CrossHarbor. Sam Byrne Bought the Yellowstone Club for $335 Million Reduction then Refuses "Discovery" in Lawsuit over It.

"
1. The Agent and Prepetition Lenders have been seeking informal and formal
discovery of CrossHarbor Capital Partners, LLC and its affiliates and agents
("CrossHarbor") and other insiders of the Debtors since November 18, 2008. Since then,
CrossHarbor repeatedly has evaded such discovery.

Indeed, since these chapter 11 cases commenced, CrossHarbor has produced only two (2) documents (the "MOU" and "Agreement to Form") - - and then only because this Court specifically ordered their production. [Dkt. No. 152]

2. CrossHarbor's Motion-Objection is another attempt to evade prior
discovery orders and directives of this Court authorizing the Agent to obtain legitimate
and proper discovery of CrossHarbor, including

(i) an order, dated December 10, 2008 [Dkt. No. 149],

(ii) the Court's oral ruling on December 17, 2008 overruling
CrossHarbor's objection to the December 10, 2008 discovery order, and

(iii) the Court's most recent Rule 2004 discovery order, dated January 20, 2009 [Dkt. No. 289] (the "2004 Order") authorizing the Agent to take broad discovery of CrossHarbor.2

3. The time has come for CrossHarbor to permit - - and to be ordered to submit to - - Rule 2004 discovery of non-privileged information concerning its numerous prepetition and postpetition insider transactions and relationships with the Debtors, their ultimate control person, Edra Blixseth ("Blixseth"), their manager, Discovery Land Company ("DLC), and other parties.

Without such discovery, there is no way to measure and ensure the integrity of these chapter 11 cases and the plan process.

4. More particularly, the following circumstances justify and warrant the
Rule 2004 discovery that CrossHarbor seeks to evade:

· Less than one year ago, CrossHarbor was contractually obligated to
purchase substantially all of the Debtors' Yellowstone Club assets for
approximately $470 million (the "CrossHarbor Asset Purchase
Transaction"). See Exhibit 1 hereto (Affidavit Of E. Blixseth, dated April
4, 2008) ("Blixseth Affidavit"), ex. K thereto.

· The CrossHarbor Asset Purchase Transaction would have provided funds
sufficient to pay in full all of the Debtors' creditors (including the
Prepetition Lenders), as well as substantial amounts for some of the
Debtors' equity holders. See Exhibit 1 hereto, para. 6-7.

· In mid-March 2008, just a week before CrossHarbor terminated the $470
million CrossHarbor Asset Purchase Transaction, CrossHarbor's principal,
Sam Byrne, attempted to persuade the Debtors to pursue a "prepackaged
bankruptcy" for the Yellowstone Club - - instead of the CrossHarbor Asset
Purchase Transaction. Id., para. 8, ex. C .

· CrossHarbor wanted the Debtors to pursue a "prepackaged bankruptcy" in
order to hinder certain creditors, avoid payment of the Prepetition Lenders,
and presumably allow CrossHarbor to obtain control of the Debtors and
their properties through bankruptcy without paying the full CrossHarbor
Asset Purchase Transaction purchase price. Id.

· CrossHarbor refused to close the CrossHarbor Purchase transaction and
threatened the Debtors in an effort to persuade them to agree to a prepackaged bankruptcy. Id.

· In connection with CrossHarbor's efforts to force the Debtors into
bankruptcy in March 2008 and its termination of the CrossHarbor Asset
Purchase Transaction, CrossHarbor used as leverage rights it purportedly 3
had obtained from Timothy Blixseth and Blixseth Group, Inc.

to (i) exercise development rights under the Yellowstone Club Master Plan of
Development and

(ii) purchase a substantial Yellowstone Club tract now owned or controlled by Blixseth (the "Tract"), to be subdivided with 41 lots for a purchase price of approximately $56 million. Id., ex. D, E. · Shortly after CrossHarbor terminated the $470 million CrossHarbor Asset Purchase Transaction on March 26, 2008, Blixseth filed the Blixseth Affidavit in a Montana state court, in an unsuccessful attempt to intervene in creditor litigation against the Debtors, to take control of the Debtors and advance her personal interests as an indirect shareholder and indirect creditor of the Debtors. Id. 1, 5, 6, 16.

