NYT: Checkmate at the Yellowstone Club



The New York Times
June 14, 2009

Checkmate at the Yellowstone Club



NINE days after declaring personal bankruptcy -- again -- a barefoot
Edra Blixseth pads excitedly around Porcupine Creek, her 30,000-square-
foot estate here. Guests are coming, probably 125 in all. They're due
any minute. The zipper on her sternum-baring cocktail dress is jammed.
Do you think it's too tight? Can somebody help her?

Porcupine Creek is lavish, with a 240-acre private golf course and a
pool guarded by bronze lions. Many visitors have seen all that, plus
the automated fountain that splashes at the end of her 1,700-foot

But so far, only Ms. Blixseth's good friends have wandered around the
private space inside: the prayer room, the gym, the beauty parlor, the
wet room, the cozy massage alcoves and the private theater adorned
with murals; then there's the 18th-century French furniture, the
Italian stained glass, the bedroom suite from the Vatican, the ancient
Tibetan Tankas. Until this day, she has never hosted a charity event
inside her home. Given the circumstances, though, it's the best she
can do.

"I can't write a check this year," she says, referring to her usual
gift to a shelter for battered women. Her Gulfstream IV has been
grounded. Her jewelry, mostly sold. To help pay the bills, her
boyfriend even had to sell his Bentley.

Edra Denise Blixseth, age 55, is tiny, barely 5 foot 3, but she is at
the center of a huge financial mess. According to personal bankruptcy
papers her lawyer filed in March, she owes $500 million to $1 billion
and has assets of barely half that, almost none of them liquid.
Earlier this month, the court approved the sale of one of her most
prized possessions -- the private ski resort in Big Sky, Mont., known
as the Yellowstone Club -- to the private equity firm of one of its
members for $115 million. Just a year ago, that same buyer,
CrossHarbor Capital Partners, had been willing to pay $400 million for
the club.

The Yellowstone Club, a 13,600-acre playground 20 miles north of
Yellowstone National Park, may be the world's lone members-only ski
resort. Its pristine natural beauty and remote location have attracted
wealthy skiers who prize their privacy, including Bill Gates of
Microsoft; Barry Sternlicht, the hotelier; and Peter Chernin,
president of the News Corporation.

In one of the signature, fin de siècle moments of our passing Gilded
Age, the Yellowstone Club filed for Chapter 11 protection last
November; four months later, Ms. Blixseth followed suit -- a club and
its doyenne, sucked into a financial downdraft that has wounded even
once-untouchable elites.

Marketed with the phrase "Private Powder," Yellowstone is the anti-
Aspen -- luxurious, sure, but discreet and child-friendly. Ask members
what makes it so special, and more than one offers this simple fact:
There, and nowhere else, the family of the world's richest man can ski
without bodyguards. One club member -- who, like many Yellowstone
members, requested anonymity so as not to be seen as violating the
club's tradition of not blabbing about one another -- recalls Mr.
Gates's saying that his family once tried Vail but their need for
security "made us look like jerks. Here, we don't need it." That's
because the club has long been kept safe by former Secret Service
agents, and who can put a price tag on that?

"Once you ski there, you never want to go anywhere else," says Burt
Sugarman, a Beverly Hills businessman who with his wife, the
"Entertainment Tonight" host Mary Hart, was among the club's first

Steve Burke, the chief operating officer of Comcast, has a place at
Yellowstone. As do Bill Frist, the former Senate majority leader; Todd
Thomson, the former head of Citigroup's private banking unit; Robert
Greenhill, founder of the investment bank Greenhill & Company; Greg
LeMond, a Tour de France winner; Annika Sorenstam, the Swedish golf
star; Frank McCourt, the owner of the Los Angeles Dodgers; and about
250 other low-key rich folks.

Membership has its price: a minimum of $250,000 to join, plus the cost
of a $5 million to $35 million mountainside home, plus annual dues of
about $20,000, according to members.

The club, which opened in 1997, was the brainchild of Ms. Blixseth's
former husband, Tim Blixseth. For years they ran it together,
installing the caviar bar in the clubhouse, and giving the 75 ski runs
names like "Learjet Glades" and "Ebitda." Then in 2005, despite
assurances to members that Yellowstone would never take on debt, the
Blixseths obtained a $375 million bank loan from Credit Suisse by
pledging the assets of the club as collateral.

