Trouble in Paradise

Edra Blixseth to Seek Control of Yellowstone Club

"Liquidity crisis," "breach of fiduciary duty," "hopelessly conflicted" and "mind-boggling" were just some of the phrases turned Thursday in a Dillon courtroom, where the ongoing case of a settlement between the club and cyclist Greg LeMond aired the finances and inside struggles of the ritzy resort.

By Courtney Lowery, 5-29-08

	Edra Blixseth made a move in court Thursday to usurp control of the Yellowstone Club from her estranged husband Tim. Photo by Alexia Beckerling

Editor's note: This story has been updated throughout with more detail from the court hearing.

A high-stakes battle over the future of the Yellowstone Club, the private retreat for the mega-rich near Big Sky, Mont., took a new turn Thursday when Edra Blixseth, co-owner of the club and estranged wife of club founder and co-owner Tim Blixseth, promised to file a lawsuit to install herself as COO of the club and bar Tim Blixseth and his managers from any role in the club's operations or finances.

The development came during a court hearing in a long-running legal war between the club and former cycling great Greg LeMond. LeMond and a group of longtime investors sued the club and Tim Blixseth over an unpaid legal settlement of $20 million; the settlement was part of an agreement reached in October, 2007, over allegations that Tim Blixseth tried to buy out the LeMond group's interest in the club on the cheap and otherwise deny them money they were due.

The club paid the first $18 million of the settlement but defaulted on the final $20 million, and the case has shown a bright light on the club's convoluted finances. While the downturn in the real estate market and alleged mismanagement of the club have played a role in the drama, the biggest issue is the nasty divorce war between Tim and Edra Blixseth.

In a Dillon, Mont. courtroom Thursday, packed mostly with suits, District Judge Loren Tucker denied a motion by Edra Blixseth's lawyers to let Blixseth Family Investments, of which she is the manager to intervene in the case. Edra Blixseth contends that the LeMond settlement - and many other bills - have not been paid because the club is insolvent, and that Tim Blixseth needs to be removed for the mess to be cleaned up.

Edra's attorney, Deborah Klar, insisted Edra and BFI were the best answer to the settlement case because she has immediate access to money to pay the settlements. Not only that, Klar said Edra has access to enough capital to deal with a looming $375 million loan from the investment bank Credit Suisse -- an issue that accounted for nearly the entire first half of the hearing.

	There were, by a rough count, 9 attorneys with something at stake in the Dillon courtroom Thursday. Photo by Alexia Beckerling.

Edra had provided information, in pre-hearing documents, about a commitment of $50 million to start, from J. Gary Peters, CEO of 1800 Investment LLC. As for the amount the club would need to stave off a foreclosure on the Credit Suisse loan, Klar was willing to provide the court with documentation of Edra's access to that money, but said she would only do so, if she was assured the letter would be for "attorneys' eyes only." If information were to get out, she said, the money would be lost. She added, "We don't trust Mr. Blixseth. We don't trust the people who work with him."

Tucker said he denied the motion to intervene partially because he wanted to keep the LeMond case focused on the settlement contract. "This case is just on the verge of becoming absolutely unmanageable," he said. But for a mind-boggling case, the courtroom was civil and Tucker even got it jovial at times.

After the ruling Edra Blixseth, through her attorney Deborah Klar then promised to file a suit against Tim Blixseth and Blixseth Group Inc., (what Klar called his "alter ego") to reinstate herself as COO of the club and to bar him or his managers through restraining orders from operating the club or managing its finances -- essentially the same thing she had requested in court Thursday through the intervention and the temporary restraining order.

(Click here to open a PDF of Edra Blixseth's affadavit in support of her motions in the LeMond case, including emails sent back and forth between Tim and Edra as evidence.)

Tucker had suggested that while the intervention was not the place to make the case (Klar had several witnesses lined up to testify Thursday), the court would certainly entertain a new lawsuit, to which Klar replied, "That's precisely what I think we will do."

She asked to schedule a date then and there. "We'd like to be able to get back in court as soon as possible," she said, later adding, "There is a real emergency here."

Yellowstone Club vice president of real estate development Robert Sumpter, who has denied the the club is in an emergency, called the legal drama a distraction.