· In the months that followed termination of the CrossHarbor Asset
Purchase Transaction, Blixseth and CrossHarbor formulated plans and
strategies that would permit CrossHarbor to obtain control of the Debtors
for its and Blixseth's benefit. (Dkt. No. 164 (Exs. 14-15: Memorandum of
Understanding dated August 29, 2008; Agreement to Form dated May 13,
2008); Transcript of December 11, 2008 Hearing (Blixseth testimony), at
63:18-65:1)).

· In August 2008, Blixseth obtained equity control of the Debtors through a
Marital Settlement Agreement with her ex-husband, Timothy Blixseth.

Blixseth's financial obligations under the Marital Settlement Agreement
were funded by CrossHarbor, and perpetuated CrossHarbor's control over
the Tract to be subdivided with 41 lots and valuable Yellowstone Club
development rights. (Transcript of December 11, 2008 Hearing (Blixseth
testimony), at 71:19-72:15)

· As a result of CrossHarbor's funding of Blixseth and other agreements and
understandings between the parties, she is effectively dominated by
CrossHarbor.

In particular, Blixseth and her affiliate, BLX Group Inc.
("BGI") are indebted to CrossHarbor in an amount exceeding $35 million.

Such indebtedness is secured by Blixseth's personal residence – owned by
BGI – and CrossHarbor is now enforcing such indebtedness (Transcript of
January 13, 2008 Hearing (Blixseth testimony), at 42:6-43:1).
· Upon obtaining ownership control of the Debtors, Blixseth gave
CrossHarbor (through its agent, Joseph Harris, acting as Chief Operating
Officer) full management control over the Debtors' Yellowstone Club
businesses and properties.

(Blixseth Dep. Tr. at 26:4-27:18; 61:14-62:17)
· After obtaining ownership control of the Debtors, Blixseth reached an
agreement in principle with CrossHarbor for a "global" recapitalization
and restructuring of the Debtors - - and entered into written agreements
(an "Agreement to Form" and "MOU") with CrossHarbor and DLC to 4
restructure the Debtors' businesses and advance their common interests in
giving CrossHarbor ownership and control of the Debtors' properties and
businesses. (Blixseth Dep. Tr. At 33:11-49:22; Transcript of December 11,
2008 Hearing (Blixseth Testimony) at 87:7-23).

· The Agreement to Form (which has not been terminated) calls for a
comprehensive development of Yellowstone Club property by
CrossHarbor.

This includes the platting of the Tract and CrossHarbor's
exercise of valuable development rights of the Debtors for Blixseth's and
CrossHarbor's benefit. Such platting and development by CrossHarbor
effectively reduces the number of lots that can be platted on the Debtors'
property because the overall Yellowstone Club development plan density
has not increased. (Ex. 2 hereto Madison County Planning Board Meeting
Minutes, dated April 7, 2008).

· On or about September 1, 2008, DLC began managing the Debtors
pursuant to a memorandum of understanding between the Debtors and
DLC (the "MOU"). (Blixseth Dep. Tr. 29:8-21)

· DLC has continued to manage all of the Debtors' operations and sales and
marketing functions, but was paid little if any compensation prepetition
and initially postpetition under the MOU.

The MOU entitles DLC to receive an equity participation in the restructured Debtors. (Blixseth Dep. Tr. 20:22-22:14)

· DLC is participating in the chapter 11 process in anticipation of achieving
the outcome for DLC contemplated by the MOU and Agreement to Form,
including acquisition of a "financial interest" in the Debtors. (Blixseth Dep.
Tr. 51:19-54:17)

· Just prior to commencement of these chapter 11 cases, Blixseth and
CrossHarbor steered the Debtors into bankruptcy, including by having
CrossHarbor's counsel prepare the Debtor's chapter 11 bankruptcy papers -
- at a time when the Debtors had no separate or independent bankruptcy
counsel. (Blixseth Dep. Tr. at 64:15-65:22)

· The Debtors' Chief Restructuring Officer, Ronald Greenspan
("Greenspan"), was selected and introduced to the Debtors by Blixseth's
personal counsel.