That, Ms. Blixseth says, is when the trouble began.

"I didn't recognize it as such, but that Credit Suisse loan was the
beginning of Tim's midlife crisis," she allows, saying she signed off
on the loan only after vehemently opposing her ex. "Before, we could
contain him. After, it was ego gone wild."

Mr. Blixseth declined repeated interview requests. But in documents
filed in the Montana bankruptcy court last Thursday, he describes Ms.
Blixseth as someone who "spent millions like money grew on trees" and
accuses her of being involved in "a pattern of untruthfulness and
dishonest tactics."

Among examples of profligate spending Mr. Blixseth cites in the filing
is a $90,000 party that Ms. Blixseth had at Porcupine Creek for more
than 100 guests. Guests were invited to whack piñatas shaped like Mr.
Blixseth and which contained chocolate coins wrapped in gold foil.
Voodoo dolls resembling Mr. Blixseth -- complete with stickpins --
were also on display. (Ms. Blixseth acknowledges that the party did
indeed occur.)

Since the Credit Suisse loan came through, there have been lawsuits
and countersuits -- more than half a dozen, at least -- alleging bank
fraud, conspiracy and breach of fiduciary duty, among other claims.

According to bankruptcy court documents, much of the Credit Suisse
money went to create Yellowstone Club World, Mr. Blixseth's failed
effort to establish a chain of exotic resort locales. Among properties
he bought for what he imagined as a sort of megaluxe timeshare were
these: a $28 million, 14th-century chateau (complete with moat)
outside Paris, a $40 million Mexican resort, a $28 million private
island in the Caribbean, and a $40 million site in Scotland that was
to house a golf retreat (down payment: $12 million). Court documents
show that the Blixseths also pocketed $209 million in cash, as well,
which they channeled into their family holding company.

When the Blixseths finalized their divorce last year, Mr. Blixseth,
now 59, got what was left of that cash and the Mexican and Caribbean
properties, among other things. Among Ms. Blixseth's spoils were the
French spread, known as Château de Farcheville; the land in St.
Andrews, Scotland; the Yellowstone Club (and its debt); and Porcupine
Creek, where her fund-raiser is about to begin.

As she prepares for her party, she seems more concerned with battered
women than with her own sorry financial situation. If she feels any
shame, it is hidden under what might be described as a cashmere throw
rug of effusive denial.

"You here to arrest me?" she chirps gaily, greeting a large man who is
the chief of police of Cathedral City, just a few miles away. She's
joking -- he's heading the security detail for her fund-raiser -- but
the joke is a shade too real. In February, a federal judge ordered her
arrest after she missed a court appearance related to her nonpayment
of a $13.3 million loan, a sum that looked like lunch money compared
with the debt that Yellowstone had amassed: more than $360 million,
excluding interest.

"Some people think they better come because it'll be their last chance
to see the house -- because soon I won't have it anymore," she says,
speculating on what has helped lure tonight's guests to her home. "I
say fine, let's use the morbid stuff."

Has she heard the rumor that she and Mr. Blixseth are reconciling?
That their divorce was a ruse to throw off creditors? That as recently
as a year ago they were considering adopting a baby from China? She
laughs -- she's heard them all -- and says she suspects that Mr.
Blixseth (whom she has nicknamed "Toxic") may be spreading the

"I would rather feel the cold steel of a revolver in the roof of my
mouth and pull the trigger than to ever think about living a day with
that man again," Ms. Blixseth says, warming to the idea of talking to
a journalist. She has turned down 50 requests, she says; this is her
first in-depth interview ever. "I've kept my mouth shut, and I'm not
doing it anymore."

JUST a few years back, Tim Blixseth saw Yellowstone as nothing short
of his kingdom. He described himself in other media interviews as the
club's "benevolent dictator," and with Ms. Blixseth at his side, he
ruled with a velvet fist.

People who knew them say that Mr. Blixseth -- who had made his fortune
in timber, then famously lost it, then made it again -- was the
visionary, the dreamer, the one whose salesmanship and sheer audacity
made the club a reality. Early on, Ms. Blixseth served as chief
operating officer for a time. But her knack for hospitality was her
real contribution.