	Yellowstone Club vice president of real estate development Robert Sumpter and Tim Blixseth's lawyer Charles Hansberry consult during court proceedings Thursday in Dillon. Photo by Alexia Beckerling.

Sumpter, who sat with Blixseth's attorney Charles Hansberry, with his face propped on his hand for most of the hearing, has maintained and had testified in an earlier hearing that the Yellowstone Club was not in a "liquidity crisis," as Edra and her counsel alleged.

Tim Blixseth was not in court.

(Click here to open a PDF of the transcript from the April 7 hearing, in which Sumpter testified. Click here to open the PDF of the continuation of that hearing, including Klar's cross examination.)

Thursday, Hansberry reiterated, "... in the last 8 weeks [since Sumpter testified] there is still no liquidity crisis, there is still no bankruptcy, OK?"

Hansberry argued that Edra's motion to intervene was inappropriate in the settlement hearing and the temporary restraining order would put the club in jeopardy because Credit Suisse would see such a change of control as a default on the loan.

The context of the Credit Suisse loan, which Hansberry alluded to, is that the bank is no stranger to foreclosing on high-end real estate projects in the West, including two prominent cases detailed at NewWest.Net: Tamarack Resort in Idaho and the Promontory Club in Utah.

Klar said because the loan has been sold, and is now in the hands of 82-90 bond holders, the investment bank could not say one way or the other what action it would take should control of the club change hands. But, she said the lenders would be "hard-pressed" to advocate for foreclosure considering Edra Blixseth was the COO at the time the loan closed and therefore, in the eyes of the lenders, was the responsible party in the first place.

Hansberry, however, said the loan agreement is explicit in dealing with change of control and he used Tamarack as an example that while the Credit Suisse might not own the loan anymore, it has the power to act on lenders' behalf.

"That, is an example of exactly what can happen," he said.

There is increasing anxiety among the uber-exclusive club's membership, which includes celebrities such as Bill Gates. About two weeks ago a group of members formed an association to oversee ongoing operation of the facility. Many members are unhappy that a planned sale of the club to CrossHarbour Capital Partners, a Boston-based hedge fund led by club member Sam Byrne, fell through in March.

John Kauffman, who represents the newly-formed group, gave a brief statement to the court, not taking a side, but saying, "They believe that something needs to change."

Kauffman said 50 members are part of the group and 120 have verbally agreed to the group. The LeMonds' attorney, and that of another member who has a similar settlement claim against Tim Blixseth, Mike Snow, spoke up in support of Edra taking control, alluding to both the perceived cash flow problem and allegations of mismanagement.

"If Mr. Blixseth is in control, we're going to litigate to the hilt and litigate our other claims as well," said Snow's attorney Ronald Bender.

Snow, who was allowed to intervene in the LeMond case, had also detailed claims of what the court called "breaching of fiduciary responsibilities."

Christopher Madel, one of the attorneys for the LeMonds, both of whom mostly sat quietly and listened as their hearing was taken over by the back and forth between Edra and Tim's lawyers, was a little more low key, telling the judge, "Our interest is to get paid and from what I've heard today, the quickest way to do that is to have BFI [Edra's LLC] take control."

The LeMond litigation includes allegations that Blixseth diverted hundreds of millions of Yellowstone Club cash (some of it from the Credit Suisse loan) into his and his wife’s bank accounts and Yellowstone Club World, a super-high-end resort and vacation company with top-dollar land holdings around the world.

The Yellowstone Club team has maintained that all the financial dealings have been legal and proper, and that the club’s finances remain solid.

Editor's note: This story has been updated with links to PDFs of full court documents from the April 7-8 hearings in the LeMond case, as well as Edra Blixseth's affadavit in support of her motion to intervene. We've also corrected the story to reflect Judge Loren Tucker is a state District Judge, not a U.S. District Judge. We apologize for the error. [End of article]