CrossHarbor, Blixseth and Greenspan have caused the
Debtors to deal exclusively with CrossHarbor in their formulation of plan
of reorganization terms.

· CrossHarbor's principal, Sam Byrne, has negotiated and reached putative
agreements with Blixseth on plan of reorganization terms - - without
involvement of Debtors' counsel.

· BGI is obligated to the Debtors on notes aggregating in excess of $200

million and thus, it follows, the Debtors and their estates and creditors are

competing against CrossHarbor in respect of its claims against Blixseth

and BGI's assets (Transcript of December 13, 2008 Hearing, 19:14-22,

27:19-22, 37:8-16)

5. The foregoing web of insider circumstances, relationships, agreements and

actions involving CrossHarbor, Blixseth and DLC pose substantial conflicts of interest

and self-dealing that undermine the prospects for a fair and lawful reorganization that

maximizes the value of the Debtors' estates for legitimate creditors.

Such conflicts of interest risks are compounded by the terms of the Final DIP Financing Order, which gives CrossHarbor approval rights over any plan of reorganization and asset sales.

6. Given the resistance of CrossHarbor, Blixseth and others to cooperate with

the Agent's discovery of facts germane to the integrity of these chapter 11 cases - - and

the numerous alleged and admitted conflicts of interest and irregularities in the

prepetition and postpetition management of the Debtors, their properties and financial

condition - - the Agent is filing contemporaneously herewith its motion under 11 U.S.C.

§ 1104 for mandatory appointment of an examiner (the "Examiner Motion").

7. For the reasons set forth more fully below and in the Examiner Motion,

the Court should deny CrossHarbor's Motion-Objection and enter an order compelling

CrossHarbor to provide the discovery authorized by the 2004 Order.

Need For Rule 2004 Discovery Of CrossHarbor

8. A plethora of insider relationships, agreements, understandings,

obligations and commitments exist between and among CrossHarbor, the Debtors, DLC

and other parties in interest. Each of the foregoing named parties are "insiders" within

the meaning of the Bankruptcy Code. See 11 U.S.C. § 101(31) ("insiders" include an 6

"officer", "person in control of the debtor", "affiliate, or insider of an affiliate as if such

affiliate were the debtor", and "managing agent of the debtor").

9. CrossHarbor is an "insider" given its prepetition and postpetition control

over the Debtors, directly and indirectly through its present control and influence over

Blixseth and her financial condition; its liens in the amount of $35 million on Blixseth's

personal residence, which is property owned by BGI - - the entity that owns and directly

controls the Debtors; its direct prepetition management control of the Debtors through

CrossHarbor's agent, Joseph Harris, who acted as the Chief Operating Officer of the

Debtors' Yellowstone Club businesses and properties before the petition date;

its activities steering the Debtors into chapter 11 before they engaged their own counsel; and

numerous contractual and other arrangements that continue to give CrossHarbor, among

other things, rights to act for the Debtors and control their development rights, including

land development platting rights.

10. Rule 2004 discovery of CrossHarbor is needed to uncover non-privileged

information that will permit the Court and all parties in interest a fair opportunity to

understand CrossHarbor's current and historical roles, involvements, intentions and

exercises of control over the Debtors and their properties, both prepetition and in

connection with these chapter 11 cases. Such information is needed before the Court

proceeds with approval of any disclosure statement for any plan of reorganization in

these cases.

The Court Should Overrule The CrossHarbor Motion-Objection

11. The Court should overrule the Motion-Objection because good cause

exists for examination of CrossHarbor under the 2004 Order. "The purpose of a Rule 7

2004 examination is to assist a party in interest in . . . assessing whether wrongdoing has

occurred."

In re Recoton Corp., 307 B.R. 751, 755 (Bankr. S.D.N.Y. 2004); see also

Commodity Futures Trading Com. v. Weintraub, 471 U.S. 343, 353-54 (1985) (noting

that uncovering insider fraud is a "goal" of the Bankruptcy Code). This extends "beyond

the debtor to persons associated with [them] as well as to those persons who may have

had business dealings with the debtor." In Re Symington, 209 B.R. 678, 690 (Bankr. D.

