BILLINGS – The founder of Montana’s exclusive Yellowstone Club claims in a new lawsuit that he was betrayed by his ex-attorney in a civil fraud case that resulted in a $40 million judgment against him.
Resort developer Tim Blixseth also accuses former attorney Stephen Brown of participating in a plot to blame the club’s 2008 bankruptcy on Blixseth, who has spent much of the past three years refuting allegations he looted the club before it spiraled almost $400 million into debt.
In a federal lawsuit filed Wednesday in Missoula, Blixseth said he was seeking at least $375 million in damages against Brown and others he says conspired against him.
Brown on Thursday denied any liability on the part of himself or his Missoula law firm, Garlington, Lohn and Robinson.
“We will file a formal response,” Brown said. “There’s going to be a lot of disputed things in there.”
It’s not the first time Blixseth has blamed others for his legal and financial problems of the last few years, a period that saw his reported net worth drop from more than $1 billion to $230 million.
Blixseth has tried unsuccessfully to get the federal judge overseeing some of his cases disqualified for alleged bias. He has accused the club’s financial backers of setting the resort up to fail. And he has suggested Montana’s governor participated in a wide-ranging plot to strip him of control of the club.
The claims against Brown include legal malpractice, breach of fiduciary duty, fraud and conspiracy.
Other defendants named in the case are current club owner Sam Byrne of CrossHarbor Capital Partners, several attorneys connected to the club’s bankruptcy and their firms.
“What these lawyers did is unconscionable and unethical,” Blixseth said in a statement. “With a wink and a nod, they allowed a built-in conflict of interest to harm me.”
Blixseth made hundreds of millions of dollars off the ski and golf resort before giving it up during his divorce. Three months later, the club was bankrupt, unable to repay debts including the bulk of a $375 million loan Blixseth arranged for the club through Credit Suisse.
Most of that loan was passed to Tim Blixseth and ex-wife Edra Blixseth.
At the time, according to Tim Blixseth’s lawsuit, Brown signed off on the deal as legitimate. Creditors later claimed Tim Blixseth had fraudulently pocketed $286 million meant for the resort, in a lawsuit that Blixseth says Brown cooperated with.
Brown was chairman of the unsecured creditors committee that filed the complaint over the $286 million. Prior to that role, he served as Blixseth’s personal attorney and the attorney for the club.
Brown gained a seat on the committee in part because his firm was among the club’s creditors when it filed for bankruptcy. Blixseth was not an original party to the creditors’ lawsuit but he intervened in the case about a month after it was filed.
The creditors won a $40 million judgment against Blixseth last year before U.S. Bankruptcy Judge Ralph Kirscher.
In his ruling, Kirscher shot down claims that Brown OK’d Blixseth’s personal use of the loan money. The judge said responsibility for that fraudulent transfer rested with Blixseth.
Blixseth has yet to pay the $40 million judgment, and the issue remains caught up in a tangle of lawsuits and appeals stemming from the resort’s bankruptcy.
In a separate case, recent court documents show Tim Blixseth is seeking $808,000 in legal fees and unspecified punitive damages from the state of Montana after tax authorities unsuccessfully tried to force him into bankruptcy.
Montana’s Department of Revenue has alleged Tim Blixseth owes more than $57 million in unpaid taxes and penalties from the Credit Suisse loan. A federal judge in Nevada threw out the case last month saying it was not filed in the proper venue.
Tim Blixseth is a resident of Washington state. A family trust that holds most of his assets is incorporated in Las Vegas.
The dispute over the $57 million remains pending before the State Tax Appeal Board.
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