It seems to me that there is a significant criminal element to Tim Blixseth's behavior. He has dodged supeonas, told his lawyers not to receive them on his behave and so on and so on. Has he become to arrogant to show up in court and face the music. Why didn't Judge Tucker put the club and Blixseth's assets into receivership when he had the chance. By the time this kangaroo Court gets finished there will not be assets that are attachable. I am sure there are many people who would step forward to give a character reference to Judge Tucker regarding Timmy Boy. Hmm, did his well known political government friends take anything from him, ah, like maybe a free membership, special deal on property, travel on one of his jets, or maybe just a dinner or drink all of which are not kosher. How about a campaign fund raiser for a Montana Senator? Why hasn't some government watchdog group figured this one out. Timmy must have very powerful friends if the World Bank met there. Good luck trying to deep fry this turkey! But,Napoleon's own arrogance got him too.
Does anyone care about the environmental aspect of the loggers behavior. Like, loosing a huge loader off the mountain into the West Yellow Mule and letting it sit there for 7-10 days leaking oil
while people like Sumpter sit on their thumbs trying to figure out what to do! Bob must have some goods on Timmy Boy. Why else would Tim give them Porsche out.
Judge Tucker needs to step to the plate and send Blixseth packing with just stick over his shoulder with a sheet carrying his clothes, oh, and just maybe a toy jet that he can play with.

It seems to me that there is a significant criminal element to Tim Blixseth's behavior. He has dodged subpoenas, told his lawyers not to receive them on his behave and so on and so on. Has he become to arrogant to show up in court and face the music. Why didn't Judge Tucker put the club and Blixseth's assets into receivership when he had the chance. By the time this kangaroo Court gets finished there will not be assets that are attachable. I am sure there are many people who would step forward to give a character reference to Judge Tucker regarding Timmy Boy. Hmm, did his well known political government friends take anything from him, ah, like maybe a free membership, special deal on property, travel on one of his jets, or maybe just a dinner or drink all of which are not kosher. How about a campaign fund raiser for a Montana Senator? Why hasn't some government watchdog group figured this one out. Timmy must have very powerful friends if the World Bank met there. Good luck trying to deep fry this turkey! But,Napoleon's own arrogance got him too.
Does anyone care about the environmental aspect of the loggers behavior. Like, loosing a huge loader off the mountain into the West Yellow Mule and letting it sit there for 7-10 days leaking oil
while people like Sumpter sit on their thumbs trying to figure out what to do! Bob must have some goods on Timmy Boy. Why else would Tim give them Porsche out.
Judge Tucker needs to step to the plate and send Blixseth packing with just stick over his shoulder with a sheet carrying his clothes, oh, and just maybe a toy jet that he can play with.


Oops, I forgot to spell check!

Thanks for the update, I look forward to New West continuing its great coverage of the Yellowstone Club "situation."

This is really getting out of control. Why is everyone fighting? Its a club not your life. Edra, very simple, you give my father the club you get your life back, you have Porcupine Creek Estate, you keep your Mexico house, you keep you GIV, you keep your cars, Your Seattle Apartment and the French Chateau and my father pays you 1.8m per month for the next 5 years.

Tim created the Yellowstone Club, he is still well liked by many members and I believe as the club is more to do about real estate than operations, its best you stay out of the way and let those who know how to sell real estate be in charge. Conceded the club and my father will grant you the abve deal.

Thank you to stop fighting.

Tim Blixseth,

A real pleasure to see you write and watch these blogs. How is New York these days? I understand you are there trying to raise money and buy yourself out of this mess. Clearly your 'Boy' Sump was not looking well yesterday when he heard in court that there was documented evidence which proves he was lying under oath. Looks like another battle or lawsuit in Montana to insure the case does not conflict with the Lemond case. I understand you and Dieter are having a little get together at Chateau Farcheville in Paris in June? Are you holding any press conferences this year with the BBC to talk about your Yellowstone Club World Concept? Lets face it, the excuses and lies are running thin, make a decision like a man and either buy the club by injecting the necessary money into the club to finish the Warren Miller Lodge and all the other things promised members and maybe we shall forgive you or step aside and let Edra buy the club. You are behaving like a child, settle you divorce, there are enough assets to divide up and most of them according to the press are so what is it that you are hanging on to at this point of your life. You have a cute little girlfriend, your jets, friends that will lie, cheat or steal for you, you still own your Hotel and rented golf course in Mexico, the land you bought in St. Andrews, the Yachts to have swinging parties on, your Seattle home, your Bentley to pick up hot new chicks or others? Your rolls, your Palm Springs house, your 1/3 interest in Western Pacific timber. You spend more time making sure Edra gets nothing that you yourself are removing yourself from the Forbes 400 billionaire list. Spend your time looking for the next Timber deal, spend your time growing your new hotel deal with Dieter because all this intense pressure to destroy your wife really only destroys you at the end. The rate your going you will be done to nothing as well my dear little billionaire friend. Settle you divorce and be a man about it. Pay up, give up this stupid scenario. You can have Yellowstone, just promise to fix what you promised to all of us members and we will allow you to stay and prosper. By Edra out of YC and settle the divorce and you will win in the long run.

