Yellowstone Club Founder Blixseth Faces Forced Bankruptcy

Yellowstone Club co-founder Tim Blixseth may be forced into bankruptcy by three states that claim he owes $2.3 million in back taxes.

Tax officials from California, Montana and Idaho yesterday filed an involuntary-bankruptcy petition against Blixseth in Las Vegas.

“It’s bogus,” Blixseth said in an interview, referring to Montana’s claim for $219,000. “I’ve never ever seen the claim until yesterday.”

Blixseth and his former wife, Edra Blixseth, founded the Yellowstone Club, near Big Sky, Montana, in 2000 as a ski resort for millionaires looking for vacation homes. Members paid $205 million for 72 properties in 2005 alone.

The couple took cash for their personal use from a $375 million loan arranged by Credit Suisse in that year, according to a court ruling by U.S. Bankruptcy Judge Ralph B. Kirscher. Finances at the club deteriorated thereafter, and the club eventually went bankrupt, Kirscher found.

Tim Blixseth said he does owe $1.3 million to Idaho and California, which he will pay. He is waiting for tax information from his ex-wife, who took possession of the Yellowstone Club after their divorce, he said. The couple owned it together until 2008, and Tim Blixseth is entitled to write off some of the losses on his taxes for that year, he said.

Dispute With Montana

Blixseth claimed the allegations in Montana are a personal attack on him by Governor Brian D. Schweitzer. The governor is trying to help an investor in the Yellowstone Club who is opposing Blixseth in bankruptcy court in Montana, Blixseth claimed.

“That’s preposterous,” state Director of Revenue Dan Bucks said today in an interview.

Blixseth actually owes Montana about $56 million in back taxes, Bucks said. Blixseth transferred assets from all three states to an entity in Nevada to avoid paying taxes, Bucks said.

Blixseth said in an e-mail that the $56 million tax lien “is in litigation and under protest.”

The club was sold in 2009 to CrossHarbor Capital Partners LLC, a Boston-based private-equity firm.

Tim Blixseth, who turns 61 later this month, became a target of a trust set up for Yellowstone’s creditors under the club’s reorganization plan.

He was ordered to pay $40 million to the club’s creditors under a September ruling by Kirscher. Blixseth said he’s appealing that judgment.

The case is in re Blixseth, U.S. Bankruptcy Court, District of Nevada (Las Vegas). The Yellowstone case is In re Yellowstone Mountain Club LLC, 08-61570, U.S. Bankruptcy Court, District of Montana (Butte).

-- Editors: Mary Romano, John Pickering

To contact the reporters on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net; Anthony Effinger in Portland, Oregon, at aeffinger@bloomberg.net.

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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