Members say, mostly with fondness, that Ms. Blixseth's aesthetics were
more madam than monarch. Indeed, décor in some parts of the clubhouse
almost smacked of Montana bordello. There, just as at Porcupine Creek,
quality met kitsch, with Persian carpets and antiques rubbing up
against huge marble statues and a couch covered in real zebra skin.

"I mix centuries together," Ms. Blixseth acknowledges. She opens an
ornate trinket cabinet to retrieve a brown, gourdlike object. "Do you
know what this is? A camel scrotum! It holds water."

By design, Yellowstone welcomed only members who were willing to check
their egos at the door -- one of the club's chief selling points.

"You go to Vail, everyone's trying to show they're the biggest guy on
the planet: the newest Bogners, the fanciest car, the power table at
the power restaurant," says Brian Klein, a former Goldman Sachs vice
president who joined Yellowstone in 1999. Such "hey look at me people"
felt out of place at Yellowstone, says Mr. Klein, who now runs an
investment management firm in Seattle.

Not that Yellowstone was a monument to austerity. Some homes had
private elevators, wine cellars, movie theaters and spas, and one spec
house -- called the River Runs Through It home -- featured an all-
glass passageway to the guest quarters with a heated river flowing
beneath it. For a while, the club had $1,000-a-head New Year's Eve
bashes, a sommelier and concierge service.

But members say such perks revealed more about the Blixseths than
anyone else and contend that it was the club's rustic spirit -- not
its bells and whistles -- that attracted most people. That, and the A-
list fellowship.

When it came to luring new prospects, Mr. Blixseth used the club's
best-known members as bait, according to members. In the early years,
Jack Kemp, the former congressman who until his death in May was on
the club's honorary board of directors along with Dan Quayle, the
former vice president, helped recruit. More recently, Mr. Chernin of
the News Corporation -- another board member and one of the first to
build a home at the club -- has done his part.

Len Hill, a former television executive turned real estate developer,
says Mr. Blixseth courted him for a year to become a member, including
a lunch at the club, where Mr. Blixseth hoped to close the deal. "You
were in the entertainment business -- you must know Peter Chernin," he
recalls Mr. Blixseth saying. Mr. Hill says that after he answered yes,
"Tim waves, and mysteriously, Peter appears at the table." (Mr.
Chernin declined to be interviewed.)

Some members chafe at the perception that Yellowstone was a
billionaires-only club. While many arrive via private jet, others fly
commercial and everyone ends up at the same airport in Bozeman, about
an hour north of the club. This helps explain why the Credit Suisse
loan -- the spending spree it enabled, the myriad legal actions it
prompted, the bitter divorce it helped fuel -- has been such a
resounding bummer for members.

"The promise of the Yellowstone Club was somehow sacrificed to the
madness of Yellowstone Club World. The plan that worked was held
hostage to the ever more grandiose plan that didn't," Mr. Hill says.
"There is more than enough material to create a roman à clef that
would make 'Dallas' or 'Dynasty' seem mild in comparison."

LIKE every good drama, this one has an intriguing setup. The son of
Norwegian immigrants, Mr. Blixseth grew up poor in Oregon and, he said
in a magazine interview, executed his first deal when he was about 13
-- buying three donkeys for $75 and reselling them as pack mules for
$225. He briefly attended college, according to earlier profiles, but
dropped out. Later came his timber deals.

Mr. Blixseth met Edra Crocker in Oregon, where she was living,
unhappily, with her first husband and their two children. Later, she
would write a book, called "Uncharged Battery," which described the
alleged abuse she suffered in that marriage, which ended in the early

Back then she was the breadwinner, she says, turning a graveyard
waitressing shift into a managerial job for a restaurant chain and
then into her own venture: a partnership in a small hotel and
restaurant company. She sold her stake after getting involved with Mr.
Blixseth, and they married in 1983.Three years later, after one of Mr.
Blixseth's timber transactions failed, the couple filed for
bankruptcy, claiming $15.4 million in debt and $4,400 in assets,
according to court records.