I'm curious about what Tim's good friend Rehberg will try to do for him; bail him out with Federal money? Or has he already, as all prudent rats do, deserted the sinking ship?

Ahh poetic justice at last. (snicker snicker)

maybe I will finally get paid for the work I did on the lodge 8 months ago.

Sigh

maybe not

Tim, did we not have the discussion that it was in your best interest to come clean and sell the whole shootin match?

I am unsure who is advising you now but my friend you are in over your head and I am not sure that me and my firm can help you.

I should point out to you that the majority of the members want to Tar and Feather you at this point so please give it up and lets find some new deals together its really not worth all the attorney fees that you are paying now.

With much respect and warmest personal regards

Deep Throat

PS. Linda and I enjoyed the case of 98 Opus One that you sent last month.

Wow, bitter divorce, real estate swindles, illegitimate twins, lots of lawyers and hundreds of millions of dollars at stake even Hollywood couldn't even make up all this crap. The central theme of all involved, the Blixseths, Lemonds, attorneys, Credit Suisse etc is greed.

I just hope all the sub-contractors and the rest of the little guys have been paid what they are owed.Those who have purchased one of the multi million home should have enough money to take care of themselves. I could care less what happens to the rest of them.

I work at the club and I have come to love certain aspects of the club such as the beauty and the breathtaking private views. It is mainly untainted by destructive tourists and onlookers. Whatever happens I have a family to feed and bill to pay. I do wish I could buy a home some day, and from the looks of my salary, that will never happen. It is hard to see a fight about billions when I have to scratch my head each month wondering how i will meet each bill, and if we can swing 900 per month for a future mortgage. May the rich get richer and the poor get poorer. Whatever happens, I will show up as long as my check clears twice a month.

Tim- for your soul's sake fire all the lawyers. sell everything. keep just what you need to start over again and give the rest to the poor. here are some ideas:
Food Banks
Children's shelters
Disabled Veterans

be honest with yourself. when were you happiest? I am guessing it was when you first started out. This can't be any fun and if it is no fun then it is time to set yourself free. you have the talent to do it over again. People are really hurting out there. think about it.

The Yellowstone club is an unbelievable place! While there are some problems this is the best place in the world to ski and the operation of this huge ski mountain is excellent. The group of people that Tim put together is unbelievable. Most members are very happy with the club and only a few left the club in the 10 years of operation. Tim is the one that created this amazing place and probably the only one that can run this place with hundreds of VIP. He still has over $1,000,000,000 of potential land sales in the club
Let's hope the divorce ends soon. All the other stories are not significant

It is very interesting to read the comments. I do not know about Tim Blixseth other than the news stories over the years. But when I read these comments I see some very biased and HATEFUL views against people with money, wanting to see them taken down and hurt. Blixseth may be a dishonest cheat or he may be a maligned guy at a difficult point in his life. I tend to think he is a slickster who got rich by taking advantage whenever he could, whether ethical or not. Be that as it may. The vitirol and venum of some of these comments are also in the unethical category just as much. The HATE in some peoples hearts is scary. It shows the thin veneer of civilization and what these people would do to any of us if they found some reason to hate or dislike any of us. By the way I am not rich and do no live at the Yellowstone Club but I don't begrudge any of those that do. It shows that no matter how rich someone is, it doesn't shield one from life's problems or ensure happiness. Live and let live. Hate only makes you yourself unhappy if only you could realize it. Lighten up. Be nicer. You will enjoy life more and live longer. Don't be hateful.

