A federal appellate panel on Thursday upheld a contempt-of-court finding against real estate developer Tim Blixseth for violating a judge’s order by selling a luxury property in Mexico while it was tied up in a bankruptcy dispute.
The three-judge panel of the 9th Circuit Court of Appeals said Blixseth must post a bond of at least $13.8 million or face additional sanctions.
The case stems from the 2008 bankruptcy of the Yellowstone Club, a members-only ski and golf resort near Big Sky founded by Blixseth and his ex-wife, Edra.
The club has since emerged from bankruptcy under new ownership. Its creditors are seeking more than $200 million that courts have ruled was illegally drained from the club for Tim and Edra Blixseth’s personal use.
A bankruptcy judge previously ordered the El Tamarindo resort in Mexico not to be sold or transferred while the bankruptcy proceedings were pending. Blixseth, who lives in Medina, Wash., sold the hotel and condominiums in 2011 for $13 million. He originally paid $40 million for the property.
His attorney later said the sale was an “absolute necessity” because the property’s location in the state of Jalisco — a hot spot for drug cartel violence — had caused it to lose $80,000 a month. Blixseth also said Mexican authorities were threatening to seize the property for unpaid taxes.
U.S. District Judge Sam Haddon rejected those arguments, finding Blixseth in contempt. Blixseth was ordered to put up a bond to cover the sale price, prompting him to appeal to the 9th Circuit.
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The 9th Circuit ruling sided with Haddon.
Brian Glasser, the trustee of the Yellowstone Club Liquidating Trust, said he will seek the incarceration of Blixseth if he does not provide answers about what happened to the proceeds of El Tamarindo’s sale.
“We don’t believe he’s done that yet,” said Glasser, an attorney with the Charleston, West Virginia, firm of Bailey & Glasser. “We will be moving before the district court to make (Blixseth) explain where all the money went in a very detailed way.”
Blixseth and his attorney, Phillip DeFelice of Havre, did not immediately respond to messages seeking comment. They previously argued to the 9th Circuit that the sanctions attached to Haddon’s contempt order were unfairly punitive in nature.
DeFelice also has suggested his client - a one-time billionaire who has seen his fortunes erode since his acrimonious divorce - might not have enough money to cover the bond.
The liquidating trust “would rather assume that Blixseth has $209 million that he allegedly ‘hijacked’ (from the club) than discover the truth that this legal war has cost him everything,” DeFelice wrote to the court in June.