Md. 1997).

Accordingly, "good cause is shown if the [2004] examination is necessary to

establish the claim of the party seeking the examination," In re Dinubilo, 177 B.R. 932,

943 (E.D. Ca. May 10, 1993), and "inquiries that are tightly-focused on the creditor's

relationship with a particular debtor will require a low level of good cause because they

represent a low level of intrusion into the creditor's business affairs and a low risk of

abuse."

In re Countrywide Home Loans, 384 B.R. 373, 393 (Bankr. W.D. Pa. 2008).

12. Good cause is amply present here. A web of material insider relationships

exists between and among CrossHarbor, the Debtors, Blixseth, the various Blixseth
controlled entities, DLC and other parties in interest.

Such relationships continue to

threaten the integrity of chapter 11 cases and any plan of reorganization process.

Moreover, any plan in these cases will implicate the treatment of the Prepetition Lenders'

claims - - and, therefore, discovery of issues going to the integrity of the plan proposal

and confirmation process is cause for enforcing the 2004 Order.

13. Blixseth and others have admitted CrossHarbor's indisputable prepetition

and postpetition involvements in the Debtors' and Blixseth's affairs. As such, there is no

merit to CrossHarbor's position in its Motion-Objection (pp. 9-10) that the discovery

being sought is outside the ambit of Rule 2004. CrossHarbor is not merely a "third party" 8

witness having "no relationship" to the Debtors' affairs or the administration of these

cases.

As the record of these cases already reflects - - and as Rule 2004 discovery will

show more completely - - CrossHarbor is a knowledgeable prepetition and postpetition

"insider" of the Debtors within the meaning of section 101(31) of the Bankruptcy Code.

See 11 U.S.C. § 101(31). As an insider, CrossHarbor is properly and fairly subject to

Rule 2004 discovery - - and such scrutiny is all the more necessary because of

CrossHarbor's central role and control over the Debtors' postpetition financing and plan

process.

14. There is no merit to CrossHarbor's allegations that the discovery the Agent

seeks is an "abuse or harassment" or a "scorched earth" tactic, because the discovery

sought falls squarely within Rule 2004. It is CrossHarbor that is abusing and

manipulating the Rule 2004 examination process and these cases with repeated attempts

to evade prior discovery requests and orders of the Court.

15. Despite CrossHarbor's rhetoric about its "extensive efforts to

accommodate Credit Suisse 's discovery demands" in these proceedings – CrossHarbor

has merely evaded the Agent's attempts to take meaningful discovery by insisting upon

patently unreasonable restrictions on the scope of any production.

However, inquiries under Rule 2004 are properly very broad. In re W&S Investments, Inc., 1993 WL 18272 (9th Cir. January 28, 1993) at *2 (citing In re Wilcher, 56 B.R. 428, 433 (Bankr. N.D. Ill. 1985). CrossHarbor's Proposed Limits On Discovery Are Inappropriate

16. The Court should not countenance CrossHarbor's efforts to limit the scope

of Rule 2004 discovery to time periods and information set by CrossHarbor that will 9

preclude proper Rule 2004 examinations. Given the circumstances identified above,

there is abundant need and cause for Rule 2004 examination of non-privileged documents,

communications and other information that sheds light on CrossHarbor's: numerous

involvements with the Debtors and their properties; its insider relationships with the

Debtors, Blixseth, DLC and others; its prepetition actions and intentions to accomplish an

acquisition of the Debtors' assets within the last year (including efforts to force the

Debtors into bankruptcy as early as March 2008);

its termination of such acquisition and related efforts to force the Debtors to commence "prepackaged" bankruptcy cases in March 2008; its actions and intentions when directly controlling the management of the Debtors businesses prior to the commencement of these cases; its actions and intentions steering the Debtors toward commencing these chapter 11 cases; and its subsequent postpetition actions and intentions related to the Debtors' cases, Blixseth and DLC.