Neutral Observer: What a wonderful way to blow off steam about a creep who has a life history of not paying his bills when it suits him, while strutting the opulence of his ill gotten wealth. That is what you are reading. And before this is over, those who are stiffed will be legion. Anger is not hate. Self loathing at allowing yourself to be duped by someone who will flay you with lawyers rather than pay is understandable. So let people rant and blather about Timmy. He is, at the least, deserving. The difference between the bloggers and the LeMond Group is personal wealth. LeMond has the dough to counter Timmy's legal crew with a legal crew of his own. If dueling lawyers is going to be the game, LeMond might have the ability to outlast Blixeth, et al. And, those of us who have friends or family that have been Blixeth-duped will have a summer of joy watching him play hardball dodge-suit as he dances to the summer hit, D.I.V.O.R.C.E. After all, some people are deserving of the public scorn you are reading. This is the New West, and Montana vigilantes no longer flog offensive nuisances. They blog them with . You can see the humanity in that, no?

Dear Yellowstone Club member,

I do agree that the mountain and area are very beautiful especially the wild flowers in the meadows behind Pioneer, but there are many places in the world that are far better. You must not be an early member who were promised the world by Tim. The club would not have as successful without several Pioneer members who brought the seed money and national name recognition(i.e. Greg, Warren). Do you think Tim remembers that, I do not. Tim has done nothing but screw the two nicest guys there, which I know both personally. Graciousness is a virtue. These blogs are significant because the truth about Tim should come out, he is evil. Although he is no longer there was Bill Griffon a good guy? How about the useless Bob Sumpter or Eric Ladd they are worth mentioning together, aren't they? I will agree people like
Calender, Foote, Jorgenson,and most of the security and staff are great people, even Edra, but Tim and his lying, cheating management team. Hank, who was awesome, finally saw the real thing didn't he? You are probablly one of those "clubbers" who came here because you needed to keep up with your neighbors! I know many members personally and think most do care about the empty promises and lack of delivery on Tim's part. Have you lost any money there yet. Maybe your view will change if you do. I'll see you on the slopes or maybe on the tee.

Sharkbite
I am not a new member, I am probably member for longer period then you!
Like most club member (including you) I made a lot of money by joining the club. I did not join because of verbal promises, I joined based on written documents and these where more then fulfilled (for example we where never promised snow making and now we have many miles of it). Tim kept every promise he made to me, including monitory verbal promises.
If you find a better place to ski in the world sell your membership! Every member will pay u much more then you paid.
Hank, awesome? What did he do for the club?
Edra, while she is a great person is creating a lot of damage to all of us now.Edra finalize the divorce and let the club prosper again, don't do your fights over 300 members investments.

The Club is a wonderful place both resort wise and company wise. Despite the negative media press, it has made a good impact on the economic growth of the Big Sky, Bozeman and surrounding areas. Granted, this growth has been “full speed ahead” which has resulted in home prices at unbelievable highs for the area, but for the most part many folk have benefited from the Club and its operation (employees, contractors, gravel pits, retailers and the county (property taxes) just to name a few). The Club employs hundreds of folk, and most are content with their rate of pay (as long as cost of living increases are met and there is a feeling of “fairness”), and it is well known that the CEO, and all the VP’s and Sales Staff have made a killing in their field.

There seem to be a lot of personal “digs” towards Tim – but we all have our human flaws – as well as our good traits too. Their divorce should be handled without involving the Club, its members and possibly all the employees. It’s sad that all this has to be dragged thru the media, as it is not helping in anyway.

Whoever in the end obtains control over the Club, I hope they will take a good look into all the “free-bees” and “useless” spending that occurs. I understand the saying “It takes money to make money” – but come-on, there needs to be more control and reasonable limits set. An example of some of the free-bees are the condos, autos, vacations, and other of the sort offered to the CEO, VP’s and many of the Upper Management Staff – they have made a very enviable rate of living while employed with the Club, they need not company assistance with such exuberant free-bees. One example of useless spending was the hundreds of thousands spent on Christmas décor. A few less jets, and, over the top free parties, at the company expense, would also be something to look into. Not to mention the personal expenditures (where, why, for whom) that have gotten out of hand by VP’s, Sales and Upper Management – again, more control and reasonability is needed in this arena of things.

Hard times fall on many companies (yes even the ultra-rich) and through-out the years, the Club has had its share of hard times, however, the Club has always paid its debts – albeit aged 180+ days at times. With a more “curbed” or control on the free-bee and useless expenditures, the Club may actually turn a profit, and be looked upon more favorably.

