Resort Bankruptcies
Blixseth’s Son Leads New Lawsuit Against Credit Suisse
A federal lawsuit alleges that Credit Suisse engaged in a "loan to own" scheme that involved deliberately bankrupting luxury resort projects across the West.
By Jonathan Weber, 1-04-10
The son of Yellowstone Club developer and former owner Tim Blixseth is taking a lead role in a new lawsuit against investment bank Credit Suisse, accusing the financial giant of deliberately engineering the failure of at least four major resort projects so that it could acquire them on the cheap.
Beau Blixseth, the son of Tim Blixseth and a Yellowstone Club property owner, and L. J. Gibson, an individual who bought property at Tamarack Resort in Idaho, Lake Las Vegas in Nevada, and Gin Sur Mer in the Bahamas, are the initial plaintiffs in the proposed class-action lawsuit, which was filed Sunday in Federal District Court in Idaho. The suit alleges a host of illegal acts by Credit Suisse and the real estate firm Chushman & Wakefield, including violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), fraud, negligence and breach of fiduciary duty, and seeks $24 billion in damages.
Michael Flynn, the attorney who represents Tim Blixseth in his ongoing bankruptcy court battle with Credit Suisse, is the lead attorney in the lawsuit. The legal action has long been rumored to be in the works; an email provided to NewWest.Net in September, which a source said was sent to a Tamarack homeowners group, says: “As a fellow home owner, you would be interested to know that a class action law suit against Credit Suisse is been formed to join homeowners of all resorts that bought into Credit Suisse so-called equity re capitalization loan program. Tamarack’s home owners qualify to join the class. The attorney handling this matter is Michael Flynn...” The email then provides Flynn’s email address.
The lawsuit alleges that Credit Suisse’s resort loan program, which eventually included more than a dozen properties and billions of dollars in loans, was a deliberate scheme to burden the resorts with debts they could not repay so that the bank could gain ownership through foreclosure or bankruptcy. While the suit currently only includes the four projects named above, it also suggests that other resorts that took loans from Credit Suisse - including Promontory in Utah and Turtle Bay in Hawaii - could eventually be part of the litigation as well.
Credit Suisse spokesman Duncan King said: “We believe the suit to be without merit and will defend ourselves vigorously.”
The lawsuit focuses on the use of an appraisal method that is not compliant with U.S. banking regulations. The co-called “total net value” appraisals, which essentially took the total estimated market value of all sale-able real estate but did not apply the normal “discount rate” that factors in market fluctuations and how quickly properties might sell, yielded a much higher value than a typical appraisal and was used to support very large loans. At Yellowstone Club the loans totaled $375 million; at Lake Las Vegas it was $540 million. Credit Suisse allegedly set up an entity in the Cayman Islands specifically to facilitate the loans, which could not be marketed by or to U.S. banks because they relied on the non-compliant appraisals.
Under the scenario sketched out in the lawsuit, the resort owners, who were explicitly permitted to take hundreds of millions of dollars in loan proceeds as “dividends,” were duped by Credit Suisse into taking the money. The suit relies heavily on a Yellowstone Club case ruling by U.S. Bankruptcy Court Judge Ralph B. Kirscher, who called the Credit Suisse loan to the club “predatory” and said the behavior of the bank “shocked the conscience of this court.” That ruling led to a settlement in which the decision was vacated and Credit Suisse agreed to a sale of the property to CrossHarbor Capital Partners.
The lawsuit alleges that in the Yellowstone Club situation, CrossHarbor was actually a co-conspirator with Credit Suisse, even though the two institutions engaged in a furious legal battle over control of the property that ultimately resulted in Kirscher’s ruling and a settlement. Tim Blixseth, who took some $209 million of the Credit Suisse loan as a “loan” to himself, remains involved in a bankruptcy court lawsuit with Credit Suisse that is scheduled to resume in February. Credit Suisse now controls the “liquidating trust” in the Yellowstone Club case, and contends that it is Blixseth who acted badly in transferring so much money out of the club and that he should be required to pay the money back.
Michael Flynn did not respond to an email seeking comment.
Lake Las Vegas remains mired in a highly complex bankruptcy proceeding, with its golf courses and many other facilities closed. Tamarack is also closed, and a foreclosure trial is scheduled for next month. Yellowstone Club and Promontory have emerged from bankruptcy and are now operating normally. The institutional investors who bought the debt from Credit Suisse lost about 70% of their money on Yellowstone Club, and virtually all their money on Promontory. Tamarack and Lake Las Vegas are likely to yield little if any payback for the debt-holders.
