Former timber baron Blixseth goes on trial, accused of ‘looting’ $286M from Yellowstone Club

Club founder goes on trial for ‘looting’ MT resort

BILLINGS, Mont. — The founder of the millionaires-only Yellowstone Club goes on trial Wednesday to face claims that he fleeced the private ski resort out of at least $286 million.

Before its 2008 bankruptcy filing, the Montana club gained a reputation as an alpine haven for the nation’s elite. Its membership list includes Microsoft Corp. co-founder Bill Gates, hotel magnate Barry Sternlicht and former Vice President Dan Quayle.

The club came out of bankruptcy protection last year, but creditors are still chasing former owner Tim Blixseth in federal court.

They want a civil fraud judgment against the real estate tycoon and former timber baron, who used a loan ostensibly for the club to bankroll a gilded lifestyle of luxury jets, fleets of cars and international estates.

“His conduct can only be described as looting, and he should be held accountable for his actions,” creditors’ attorney Charles Hingle wrote in court documents.

A three-day trial is set to begin Wednesday before U.S. Bankruptcy Judge Ralph Kirscher in Missoula.

Blixseth, 59, claims the club’s debts were transferred to his former wife, Edra, when she got the 13,600-acre resort in their divorce settlement. He said that ended his obligations on the $375 million loan, which Credit Suisse arranged in 2005.

“She knew it and acknowledged it,” he said Tuesday. “I got waivers, releases.”

Edra Blixseth is in personal bankruptcy. She sold the club last year for $115 million to Sam Byrne of Boston-based CrossHarbor Capital Partners.

Under court order, she’s had to give up multiple homes and most of her jewelry and other possessions. Her main residence — Porcupine Creek, a 25,000-square-foot mansion with its own golf course in Rancho Mirage, Calif. — was recently put on the market for $75 million.

She has blamed her former husband for the club’s problems, starting with the 2005 loan.

Tim Blixseth, too, has been trying to shed property, including a small private island in the Turks and Caicos. The asking price was recently cut from $75 million to $48.5 million. Blixseth denied the sale was prompted by his court troubles.

Until two years ago, Tim Blixseth was listed on Forbes magazine’s list of the 400 richest Americans, with an estimated fortune of $1.3 billion. He’s no longer on the list and in an interview declined to estimate his worth.

Like many in the high-end real estate market, he said he’s been forced to “hunker down” since the recession and tone down his lifestyle.

He maintains his economic moves at the Yellowstone Club were the right ones — that it was thriving with $50 million in pending sales before the August 2008 divorce. Yet he also blames Credit Suisse for arranging a “predatory loan” he couldn’t have been expected to repay.

Three months after Blixseth severed ties with the club, the resort was $400 million in debt.

Newly disclosed billing records from one of Blixseth’s attorneys show he was contemplating the club’s bankruptcy months before his wife took over.

By that time, he also was setting up a Nevada partnership, Desert Ranch LLP, with his son, Beau, to hold property and other assets acquired through the 2005 loan. Desert Ranch received at least $245 million in assets, according to court documents.

The trustee for the club’s creditors, Marc Kirschner, contends Blixseth had seen the bankruptcy coming and set up scheme to protect his money from creditors.

Blixseth said he was estate planning and the club’s bankruptcy was discussed only as one of several future scenarios.

Blixseth is now remarried and lives in Seattle. Through the Nevada partnership, he also owns a ranch near Cody, Wyo., a $40 million resort in Mexico and the island in the Turks and Caicos.

If the bankruptcy judge rules against him, those assets could be used to pay off the club’s remaining debts, including the Credit Suisse loan.

Last month, Beau Blixseth and investors from several other resorts filed a federal lawsuit in Idaho, alleging Credit Suisse arranged the Yellowstone Club loan and similar transactions in a scheme to take over the properties.

The lead attorney in the case, Michael Flynn, works for Tim Blixseth. Blixseth said he is going after the bankruptcy’s true culprit, Credit Suisse.

Last May, in an earlier phase of Blixseth’s trial, the judge admonished Credit Suisse for using “overreaching and predatory lending practices” to “line its pockets” with loan fees from resorts like the Yellowstone Club.

Blixseth said the banking giant took him with “a typical hustle” through the 2005 loan and is now trying to squeeze him to repay using the firm’s influence with the creditors’ trust.

“We did borrow the money. I’m the first to admit that,” Blixseth said. “(But) they had no regard for whether the borrower would ever pay this money back.”

Credit Suisse spokesman Duncan King declined comment on Blixseth’s assertion and said the Idaho lawsuit was without merit.

(This version CORRECTS Blixseth’s age to 59, not 60.)