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
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| Edra Blixseth made a move in court Thursday to usurp control of the Yellowstone Club from her estranged husband Tim. Photo by Alexia Beckerling | |
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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.
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| There were, by a rough count, 9 attorneys with something at stake in the Dillon courtroom Thursday. Photo by Alexia Beckerling. | |
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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.
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| 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. | |
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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.
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Comments
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.
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!
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.
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.
maybe I will finally get paid for the work I did on the lodge 8 months ago.
Sigh
maybe not
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
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.
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.
Let's hope the divorce ends soon. All the other stories are not significant
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.
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.
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!
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.
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.
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!"