17. In short, the Court should overrule the Motion-Objection because it is only

another attempt by CrossHarbor to delay, hinder and avoid legitimate inquiry into

CrossHarbor's insider status, relationships, actions and intentions that go to the integrity

of these chapter 11 cases, numerous prepetition transactions involving CrossHarbor, and

any reorganization plan proposed by CrossHarbor and the Debtors.

18. CrossHarbor's agreements and relationships with Tim and Edra Blixseth

existed long before Edra Blixseth regained control of the Debtors in August 2008, and

CrossHarbor has been deeply involved with the Debtors and Blixseth in connection with

debtor-in-possession and undisclosed reorganization plan proposals, understandings and

agreements in these cases.

Although CrossHarbor wants to limit discovery only to the period ranging from May 19, 2008 to November 26, 2008, in the circumstances identified 10 above, it is entirely appropriate and necessary that the discovery period be January 1, 2007 through to the present.

19. CrossHarbor's objection to producing its non-privileged internal business

communications and documents is also without merit.

The Agent should be permitted to examine internal CrossHarbor communications to effectively evaluate both the nature and scope of CrossHarbor's material insider relationships, as well as CrossHarbor's intentions with respect to prepetition and postpetition actions, transactions and proposals involving the Debtors and their property, including without limitation any possible insider intentions and actions undertaken to delay or hinder the Debtors' legitimate creditors.

Certainly, non-privileged internal communications between individuals at CrossHarbor

concerning such issues goes directly to "the acts, conduct, or property or to the liabilities

and financial condition of the debtor."

In re MMH Auto. Group, LLC, 346 B.R. 229, 233

(Bankr. S.D. Fla. 2006) (quoting In re Wilcher, 56 B.R. 428 (Bankr. N.D. Ill. 1985)). To

the extent any of those communications are either privileged or irrelevant, CrossHarbor

may designate them as such.

WHEREFORE, the Agent respectfully requests entry of an order (i)

denying the Objection, (ii) compelling CrossHarbor to produce all material, nonprivileged information possessed by them pursuant to the Court's Order for Rule 2004

Examination dated January 20, 2009, and (iii) granting the Agent and Prepetition Lenders

such other and further relief as is just and proper.

Dated: Billings, Montana

February 3, 2009 ... "

Source of Post and Full Document

http://ycmembers.org/docs/20090210_usbc_discovery.pdf

Crystal L. Cox

Investigative Blogger

Crystal@CrystalCox.com

Is Credit Suisse the REAL Criminal in the Yellowstone Bankruptcy? I say Indict them, and I Demand Transparency and Accountability.

... Or was the Judge Corrupt? or Was Sam Byrne Conflicted somehow as a Buyer? What Really happened behind the Scenes of the Yellowstone Club Bankruptcy...

Did connections between Sam Byrne and Edra Blixseth Get Sam Byrne a $335 Million Dollar Price Reduction on a Montana Ski Resort?

What Really Happened? Crystal L. Cox, Investigative Blogger - Real Estate Industry Whistleblower Intends to find out... stay tuned to my Whistleblower Media Blogs as the Truth Continues to Roll out.. on the Yellowstone Club Bankruptcy.

News Article from New West -

"Greed, Bankruptcy, and the Super Rich
Shady deals put a ritzy Montana ski resort at risk. Then along came a common-sense judge.

By JONATHAN WEBER
A private ski resort created by a timber baron in the rugged mountains of Montana would hardly seem to be a global bellwether for anything, except perhaps the evolving preferences of the very rich.

Yet the dramatic bankruptcy of the Yellowstone Club, the events that precipitated it, and the way it has been resolved show with unusual clarity the good, bad, and ugly of our current economic predicament. And the club’s future will be a leading indicator of the economic zeitgeist in the age of Obama.

Let’s start with the bad. In 2005, investment bank Credit Suisse was aggressively peddling resort loans, offering developers the opportunity to line their own pockets with the proceeds and offering institutional investors high-yield loan products whose risks were vastly underestimated.

Tim Blixseth, founder and dominant shareholder of the Yellowstone Club, was among the many who found the money irresistible.

