A down-on-his-luck billionaire and a banking giant with a soiled name sparred Wednesday in bankruptcy court, each blaming the other for fleecing the ritzy Yellowstone Club of nearly $300 million.
Dirty laundry from the world of international finance and the divorce of club founders Tim and Edra Blixseth remained on display in the ongoing bankruptcy saga of the ultra-exclusive alpine getaway for millionaires.
Lawyers for club founder Tim Blixseth argued that Credit Suisse has seized control of the club's bankruptcy trust and crafted a deal that stands to enrich the trustee who wants to force Blixseth to repay a $286 million loan Credit Suisse arranged for the club in 2005.
Creditors, captained by trustee Marc Kirschner, counter that Blixseth intended to defraud the Yellowstone Club by lining up big loans to bankroll a lifestyle of luxury estates, personal jets and luxury cars. The creditors want to collect even though the club emerged last year from its 2008 bankruptcy filing.
The creditors say Blixseth knew bankruptcy loomed, looted club assets and sought to hide them amid a myriad of other investments.
Blixseth argues he was the victim of a predatory lending scheme by Credit Suisse and was given the loan without regard for whether the club could repay the money.
Just last year, the bankruptcy court admonished the Swiss bank for "overreaching and predatory lending practices" meant to "line its pockets" with loan fees from resorts like the Yellowstone Club, which counts Microsoft Corp. co-founder Bill Gates and former Vice President Dan Quayle as members.
"Those are the same lenders who have a majority interest on the trust board," said Blixseth lawyer Tom Banducci.
Blixseth's lawyers said Kirschner stands to gain millions if he can collect a full $286 million from Blixseth and it's lawyers with ties to Credit Suisse that are trying to recoup the money.
But creditors seeking a civil fraud judgment against the real estate tycoon said Credit Suisse has little to do with the trust's pursuit of Blixseth. Kirschner beat back an assertion that Credit Suisse hand-picked the board he reports to.
"Definitely not," he told the court.
The Blixseth divorce, with its $9-million-a-year housing maintenance payments and contentious legal battles, again was a key issue.
Tim Blixseth's lawyers argued that ex-wife Edra Blixseth, who took control of the club right before its bankruptcy filing, also assumed the club's debts. She later sold the club in an insider deal to its creditors.
U.S. Bankruptcy Judge Ralph Kirscher will have to sort through the intrigue to determine whether the transfers of money from the club to Tim Blixseth were fraudulent. The judge said he has the power to void them and force repayment.
Kirschner noted that the bankruptcy court has already admonished Credit Suisse for its behavior in granting the loan. Now its Blixseth's turn.
"I feel quite confident in our case, but the judge will have to make the decision based on the facts presented in the next several days," he said.