By PHIL DRAKE, Helena Independent
HELENA, Mont. (AP) – A US bankruptcy judge has upheld court rulings that the state of Montana did not file involuntary bankruptcy against Yellowstone Club co-founder Tim Blixseth nearly a decade ago.
Nevada Judge Mike N. Nakagawa on June 3 upheld previous judges’ ruling to dismiss the involuntary petition, ruling that the case had been going on for nearly 10 years.
The 9th District Court of Appeals ruled in 2019 that the Montana Department of Revenue (MDOR) had no authority to file an involuntary bankruptcy petition against Blixseth and referred the case to a bankruptcy court to see if it should be dismissed.
The Yellowstone Club, a private ski and golf resort in Big Sky, founded in 1997 by Blixseth and his current ex-wife, filed for bankruptcy in 2008. Blixseth was accused of saving a large portion of a $ 375 million Credit Suisse loan to the resort and later gave control of the company to his ex-wife during their 2008 divorce. The club, which touted billionaire Microsoft co-founder Bill Gates and former Vice President Dan Quayle as members, has emerged from bankruptcy under new owners.
The Montana Treasury Department had conducted an audit of Blixseth and said in 2009 that he owed $ 56.8 million in taxes, penalties and interest on eight audit questions, court documents said. The Montana lawsuit against Blixseth is separate from Blixseth’s claims for damages against Montana, Nevada, based on the involuntary petition, Independent Record reported.
In 2011, Montana joined forces with the Idaho State Tax Commission and the California Franchise Tax Board against Blixseth. However, according to court documents, these two states had settled agreements and withdrew from the petition.
Nakagawa noted that at the time of the hearing, it has been almost a decade since the involuntary petition was filed. He said that since April 20, 2011, only Montana has continuously pursued this matter against Blixseth.
He said the Yellowstone Club’s Liquidating Trustee appeared to be interested in continuing the involuntary trial against Blixseth but gave up nearly two years before receiving the 9th district mandate in that bankruptcy court.
“Montana claims to have ‘vigorously’ pursued this involuntary trial,” Nakagawa wrote. “There is no question that Montana has been more on the defensive than the offensive throughout the proceedings. Undoubtedly, the prospect of defending the alleged debtor’s likely claim under Section 303 (i) adds to the strength of Montana. “
He said Montana has provided no evidence that unsecured creditors eligible to participate in the lawsuit have “been prohibited from or even expressed an interest in it.”
“Under these circumstances, the discontinuation of these almost decades-long proceedings serves the public interest in a speedy processing of the bankruptcy proceedings,” wrote Nakagawa.
He also said the court wanted to retain jurisdiction over claims.
The judge also dismissed another motion by the state to overturn a previous release order.
“First, based on the evidence, there is no need to be exempted from the second release order,” Nakagawa wrote, noting that the law “does not provide for a ‘decline’. The mere dissatisfaction of a party with a judgment of the court of first instance does not constitute exceptional circumstances … “
Samuel A. Schwartz, Blixseth’s attorney, said the judge’s decision allowed Blixseth to seek a refund from the state of Montana.
“The way forward is pretty clear now: a lawsuit and damages,” he said.
The Montana Treasury Department declined to comment on the recent lawsuits.
Schwartz notes that Blixseth was a Forbes 400 billionaire and said his client was “trapped in purgatory in the state of Montana” during a decade of bull market and real estate development.
He said his reputation had been damaged because he had been fighting this fight for a decade.
“We think Tim has significant and demonstrable damage,” he said.
In 2016, shortly after his release from Cascade County Jail, Blixseth requested the emails from Governor Steve Bullock, who had served as attorney general, only to learn that the emails no longer existed.
State officials at the time said no laws had been broken. Blixseth claimed the state had failed to comply with the law. He said the emails would aid him in his pending legal battle with the state.
These emails contained correspondence between Bullock and the then government. Brian Schweitzer and with various members of the Department of Environmental Quality, the Attorney General and the Governors Office.
Blixseth said he would charge the state $ 700 million plus legal fees. He said he would ask the jury to award punitive damages for the willful destruction of evidence by Bullock and others.
“The state, led by Schweitzer and Bullock, used the power of the state to prevent me from appealing and filing lawsuits in an attempt to stop the Yellowstone Club’s bankruptcy plan,” Blixseth said in an email.
Blixseth was jailed for civil contempt for violating a bankruptcy judge’s order, Tamarindo, a luxury property in Jalisco, Mexico, not for sale for $ 13.8 million in 2011, for civil contempt for contempt of court prior to release in 2016 .
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