First he was going to take $150 million. Take a little more, urged the investment bank. Hell, take a lot more. And he did, finally closing on a $375 million loan, and, as explicitly permitted in the loan agreement, immediately transferring $209 million of it to his personal accounts.

When he and Jeff Barcy, the lead Credit Suisse Banker, couldn’t agree on the fee, they flipped a coin.

(Blixseth won, and Barcy got 2 percent instead of 3 percent.) Appraisals?

Cash-flow projections? The ability of the borrower to re-pay? Ah, not to worry, these small details didn’t require much attention, because Credit Suisse didn’t have any money at risk anyway.

The loan would be packaged and sold as part of so-called collateralized loan obligations, putting possible future problems on the shoulders of institutional investors like hedge funds and pension funds.

Credit Suisse did more than half-a-dozen resort deals like this, totaling close to $3 billion. How many other loans of this nature were made between 2002 and 2006, by most of the biggest names in banking? (Answer: a lot.)

Now we get to the ugly: The club had minority shareholders, including cycling great Greg LeMond, who thought they should get a share of the windfall. They sued the club and Blixseth, who finally settled for $38 million (though the judgment was never fully paid).

Blixseth, always looking for ways to expand his reach, hatched a new plan to lure the über-rich.Yellowstone Club World would offer elaborate vacation timeshares at exotic overseas properties, including castles and private islands bought with the Credit Suisse loan proceeds.

But that plan quickly disintegrated, leaving Blixweth with a pile of expensive (and soon all but unsellable) assets.

By 2007, the club was facing serious cash flow problems, stemming from the heavy debt service on the Credit Suisse loan, profligate spending, and erratic management. Blixseth decided to sell the property, but the deal fell through.

Tim and Edra Blixseth, meanwhile, were getting a divorce. They fought it out in court even as they continued to spend lavishly—seemingly oblivious to that fact that their empire was on the brink of collapse. Edra got the club in the divorce, and with it the huge debt load.

When the real estate meltdown hit, bankruptcy was only a matter of time, and a Chapter 11 filing came last November.

Credit Suisse, still the agent for the outstanding $310 million on the loan, responded by calling the lawyers. The Yellowstone Club Bankruptcy was an evil conspiracy, argued the men from Skadden Arps, a plot by Edra Blixseth and Sam Byrne (the private equity investor who had tried to buy the club in early 2008). And besides, they argued, we’re the first-lien holder! We have our rights! Don’t stand in our way or we will lawyer you to the death!

But then, surprisingly, came the good, mainly in the form of an unassuming Montana Bankruptcy judge named Ralph Kirscher.

When Credit Suisse floated an interim funding plan that would involve “mothballing” the club—and thus throwing hundreds out of work and diminishing the chances of the tradesmen getting paid—Kirscher rejected it.

When the club’s Unsecured Creditors Committee sued Credit Suisse for “fraudulent transfer” on the loan—a move most lawyers viewed as risky bordering on reckless—the judge all but dared the parties to take it to trial.

Credit Suisse and Skadden took him up on it, and Tim Blixseth, an unnamed defendant in the original lawsuit, filed his own legal action against the creditors and the club.

The trial was quite a spectacle. Under Kirscher’s firm hand, the bankruptcy process compressed into weeks complex litigation that would normally take years.

Kirscher, feeling pressure to make a decision and clear the way for an auction of the club, issued a partial ruling that minced no words about Credit Suisse’s behavior, blasting the bank for acting out of “naked greed” and making a “predatory” loan with total disregard for the consequences.

He stripped Credit Suisse of its first lien position, a rare act in bankruptcy court.

Cleverly, though, Kirscher stopped short of voiding the loan entirely, and so Credit Suisseretained the right to use the outstanding debt as part of a bid for the club at auction.

Sam Byrne and his firm, CrossHarbor Capital, already owned a lot of property at the club and had provided interim financing for the bankruptcy; they were the only other bidder.

Finally, Credit Suisse agreed to settle (for an $80 million note and some other considerations), and Byrne will buy the Yellowstone Club for $115 million.

The settlement calls for Kirscher to take back all those mean things he said about the bank’s behavior.

