Credit Suisse Group AG’s “greedy antics” bar it from collecting $229 million on a soured loan the bank arranged for the Yellowstone Club, a ski resort for millionaires, a court ruled.
U.S. Bankruptcy Judge Ralph B. Kirscher in Butte, Montana, ordered Yellowstone co-founder Tim Blixseth to pay $40 million to the club’s creditors but nothing to Credit Suisse. Credit Suisse made the loan “with no meaningful due diligence and a noncompliant appraisal,” the judge said.
“The loan at issue was not normal under any circumstances and the greed of not only Blixseth, but also Credit Suisse, shocked the conscience of the court,” the Kirscher said in an amended order.
While under Blixseth’s control, Yellowstone borrowed $375 million, according to court records. Afterward, Blixseth paid himself, through a company he controlled, $209 million, Kirscher wrote in an earlier ruling.
After Yellowstone filed for bankruptcy in 2008, Credit Suisse tried to collect from Blixseth. A bankruptcy trustee sued Blixseth last year in an attempt to collect on behalf of Credit Suisse and other Yellowstone creditors.
Kirscher ruled against the trustee last month and yesterday reiterated his decision in an amended order setting out the amount that Blixseth must pay.
Duncan King, a spokesman for Credit Suisse, declined to comment immediately on the ruling.
Yellowstone Club exited bankruptcy last year under the ownership of group led by CrossHarbor Capital Partners, a Boston hedge fund manager.
Kirscher is the latest U.S. judge to criticize the actions of a bank from the bench this year.
Last month, U.S. District Judge Emmet Sullivan in Washington said that Barclays Plc got a “sweetheart deal” from federal regulators who settled allegations that the bank profited from its trades with Iran, Cuba and Sudan. U.S. District Judge Ellen Huvelle in Washington Aug. 16 held up a $75 million settlement between the Securities and Exchange Commission and Citigroup Inc., lawyers in the case said.
In August 2009, U.S. District Judge Jed S. Rakoff in New York rejected a proposed $33 million settlement between the U.S. Securities and Exchange Commission and Bank of America Corp over disclosures connected to the purchase of Merrill Lynch & Co.
In February, Rakoff “reluctantly” approved a $150 million accord, calling it “half-baked justice at best.” The SEC accused the Charlotte, North Carolina-based bank of misleading investors about Merrill’s bonus payments before the acquisition and losses following the announcement that it would buy Merrill.
Blixseth and his former wife, Edra, founded Yellowstone Club in 2000. Wealthy people flocked to the resort, paying $205 million for 72 properties in 2005 alone.
The couple took cash out of the syndicated loan for personal use, Kirscher found. Finances at the club deteriorated thereafter, he wrote.
Edra Blixseth gained sole control after the couple’s divorce. She declared personal bankruptcy in March 2009, claiming her debt was $500 million to $1 billion and her assets were worth $100 million to $500 million.
The bankruptcy case is In re Yellowstone Mountain Club LLC, 08-61570, U.S. Bankruptcy Court, District of Montana (Butte). The lawsuit is Blixseth v. Kirschner, 09-00014, U.S. Bankruptcy Court, District of Montana (Butte).