[End of article]If there is a Blixseth family member involved in this ridiculous suit against Credit Suisse, you know from the start that the entire case is as phony as a three dollar bill. It will be thrown out of court in short order.
Comment By YCmember, 1-04-10Jonathan,
Do you have a link to the actual filing with the court?
Why dont you start by suing your dad...he left with all the loot..Come on now, you cant be serious. They over evaluated what your pops borrowed against and your complaining?. You should be suing TB for takin the cash in the first place. This is ludicrus, it is a good thing that you are gathering up a few honest folks to make your case a class action. Goin it alone, Beau would not stand a snowballs chance in the turks and caicos...Good Luck!
Comment By The Boneshackler, 1-04-10I dunno. These banksters do seem to be a repugnant bunch:
In an article published by Reuters on February 23, 2008, Brazilian public prosecutor Karen Kahn announced that… in 2007, police arrested 20 people, including bankers at UBS, Credit Suisse unit Clariden and AIG Private Bank after the discovery of illegal activities including money laundering, tax evasion, fraudulent banking and operating without a banking license.
The New York Times reported on December 16, 2009, that Manhattan District Attorney Robert Morganthau, the Justice Department and Federal Reserve had reached an agreement with Credit Suisse in which Credit Suisse was fined $536 million. Credit Suisse settled on charges that it …stripped the identities of Iranian banks enabling funds to be transferred to the Atomic Energy Organization of Iran and the Aerospace Industries Organization, entities respectively involved in the production of nuclear weapons and long range missiles. (wiki)
February 8, 2009 (Reuters) — Swiss newspapers expect the country's top two banks, UBS and Credit Suisse to announce record losses for 2008 this week… the paper also forecast Credit Suisse’s annual loss will range from 5 billion to 8 billion francs, with NZZ forecasting a fourth quarter loss of 6 billion francs.
Credit Suisse was the top corporate sponsor of Senator ‘Deregulator’ Phil Gramm from 1997-2002. (He is now a vice chairman of financial services company UBS).
Not just crooked...absolutely corrupt.
Typical Blixseth...defended the predatory loan's validity with his own money when it suited him saying it had been past busloads of lawyers and experts. Now, when it suits him, he sponsors little Beau to throw mud in all directions. He said Yellowstone was a going concern when he jumped ship, now he says failure was inevitable.
Michael Flynn's name is worse than mud...anything he associates with is a lie. His greasy signature is probably on the contract OKing the original loan. He's getting paid still with the loan proceeds.
This is just more cheap smoke screen to help Tim Blixseth avoid his forthcoming responsibilites. Credit Suisse may have lent Tim money, but it was Tim who blew it on Yellowstone Club World and on stretching Edra's plastic face.
$24 billion is a laugh...is that because Tim got robbed of his otherwise sure thing YCW and Pinnacle 'dream'. It will be a scream to see Tim paint a picture of the fantasy Disneyland YC would have been without that loan.
Scheister = Madoff = Blixseth
Watching Tim run like a scared little girl is pretty funny.
Laughable. Just another example of greedy people not taking responsibility for their own decisions and expecting to be bailed out when their speculative investments go south.
So CS loaned way too much money on over valued resort real estate developments just so they could then foreclose them at pennies on the dollars that they had lent? Huh? So is Blixeth suing his dad as well? JP from Tamarack here in Idaho said the loan douments were "2 feet thick!" How could anyone understand all that?! These guys partied like it was 1999 when those loans closed and they were able to pull out their equity plus whatever else they wanted which didn't always include finishing existing construction. CS was making resort sized loans structured like home equity lines of credit. Incredibly stupid? Yes. Criminal? Hardly.
My guess is that the Judge Kircher's decision will not hold up. If these loans were preditory, than almost every loan commercial or residential made between 2004 and 2008 was "preditory. 2% loan fees are hardly a basis or indicator of preditory lending.
Let's see. I'll loan you 100-150% of some future value of your home with the hopes you default so I can foreclose!! What a devious and brilliant plan.
The Blixseths were all big kids... They ALL knew what they were doing. They got caught up in the irrational exhuberance as a result of the booming real estate market at the time of the loan.
It's ridiculous to blame the banker for the loan. Blixseth wasn't forced to take it. If we would have seen a continued inflation of the real estate bubble, it probably would have all been fine and dandy in the end.
I do, however, think it was irresponsible for Blixseth to take the lion's share of the proceeds as a return of capital while trying to keep the class-B shareholders in the dark about the entire transaction... And at the same time, allowing services and infrastructure to stagnate... But, that's just me...