But the unsecured creditors will get their money. The big guys with the secured position lose almost almost everything, and the little guys get paid in full. How often does that happen in bankruptcy court?

Note to bankruptcy judges around the country: There can be rough justice in this tidal-wave of toxic asset workouts, even if you have to stretch the precedents a little.

The question now, though, for both the big guys (Sam Byrne and CrossHarbor Capital, and their operating partner Discovery Land Co.) and the little guys (the vendors and contractors and waitresses and lift operators of Big Sky) is whether there is a future in the ultra-high-end resort economy.

The rich will always be with us, for sure, but in what quantities? To what extent will the contraction of the financial services industry, and the more progressive tax policies of the Obama Administration, diminish the pool of people who are able or willing to spend $5 million on a ski house at the Yellowstone Club?

In short, does the financial crisis represent a mere steeper-than-usual turn of the business cycle or a more fundamental structural reset?

The answer to that question will soon be clearly visible in spectacular mountains of Southwest Montana."

Source of Post

http://www.theatlantic.com/magazine/archive/2009/05/greed-bankruptcy-and-the-super-rich/7471/

Got a Tip on any of this?

Crystal@CrystalCox.com

Investigative Blogger Crystal L. Cox says "There is a Whole lot of Truth to Tim Blixseth's Claim of "Predatory Lending".

"Bankruptcy case heats up for former Oregon timber tycoon Tim Blixseth

MISSOULA, Mont. -- A down-on-his-luck billionaire and a banking giant with a soiled name sparred Wednesday in bankruptcy court, each blaming the other for fleecing the ritzy Yellowstone Club of nearly $300 million.

Dirty laundry from the world of international finance and the divorce of club founders Tim and Edra Blixseth remained on display in the ongoing bankruptcy saga of the ultra-exclusive alpine getaway for millionaires.

Lawyers for club founder Tim Blixseth argued that Credit Suisse has seized control of the club's bankruptcy trust and crafted a deal that stands to enrich the trustee who wants to force Blixseth to repay a $286 million loan Credit Suisse arranged for the club in 2005.

Creditors, captained by trustee Marc Kirschner, counter that Blixseth intended to defraud the Yellowstone Club by lining up big loans to bankroll a lifestyle of luxury estates, personal jets and luxury cars. The creditors want to collect even though the club emerged last year from its 2008 bankruptcy filing.

They want a civil fraud judgment against the real estate tycoon -- a Roseburg native who made his fortune trading plots of timberland -- who used a loan ostensibly for the club to bankroll a gilded lifestyle of luxury jets, fleets of cars and international estates.

Blixseth argues he was the victim of a predatory lending scheme by Credit Suisse and was given the loan without regard for whether the club could repay the money.

Just last year, the bankruptcy court admonished the Swiss bank for "overreaching and predatory lending practices" meant to "line its pockets" with loan fees from resorts like the Yellowstone Club, which counts Microsoft Corp. co-founder Bill Gates and former Vice President Dan Quayle as members.

"Those are the same lenders who have a majority interest on the trust board," said Blixseth lawyer Tom Banducci.

Blixseth's lawyers said Kirschner stands to gain millions if he can collect a full $286 million from Blixseth and it's lawyers with ties to Credit Suisse that are trying to recoup the money.

But creditors seeking a civil fraud judgment against the real estate tycoon said Credit Suisse has little to do with the trust's pursuit of Blixseth.

Kirschner beat back an assertion that Credit Suisse hand-picked the board he reports to.

"Definetley not," he told the court.

The Blixseth divorce, with its $9-million-a-year housing maintenance payments and contentious legal battles, again was a key issue.

Tim Blixseth's lawyers argued that ex-wife Edra Blixseth, who took control of the club right before its bankruptcy filing, also assumed the club's debts. She later sold the club in an insider deal to its creditors.

U.S. Bankruptcy Judge Ralph Kirscher will have to sort through the intrigue to determine whether the the transfers of money from the club to Tim Blixseth were fraudulent.

The judge said he has the power to void them and force repayment.

Kirschner noted that the bankruptcy court has already admonished Credit Suisse for its behavior in granting the loan. Now its Blixseth's turn.

