hammer builder tell how he deserved the hundreds of millions for his effort, and the need to buy a new hammer, a new pickup and a couple of G-5s. Step right up and buy a ticket to see the best show in Montanny!! See them furriners from Credit Suisse defend institutional insanity, graft, and corporate laxity (not the Los Angeles airport restroom disease). One thin dime, one tenth of a dollar, buys you a chance to see lawyers spar. The best ticket in town….Step right up. Buy a bottle of Tim’s Elixir and get in free….TGIF…..and your Congressman is airborne, and so are your Senators….coming for your money so they can give you someone else’s money. Step right up. Be a part of American Dream.

  6. billy says:

    any one who has worked at the club more than a year knows we were out of money long before 2008 ,erda is a f–k up but it is not only her falt the club is were its at now tim

  7. Blockhead says:

    Jonathan Webber,

    You really are letting your true colors come out. Why do you wish harm to CS and TB? You give slanted reporting? Why is this? You have covered this deal from day one and you do not report the biggest news filing the other agencies do about Edra owing more that 157,000,000 Personally? Why is this Mr. Webber? Why have you not done a full page article about the biggest crook and liar who ‘Robbed’ the estate of BGI for 157,000,000? Is this because you do not feel its news worthy that she ‘ROBBED’ CS, YCW Members and others of the 209,000,000 of promissory notes? Do you not care about the YCW members who have not recovered their deposits she agreed to reapay? Do you not care that WESTERN CAPITAL has be DEFRAUDED by Edra Blixseth for 13,000,000 or that Montana’s local bank has been defrauded by more than 20,000,000? You really need to eiher start reporting a fair account of Edra Blixseth and Sam Byrne or merely call your new paper and blog the ‘Supporters of Fraudersters and Wallstreet Crooks. You should be ashamed of yourself for not wanting to get the whole story out. Your campaign to attack CS and TB and support SB and EB is clear but at least run the stories for the readers. I really like you paper and am shocked you do not run these articles. did you not read her bankruptcy statements. Imagine, her good friend Burt sugarman who loaned her 500,000 is screwed! How would you like to be that friend. Petter Barrve is also listed who is her son-in-law is out over 350,000. What a great mother-in law. JW, you watch very closely, EDRA not Tim Robbed the estate. EB on her own attached 157,000,000 in personal loans to Porcupine Creeek and BGI. If you report this correctly that means she assumed the BGI loan notes of 209,000,000 and added another 157,000,000 to them. Thats a crime where we come from. Edra won Porcupine Creek worth 207,000,000 andd lost this to Sam Byrne for 35,000,000. What a deal for Sam Byrne! Edra got Farcheville worth 30,000,000 she got her Jet worth 3,000,000 her Casa Captiva worth 15,000,000 her cars, other homes etc worth 20,000,000 and she also used 25,000,000 of the Promissory notes to form Blxware and she ows this ccompany as well. So this creative farudster and I use this word cclearly as her BK statements show this and if you took the time to call her banks and the IRS this is what they are calling her, she had assets given to her with no debt. The moment she settled with TB, she palces 157,000,000 of debt on to those assets while she just won the Yellowstone Club! No wonder she could not do what TB was doing, that is JW, making land deals to insure CS was being paid. I know you cant handle the truth and as always you will delete this but you really should start reporting and quit trying to make yourself out as being FAIR and BALANCED as you are not. Tell all the readers you are a SB supoorter and you wish to see TB and CS fry on a stick correct? EB is the story now! She was played by SB ass being shown in court and SB knew she owed all this mooney and still gave her the 35m, 30-day loan! Do you get why that s wrong ad what advantage SB had over her? She really needs help and do us all a favor JW, call Waccovia, call First Bank, call the lawyers for Western Capital, call Bruce Ericcson at American Bank Montana. Ask them for a comment. Local banks who were ‘ROBBED wih a Pen ‘ by EB! She better get used to a 4×6 bedroom as even the IRS is cming after her for tax fraud! By the way, BLXWARE BLXWARE, BLXWARE, where did you go?

  8. blockhead says:

    Eric Ladd’s group of members bidding for the club are short on cash! I can not believe the members are going to allow Sam Byrne steal this club for a mere 30m! Members, get behind the bid for the members with Eric Ladd and insure Sam Byrne is not allowed to win this auction. After-all it was Edra and Sam’s brilliant plan which got us here! Sam, how did you not know Edra had owed over 100m? Sam, do you always investor your investors money without investigation? Amazing becuase we all know the truth and it will come out one way or another!

  9. Nancy says:

    blockhead,

    Why are you so desperate?

    30m would be a smart business deal don’t you think? Congrats to Sam. Are you losing faith in tb getting the club because you know he’s guilty? Why are you rooting for el’s group now? If we all know the truth then let the judge decide. Sounds simple the way you put it.

    Tim’s brilliant plan got us here. Don’t confuse the issue. We hear you loud and clear but know better. Anybody but tb is the way to go so let the judge fry tb and eb, one at a time.

  10. blockhead says:

    Nancy,

    Wow, s Cs made a good loan as well. Love you argument! Sam defrauded everyone with this loan. CS at least was a 5 yar loan you fool. Bravo to Sam I agree, I would love to be an investor in his funds! Good luck Nancy as I know you work for sunrise ridge!

  11. Nancy says:

    bh,

    List everyone Sam defrauded and we will compare it to the list of people Tim defrauded. We’ll see which list is longer.

    Maybe tb can delay the trial a week or so for jk’s funeral. Might be a good excuse and I’m sure he’ll use it. The clock is ticking.

    I think you’ll find more Sam fans working at yc then you will at Sunrise Ridge wherever that’s at. But then again the yc employees, members, vendors and contractors will take any owner over the b’s.

    You’re desparate aren’t you bh?

  12. B Burns says:

    fyi…tb was rolling in a black jeep cherokee back then…there was no pick up and certainly not a hammer in the vehicle…using a hammer would have messed up his freshly creased down the front designer jeans.

  13. another observer says:

    Funny, that is exactly what I saw.

  14. Former YCer says:

    B Burns….those designer jeans (creased down the front) that TB was sportin’ were stylin’!!

    Nancy, I enjoyed the comparison to the two fraudster: TB vs. SB….which one left more dead bodies in their wake? Does it matter…they’re both slicksters that can’t be trusted. Bearbait…love the carnival huckster story, its bang on and hilarious!!

  15. Former YCer says:

    TB is the only one that made out in this entire deal. Everyone else; the members, the lenders (CS), the investors like CH and especially EB will all be left holding the bag and get dragged through court after court while TB has his hundreds of millions stashed away somewhere that will be difficult to access. Yet another brilliant scheme to defraud the rich and greedy. We need Obama to step in on this on and fix it once and for all!!

  16. mochsie says:

    Nancy, you really riled BH with the Kemp reference, but I’d say Montana needs someone just like you. Bearbait, I think you are a friend of mine…and BH/TB, megalomanic, you like kicking the dog whenever you get a chance.