Then yet another timber deal set the stage for what would become the
Yellowstone Club. Mr. Blixseth swapped 100,000 acres that he and two
partners had bought in Montana with the federal government for the
land that now encompasses the club. His partners took the timberland,
and Mr. Blixseth took the acreage that could be developed.

At first, the Blixseths thought they would build a family compound.
But they began hearing from wealthy friends who wanted in. "Sometimes
you have to pay to play," the Yellowstone Club's Web site said in its
early years. That message would be massaged over time to stress family
values, not net worth. Yes, to qualify for membership, you had to have
money: a minimum of $3 million in liquid assets. But the Blixseths
eventually realized that they were selling something more valuable
than exclusivity, something that eluded the moneyed classes: a sort of
hometown normalcy. Soon, the club had a new catchphrase: "Where
Families Gather."

By 2004, the club was expanding at a handsome clip. Lots that had sold
for about $200,000 in the late '90s were suddenly approaching $1
million an acre. In 2005, Mr. Blixseth achieved a dream, his former
wife says: he made his debut on the Forbes list of wealthiest people
with an estimated net worth of $1.2 billion. (Other than citing Mr.
Blixseth's timber deals and the club, the magazine didn't offer other
sources for estimating his wealth.)

Still, Mr. Blixseth was growing bored, according to his ex-wife, and
decided to deploy the Yellowstone experience worldwide. Why not
acquire primo properties (and jets and yachts) in select locations and
charge members millions of dollars each to buy in?

Ms. Blixseth says she warned her husband that his business plan was
flawed. One of the attractions of the Yellowstone Club was that it was
accessible to many by a short jet ride. Members could leave dinner and
arrive, luggage-free, at their homes in Montana a few hours later.
Yellowstone Club World would serve a very different sort of clientele
-- as Ms. Blixseth put it, "people who want to flit around."

According to Ms. Blixseth, questions about whether they could actually
attract members to Yellowstone Club World made no impact on Mr.
Blixseth. "He wasn't really focused on the business," she says. "He
was focused on being able to go in and say he could afford to buy
these places. We flew around the world in the G550. It was very

Such fun was made possible, of course, by the Credit Suisse loan that
had come through in 2005, as the real estate boom was cresting and
banks were avidly courting borrowers.

Originally, Ms. Blixseth says, the club was going to borrow $220
million. But Credit Suisse -- ready to syndicate the loan to major
investors -- said the demand from those investors had topped $1
billion, according to Ms. Blixseth. Did they want more money, she says
Credit Suisse asked? They did. A Credit Suisse spokesman, Duncan King,
declined to comment on the firm's dealings with the Blixseths.

According to a lawsuit filed in March in federal bankruptcy court in
Montana by the Yellowstone Club's unsecured creditors, the resulting
$375 million loan was a "fraudulent transfer" because the bulk of the
proceeds flowed not to the club but to the Blixseths.

The suit alleged that Credit Suisse set up new financial vehicles for
luxury resort owners that offered them "the opportunity to take their
profits out early by mortgaging their development projects to the
hilt." The suit said these loans "enriched Credit Suisse and more than
one luxury development owner, but it left those developments too
thinly capitalized to survive."

Credit Suisse countersued and has asserted repeatedly in court that
its Yellowstone loan wasn't unusual and didn't cause the club's

In May, the judge overseeing the Yellowstone bankruptcy issued an
interim order in which he criticized Credit Suisse as engaging in
"predatory lending practices" that he said "resulted in financial ruin
for several residential resort communities."

In addition to the Yellowstone Club, properties in Florida, Hawaii,
Idaho, Nevada and Utah borrowed under this Credit Suisse program.
Several have defaulted or gone bankrupt. "The naked greed in this
case," wrote the judge, "shocks the conscience of this court."

Credit Suisse earned a $7.4 million fee for arranging the Yellowstone
loan, according to the creditors' suit. The club's loan agreement
explicitly stated that up to $351 million of the $375 million loan was
intended "for purposes unrelated to the Yellowstone Club" -- a
stipulation that proves, Mr. Blixseth has asserted in court filings,
that he did nothing wrong.

In his court filing last Thursday, Mr. Blixseth says his ex-wife
helped decide how the Credit Suisse loan was spent and cites
statements she made in family court two years ago in which she says,
among other things, that she was "always involved in the day-to-day
operations" at Yellowstone.