"I feel quite confident in our case, but the judge will have to make the decision based on the facts presented in the next several days," he said. "

Source
http://www.oregonlive.com/business/index.ssf/2010/02/bankruptcy_case_heats_up_for_f.html

A Few Thoughts on this Article by Investigative Blogger Crystal L. Cox

"Kirschner noted that the bankruptcy court has already admonished Credit Suisse for its behavior in granting the loan. "

What? How Can a Bankruptcy Judge Let Credit Suisse off the Hook? Was there an Investigation ? I For One as a Broker Owner in Montana, I Say the Market was Rigged, I Say Lenders Like Credit Suisse knew Damn well what they were doing. Read "Confessions of a Mortgage Broker" or "Confessions of a Subprime Lender" - they knew and they let appraisals come in at 10% higher, and then higher and higher they went..

the MLS Data was NEVER policed for Accuracy or Quality Control to ensure that Appraisals were anywhere near an Actual Value. And in fact it has not been that long were we as Brokers in Montana could go in and change the SOLD Data way after the Fact... now many MLS Data bases have changed that and a form is required but still no proof.. What a Broker Says, Goes.. ..

There were even people who would Fake a Sale in a Development Similar to the Yellowstone Club in Order to Get a "Comp" to make an Appraisal Come out "Right". In my Market in Northwest Montana the APPRAISER would call me, the Broker Owner - the Real Estate Agent on a Deal and Say "Whatia Need it to Come In At"

The Montana Real Estate Frenzy was OUT OF CONTROL, and Lenders like Credit SuisseKNEW full well that it would fall and they covered themselves.. Many Even Got a "bailout" ..

The Market climbed way to fast at that time and Lenders Gave Mortgage Brokers and Even Realtors incentives to Sell those Loans... then the Lenders would Sell on the Secondary Market, there is a Whole lot of Truth to Tim Blixseth's Claim of "Predatory Lending" .. .It was Rampant, especially in Markets such as Whitefish Montana, Flathead Lake, Bigfork, and Bozemen Montana.

Judge Ralph Kirscher, Seems to me to be Biased and Exercising Some Absolute Power in this Case and the Truth, the Facts are Of No Concern... just my Opinion of Course. However I have had a behind the Scenes look at Bankrupcty Corruption in US Courts for 2 years as an Investigative Blogger and as a Real Estate Industry Whistleblower and a 10 year Broker Owner in Montana - Well I am not coming in Blind on all this... that's for Sure...

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"Creditors, captained by trustee Marc Kirschner, counter that Blixseth intended to defraud the Yellowstone Club by lining up big loans " Was it Really the Job of the Debtor, the Real Estate Buyer - Developer to "Value" Montana Real Estate. How was Tim Blixseth to know that the Lenders, Realtors, Appraisors and the Mortgage Industry as a Whole was Creating this Financial Fiasco. As a Real Estate Developer in Montana at the Time, I Imagine the Local Commissioners, the Realtors and EVERYWAY laid out the Red Carpet.. it happened to Many .. MANY.. way to Many Resorts all over Montana.. NOT Just the Yellowstone Club.

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"The judge said he has the power to void them and force repayment." - WoW.. Absolute Power Like This, one Man? is there No Room for Fraud, Conflicts, Corruption? In My Opinion there is Plenty of Room for Corruption.

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This Statement is something that Tim Blixseth Should have Sued on "fleecing the ritzy Yellowstone Club of nearly $300 million" He did not Fleece the Yellowstone Club, he got caught up in the Same Montana Real Estate Frenzy as the rest of them did, his was just bigger. The Realtors Association MLS Data Base, the Appraiser, the National Association of Realtors and the Lenders are Who Was Doing the "Fleecing".

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"Credit Suisse hand-picked the board" REALLY? Gee No Conflict of Interest There???

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Much More Coming Soon on ALL Aspects of Possible Fraud, Corruption, Trustee Conflicts of Interest, the Buyer of the Yellowstone Club "Conflicted?", and many more details of the Yellowstone Club Bankruptcy. Got a Tip ? Crystal@CrystalCox.com