Again, with a rapidly expanding real estate market... It would have all worked out in the end.
What is priceless is that Beau Blixseth was project director for the pinnacle pink elephant. Beau and Tim were the ones hyper-valuing it and telling anyone who would listen their hyper inflated valuation of the world's most expensive palace. Beau was also a VP within Yellowstone Club World. His only excuse is that he is a hand puppet of Tim...beyond that they wrote the book on over-valuations.
What Tim and Mike have managed to do is create a highly publicized headline that they hope will be a bad publicity shot across the bow of Credit Suisse as they pursue him. Tim spent more time preparing the press release than the suit, knowing that a sum of 25 bazzillion dollars would make headlines...which it has and lazy news outlets are covering this filing where the original bankruptcy never got coverage. I can't wait to watch Tim or Beau pledge under oath that they never knowingly overvalued and that Tim was merely a doe in the headlights. That part will be pure comedy.. valuations and manipulation remain Tim's stock and trade. He would have to admit that lending money to himself is like giving crack to an addict.
Tim has used Edra's corpse as a shield so long it doesn't work and now it's time for a new smoke screen to help his cowardly exit.
False sales can be used to artificially inflate real estate values for the purpose of over-borrowing. For example, I sell you a lot in a private club for a million then loan you 500,000 after the closing (never to be repaid) or buy you a house or condo or vegas hooker junket somewhere else. Then I can "value" all of my unsold lots at one million thus creating instant and massive equity for myself. One can easily see how a couple of "favors" for early investors could result in hundreds of millions in paper gains almost overnight. I can then borrow a shit-load of money secured by the false value of my unsold lots and then leave town if I want to. If I was a bankruptcy judge or a lawyer of any intellect, I would seek to determine the possibility and scope of false sale activity to help determine who did the "over-valuing."
Comment By Yes we can't, 1-06-10Here is Tim 'Turncoat' Blixseth defending these very same loans when it suited him:
Tim Blixseth in New West:
"ALL financial transactions involving the Yellowstone Club have always been audited by KPMG, have ALL been done in the ordinary course of business, and in compliance with ALL laws, state and federal.
The Credit Suisse loan was approved by armies of accountants, lawyers, securities experts, the bond rating agencies, lawyers and accountants for Credit Suisse, and for the bondholders buying the bonds, etc with full disclosure. Credit Suisse did a total of 15 identical credit facilities totaling more than $4 billion dollars. Trying to re-write history on these commonly utilized transactions (in the thousands over the prior 20 years) would constitute a dismemberment of our financial system."
I would say make up your mind Tim, only he is simply being conniving...again. Then again, it is fair enough to ask Tim, were you lying then or now?
Wow, I've always known Beau to be a whiny cry baby but didn't expect his daddy to throw him under the bus. Beau will be full of embarrassments so it should be fun to watch. His lawyers will hopefully be smart enough to tell him what to say and nothing more. Beau has lost what pull he thought he had at the yc and upper management is relieved of that headache. I think there was a party just for that. Beau has got A LOT of growing up to do so hopefully this life lesson will help a little. Thanks for more entertainment.
Comment By dan, 1-07-10"loan to own" is a cute phrase but ultimately tim ran away with most of the credit suisse loan. i hope they all get their comeuppance in the end.
Comment By Still trying to Feed the Family, 1-07-10I'm glad some people find it funny. It makes me sick to think there are still people out there who think like this. I hope all these bastards burn in hell. The area still hasn't rebounded and it's still very hard to put bread on the table around here. That's not ALL Tim's fault but his BS surely didn't help. Hopefully the new management team can implement a sustainable business model that will bring a little security to our region. There are countless families in the Gallatin Valley and Big Sky who NEED to have a place to work. Hungary babies depend on it.
Comment By Confused, 1-07-10What have Hungarian babies got to do with the Yellowstone Club?
Comment By Mehmnet, 1-07-10If I were him I'd be suing her plastic surgeon: that doctor did way more damage than Credit Suisse.
Comment By Sharkbait, 1-18-10I would say any or all of Beau's current assets were a way for Timmy to hide monies or holdings like the two houses at the club not to mention the other lots. Beau never made enough to afford his supposed holdings with out daddy's flow. The recent ruling in Butte which was both stern and with sanctions will be tell-tale. We can only hope the asset and liability lists will be public because the orders are far reaching. Good luck Timmy! Did you get your second radiant heating leak fixed yet? Seems like there might be some more leaking going on soon! Beau, you should have tried to shed Dad's stigma because it will just keep getting worse, but I guess it might not be easy to get off the gravy train.
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