Ms. Blixseth says she deferred to her husband on financial matters.

"Tim controlled all the money," she says of her role in Yellowstone's
problems. "I didn't have access to it." But she does acknowledge that
her name was on many of the financial documents, and that $9 million
of the Credit Suisse loan paid off a loan on Porcupine Creek, the
residence where she now lives.

"I haven't wanted to speak out," she says. "But it's hard for me to
read articles that say: 'Where are the hundreds of millions of dollars
that Tim and Edra took out?' -- like we're still this one entity."

Ms. Blixseth says the $375 million loan signaled "the beginning of the
end of my personal and business relationship with Tim." Before the
loan, she says, her job was "holding him accountable. But I couldn't
anymore when the Credit Suisse loan came through because he could just
say, 'Too bad. I've got the money. I'm gonna do it.' "

Ms. Blixseth says that her ex-husband lost $10 million of the Credit
Suisse loan speculating in the stock market and that he bought the
golf property in Scotland without even visiting it. Membership sales
in Yellowstone Club World, meanwhile, were suspended in 2006 for lack
of interest.

HERE'S what Yellowstone members say galls them most: Even as the
Blixseths spent heaps of money on properties around the world, they
neglected the club that they had borrowed against.

They say that for a time, potholes went unrepaired and sewage backed
up at the main ski lodge. The power grid was meant for 80 homes; as it
strained to meet the needs of 300, the ski lifts would occasionally
creak to a halt.

But no one took action until Greg LeMond began examining the Credit
Suisse loan. Mr. LeMond, the renowned American cyclist, was an early
Yellowstone member and a minority investor. In 2006, he sued Mr.
Blixseth and his various corporate entities in a Montana district
court, alleging what would eventually number 30 counts of malfeasance.
The suit contended that Mr. Blixseth tried to bully his partners into
selling their Yellowstone shares. Then, having failed to force that
deal, the suit said, Mr. Blixseth obtained the Credit Suisse loan
without consulting his investors and without sharing the loan

Ms. Blixseth eventually agreed to pay Mr. LeMond and others a $21.5
million settlement; she's paid only $8 million of that amount, and Mr.
LeMond and others are now among her creditors.

In December 2006, Mr. Blixseth made headlines by announcing he was
building a Yellowstone Club manse that he boasted would be the most
expensive home in the world. Priced at $155 million, the 53,000-square-
foot home, called the Pinnacle, would have a heliport, an ice skating
rink and underground parking for 20 S.U.V.'s. (The home was never
built, but for the driveway. Mr. Blixseth would later sell the site
for $10 million.)

Tensions at Yellowstone were rising. Construction of the main lodge
wasn't complete, members grumbled, and was over budget. Some had been
waiting for years to move into the lodge's 23 condos. At one point,
someone mistakenly cut the lodge's main support beam while installing
a skylight.

"Tim is an aggressive businessperson who tends to operate in the
gray," says one Yellowstone member who defended Mr. Blixseth's take-no-
prisoners tactics but declined to be named for fear of angering other
members who are upset with Mr. Blixseth. "It's that aggressiveness
that got this thing off the ground, that got the lifts built, that got
the forest land away from the government, that got the water rights.
As long as it was working in our benefit, everybody thought he was

But Gary Rieschel, a venture capitalist whose family joined the club
in 2000, sees it differently. "Tim is a trader, going back a long
way," he says. "When he put together the club, it was one of the great
land trades in history, and he attracted a group of people who were a
leave-your-ego-at-the-door crowd. But then he tried to trade off those
relationships into what in his mind was an even more exalted group --
and it just didn't work. Tim actually punctured his own bubble."

EVEN as his divorce was being finalized last year, Mr. Blixseth was
preparing to sell the club to CrossHarbor Capital, the private equity
firm founded by Sam Byrne, a Yellowstone member. Mr. Byrne had agreed
to pay just over $400 million, according to several people familiar
with the terms.

The deal fell through. According to several people who talked to Mr.
Blixseth, he contended that Mr. Byrne failed to raise the money. But
Ms. Blixseth, among others, says this is untrue. She says Mr. Blixseth
backed out because the Blixseths, due to the club's debts, needed to
provide a pile of cash at closing, as much as $60 million -- which Mr.
Blixseth didn't want to do.

