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
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| The half-finished base area of Tamarack Resort. | |
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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.
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Comments
Do you have a link to the actual filing with the court?
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.
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.
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.
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 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.
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?