Yellowstone Club collapse pinned on founder, judge says Blixseth must repay most creditors

Aug 17th, 2010 | By usnews | Category: U.S.

BILLINGS, Mont. –  A federal judge has pinned the financial collapse of the ultra-exclusive Yellowstone Club on its founder, Tim Blixseth, but says he doesn’t have to repay all its debts.

U.S. Bankruptcy Judge Ralph Kirscher says in a 135-page ruling issued Monday that Blixseth siphoned hundreds of millions of dollars from the private Montana ski club that counts Microsoft’s Bill Gates among its membership.

Kirscher ordered Blixseth to repay most of the club’s creditors for losses stemming from its 2008 bankruptcy. That could amount to tens of millions of dollars.

But Kirscher denied repayment to the financial giant Credit Suisse. The judge said the firm knew most of a $375 million loan it arranged for the club would go straight into Blixseth’s pockets.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

BILLINGS, Mont. (AP) — A federal judge has pinned the financial collapse of the ultra-exclusive Yellowstone Club on its founder, Tim Blixseth, but says he doesn’t have to repay all its debts.

U.S. Bankruptcy Judge Ralph Kirscher said that “in a pattern of self-dealing,” Blixseth siphoned hundreds of millions of dollars from the private Montana ski club, which counts Microsoft’s Bill Gates among its membership.

In a 135-page ruling issued Thursday, Blixseth was ordered to repay most of the club’s creditors for losses stemming from its 2008 bankruptcy. That could amount to tens of millions of dollars.

But Kirscher denied repayment to the financial giant Credit Suisse. The judge said the firm knew most of a $375 million loan it arranged for the club would go straight into Blixseth’s pockets.

“Blixseth and Credit Suisse have done a lot of finger pointing in this case, but in the end their conduct prompted (the club’s) bankruptcies,” Kirscher said in his ruling.

Neither Blixseth nor his attorneys could be reached immediately for comment.

Thomas Beckett, a Utah attorney formerly involved in the case, said the decision could have been much worse for the embattled real estate mogul.

Credit Suisse’s consortium of lenders were repaid about $80 million during an earlier phase of the bankruptcy case from the proceeds of the club’s sale last year, to Sam Byrne of Boston-based CrossHarbor Capital Partners.

But Beckett said the Credit Suisse lenders still were owed more than $200 million — money for which Blixseth now appears off the hook.

“If the party who is suing you for $225 million is suddenly told they can’t, on some level it’s a good day,” Beckett said.

(This version CORRECTS APNewsNow. Corrects that ruling was issued Monday, not Thursday. This story is part of AP’s general news and financial services.)

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