All-in-all, whatever the outcome of all the various situations going on, the operations side of it all needs to be reviewed, controls set, and accountability of those to keep it in place, and whomever does this, let’s hope they don’t look solely to the VP’s for the answers, but rather they go out to the front lines for some feedback from the ground troopers who see the action!

What a wonderful and well written story from the small pea in the pod. Are we to assume this is written from a close source to the management? Is this an employee with a passion for seeing the good at ever corner of the winding road?

I think one must look at the situation a little more pragmatically. What are the chances this great economy turns around in the near future? Are the 'Big Spenders' still spending on ''Extra Homes and Memberships?"'

The Club market according to the Alliance reported this week shows all clubs are down by 50% from last year on sales. Reading between the lines, this means nothing is selling.

Therefore, unless the club is properly funded, how can one merely implement a strategy of cost cutting and cost controls and pay its debts without selling 'Plots' of over-priced land to build million dollar homes on? Clearly the Alliance report is showing Tamarack in Idaho in default as it cannot sell land to make its payments to Credit Suisse, Promontory fell into this trap as well. Therefore, I would conclude that merely cutting out the Freebies (maybe this means charging the current members more annual dues and more for that gourmet burger and Warren Miller Lodge and cutting out the fresh Chocolate Chip Cookies) simply will not cover the debt payments.

I would hope that investors see the light on this colourful picture. The picture is rather simple, it’s all about selling real estate & memberships and unless the sales pick up quickly debts cannot be covered. This is not 'Rocket Science'. A great manger will help but it will not pay the increasing bills. Let’s also not forget that many items remain unfinished in the club. Who is going t pay for this failed promise to the members? Let’s hoe for the best but let's also be practical in the approach. Sooner or later the Blixseth problem will come to an end but the investors who own homes now need to address the problem of cash.

Come on small pea, let's be honest with our audience. Without real estate sales, you can not fix the problems.

One final thought. The problem is not is no longer with the owners divorce, its with the economy and the ability to sell land. Both Tim and Edra built a dream for many people but the markets are what is killing the club. Ok, we can argue the loan is as well but you can not fault the owners for profiting when everyone else who invested into the club was doing the same in their own companies. Lets leave the Blixseth Family out of these comments. Its so easy to pick on either of them as they are at the top. Many people try to kick people from the top but until you have been there you will never know what its like. Focus on the problems and issues an you will realize they are the good guys not the bad guys

Tim didn't pay his bills, and used the lawyer bluff on any who dared try to collect. He always found a way to NOT be the owner of record when bills came due. His history of not paying the little guys is how he got to the top. His path to glory was on the backs of working people. If there is some fairy tale ending to all this, he will be on the corner with a tin cup full of pencils trying to make his next meal. Go search the courthouse records in Oregon.

The Wall Street Journal says that Mrs. Blixeth is now in control at the Yellowstone Club. Damn. I hope the fun is not over.

The fun appears to be over. Tim Blixseth finally gives up the club but it appears he made the best financal decission. I think the story is just started again, Tim fades away on Tooth Fairy Yacht with cash, no tax problems and debt free assets, what a deal! It appears he played a better game of poker than we all assumed Well done Edra, you showed everyone you can win as well. Two winners, one with money and another with a club full of debt and very valuable land. Does this mean Edra now goes to the Forbes list instead of Tim? THe club put him there so do we assume it now puts Edra there?

Dear Tim Blixseth,
Did you forget YOUR promise to the Roseburg High School Booster Club? You made a commitment to donate $250,000.00 for the Football field over 2 years ago! You have defaulted on your promise and now the Booster Club is having to come up with the money other ways. They were counting on you! How could you have done this to your High School in little Roseburg, Oregon.
Come on Tim, be a man and pay-up.

I've read most of these comments, several from members at YC and others and am simply amazed at the lack of skill in writing. Why is it people think that not using proper grammar, spelling and punctuation is okay?

And much of these comments are from the so-called 'elite' with their fabulous educations, expensive homes and wine cellars. My God. This country is probably doomed.

Well, as George Carlin used to say, "We may be circling the drain, but it should be a fun ride down!"