A federal bankruptcy judge ruled Tuesday that a creditors' committee and the financial firm Credit Suisse can pursue $272 million owed to the Yellowstone Club, the swank Montana resort for the ultra-rich now under Chapter 11 bankruptcy protection.
U.S. Bankruptcy Judge Ralph Kirscher previously had said the millionaires-only club could pursue the missing money on its own. But he vacated that earlier ruling on Tuesday, citing a potential conflict of interest on the part of club owner Edra Blixseth.
Blixseth also controls BGI, the corporation that owes the club the $272 million. She testified Tuesday that BGI cannot repay the money at this time.
"It puts Mrs. Blixseth in a really difficult position because she's on both sides of this," Kirscher said. He added that he wanted a "big-picture solution" to the club's financial problems so that it does not go out of business.
The club, which boasts a private ski hill about 50 miles south of Bozeman, employs as many as 600 people during the winter season and has become an economic mainstay for surrounding communities.
Blixseth's ex-husband, Tim Blixseth, arranged the transfer of the $272 million from the club to BGI in 2005. That was before the couple's divorce, when he was in control of both entities. One of his attorneys, Joel Guthals, declined comment Tuesday when asked by The Associated Press whether he expects the money trail to lead back to his client.
Most of the missing money originally came from a $375 million loan to the club arranged by Credit Suisse in September, 2005. The terms of that loan detailed that most of that money could be diverted to nonclub purposes.
After the money was transferred out of the club, Tim Blixseth signed at least three promissory notes on behalf of BGI pledging to repay the funds. Repayment has never been made.
Now Credit Suisse lawyers will work with the Unsecured Creditors Committee to attempt to get the money back. The committee, set up as part of the Yellowstone Club's Chapter 11 bankruptcy case, represents hundreds of individuals and companies owed money by the club.
Credit Suisse, the club's largest creditor, is still owed $307 million on its 2005 loan. But unlike the unsecured creditors, the firm holds liens on much of the resort's mountain property as collateral against what it is owed.
Lawyers representing many of Yellowstone Club's estimated 340 members had opposed Credit Suisse's participation, since the financial firm had knowingly allowed Tim Blixseth to divert the missing money in 2005.
Thomas Beckett, a Salt Lake City lawyer representing the creditors committee, said Credit Suisse will be closely watched. "Make no mistake, the committee will be running the show, deciding what needs to be done," Beckett said Tuesday.