When the club declared bankruptcy last fall, CrossHarbor stepped in
with $20 million in debtor-in-possession financing to keep the place
running, a sum the firm posted only after Credit Suisse failed to
raise the money, according to court documents.

With the installation of Mr. Byrne's firm as the new owner later this
month -- he has pledged to invest $75 million above the purchase price
in repairs and has set aside $15 million to pay the club's creditors
-- members hope that peace will be restored on the mountain.

Whether such calm will descend upon Ms. Blixseth remains to be seen.

A partial list of her debts filed with the bankruptcy court in April
includes bank loans, judgments and tax liens totaling more than $141
million, including the $35 million from CrossHarbor. Her household
staff of 114 has been cut to less than 40. Some days, she spends hours
outside doing yard work.

"I call it Zen weed-pulling," she says. "I take it one golf hole at a

Still, some Yellowstone members say they are willing to forgive Ms.
Blixseth because she's been so heavily involved lately in keeping the
club on its feet.

"I don't think she's blameless," says Jim Davidson, a founder of
Silver Lake Partners, the private equity firm in Menlo Park, Calif.,
and a longtime Yellowstone member. "But with all the chips down, she
has made some very brave decisions that benefited not just the club's
members but also those who work in and around Big Sky. There were
consequences she had to know were coming, but she did it anyway."

If only her ex-husband were as kind, Ms. Blixseth says. She says she
believes that even today he is trying to undermine her attempts to
move on in her life.

As she frets about her ex-husband, standing by is her boyfriend, Jack
Scalia, an underwear model turned actor who starred in the soap opera
"All My Children." (Mr. Scalia and Ms. Blixseth both dismiss rumors
circulating around Yellowstone that the Blixseths jointly hired Mr.
Scalia to masquerade as her beau.)

"Bury him," Mr. Scalia growls.

"I don't want to bury him," she replies softly. "He can bury himself,

"That's your biggest mistake," Mr. Scalia says.

"It's not that I'm passive," Ms. Blixseth replies. "I'd rather let
things phase out like they should because people are tired of the

Her eyes dart toward Mr. Scalia, who is glaring.

"But what I'm finding in this, after three years, is that's not

CREDIT Suisse and its investors, meanwhile, have taken a big hit on
Yellowstone: Under the terms of a court settlement reached in May, the
$310 million the club still owed the bank has been replaced with a new
$80 million note. Should the French chateau sell, the bank -- as the
agent for the debt holders -- will pocket those proceeds on behalf of
its clients. "We continue to work to maximize the recoveries," said
Mr. King, the Credit Suisse spokesman.

In late May, Ms. Blixseth's bankruptcy was converted from a Chapter 11
filing to a Chapter 7, so instead of having time to reorganize her
finances, she would have to liquidate. She recently filed a motion to
vacate that order; a hearing is scheduled for Tuesday.

Should the court stand firm, she knows the outcome: "Fire sale," she
says. But if she prevails, she hopes to stay at Porcupine Creek, which
she has told the court she will turn into a revenue-generating golf
resort. She also hopes to keep her home at Yellowstone, where members
have told her she will always be welcome. There is even talk of her
serving as an informal ambassador for the club.

Recently, Ms. Blixseth says, she got word that her ex-husband was
spreading rumors about her again. Instead of reacting in anger, she
says, she sent him an e-mail message laying out a new strategy: she
was going to pray for him.

She rises from the leopard-print couch in her great room at Porcupine
Creek and beckons a reporter to follow. Down a long hall crowded with
curios, we arrive at her prayer room, a vast windowed space filled
with Buddhas and silk pillows that faces a faux waterfall. Giggling,
she opens a cabinet and hands me a bobblehead doll of a bespectacled
man in jeans and cowboy boots and a red fleece vest emblazoned with
the Yellowstone Club insignia. He is a miniature Tim Blixseth.

"We had these made at one point. Most people used them for skeet or
got angry and trashed them," she says, walking past a photograph of
her and the Dalai Lama to a table where she likes to place the tiny

"I only put him in one spot, right here," she says. "And I usually hit
the heart chakra, and I say my prayer. And then I use sage to rid the



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