Background and career
Timothy Lee Blixseth (born 1950) is an American real estate developer, record producer, songwriter and timber baron. He was a co-founder of the Yellowstone Club in Montana. In 2006, Blixseth was featured in the Forbes 400 List of wealthiest Americans with a net worth of $1.3 billion. However, based on court records from his 2009 divorce, news reports estimated his 2011 net worth to have dropped to $200 million. By 2012, he faced a forced bankruptcy for failing to pay the state of Montana $57 million in income taxes and in 2014 he told the courts he was "too poor" to pay pending judgments and contempt findings for his fraud role in the Yellowstone Club bankruptcy. Blixseth's wealth and assets have been the subject of controversy. In 2008, the bankruptcy of the Yellowstone Club led to extensive litigation with Blixseth and his creditors. The property emerged from bankruptcy under new ownership in 2009.
According to Blixseth, he "grew up on welfare in Roseburg, Oregon". He attended Roseburg High School (Class of 1968) and after graduating, he worked in a sawmill. His parents were members of "a local cult" called Jesus Name of Oneness.
Blixseth began his business career using land swap deals and federal timber contracts.
Following bankruptcies in 1981 and 1986, Blixseth began to rebuild his timber business endeavors. In 1988, he co-founded Crown Pacific, LTD with Peter Stott and within a year he had $44 million in sales. During this time, Blixseth was involved with three Oregon companies that defaulted on 22 national timber sale contracts owed the U.S. Forest Service more than $8 million. Two of Blixseth's timber companies, Capital Veneer and Capital Log Sales, filed for bankruptcy with debts totaling more than $16 million. A third company, Little River Box Co., was dissolved following two federal contract defaults. By 1992 Blixseth had sold his interests in Crown Pacific and launched Big Sky Lumber in Montana. In 1995 Blixseth's Big Sky Lumber sold another 8,100 acres (33 km2) to the U.S. Forest Service for $16.4 million and then swapped the remaining 101,000 acres (410 km2) in checkerboard layout for 47,000 acres (190 km2) contiguous and an additional $25 million. Following this final sale and swap, Blixseth dissolved the Big Sky Lumber partnership and divided up the proceeds, keeping 15,000 acres (61 km2) and tens of millions in cash for himself. The cash and new acres became the foundation for Blixseth's Yellowstone Club project. Blixseth with Pittsburgh financier James J. Dolan also started the Spanish Peaks development, a high-end but somewhat less exclusive resort on neighboring property to the Yellowstone Club with land from the swap deal. Spanish Peaks announced it was closing and filing for bankruptcy in 2011. Between sales to timber interests, developers and the U.S. government, Blixseth's team grossed $56.9 million and 47,000 acres (190 km2) of prime development real estate valued at over $100 million in less than three years from the date of their initial $27.5 million investment, of which Blixseth reportedly put less than $3 million.
With cash and land from his 1995 deal with the U.S. Forest Service, Blixseth began development of 15,000 acres (61 km2) of pristine Montana real estate outside of Big Sky. Blixseth said to a Montana Bankruptcy court as "I started the club with a pick-up truck and a hammer." In 2005, they took in over $200 million from the sales of building lots and memberships to wealthy business leaders, media icons and celebrities. Early Club members and investors included Bill Gates, Mary Hart, Dan Quayle and Steve Case. Leading to the Club's eventual financial failure was Blixseth's dealings with cyclist Greg LeMond. In 2002 LeMond, with four other family members and associates, invested in the Yellowstone Club. Each of the five partners paid Blixseth $750,000 for one percent shares in the exclusive resort. LeMond also purchased several building lots and maintained a property at the resort. LeMond and partners sued Blixseth in 2006 following reports of a Credit Suisse loan to the resort of $375 million from which Blixseth reportedly took $209 million in a disputed partial payout for his ownership stake. Blixseth said he used the money to expand the Yellowstone Club into the Yellowstone World Club. In 2006 Blixseth told the New York Times that he "paid cash, with no help from investors, for each of the properties that make up the Yellowstone World Club." The Credit Suisse loan was based on a $1.16 billion Cushman & Wakefield valuation of the resort and for which LeMond and partners each sought $11.6 million for their one percent shares. LeMond settled his suit with the Blixseths for $39 million in 2007. Blixseth appealed several aspects of the Yellowstone Club bankruptcy. The judge found Blixseth's claims unconvincing, noting, "Given the evidence, Blixseth's arguments are without support" and on March 6, 2013 U.S. District Court Judge Sam Haddon denied Blixseth's final appeal noting his lack of standing to revisit his rejected claims of "bad faith" in the bankruptcy reorganization." In December 2013 Judge Haddon ruled Blixseth in contempt for committing fraud and deception against the Court after it was revealed that in 2011 he had illegally sold-off assets frozen by an earlier court order to cover judgments against him in the Yellowstone Club bankruptcy proceedings.
In 2006 the Blixseth's partnered with a computer software designer Dennis L. Montgomery, former Microsoft executive Michael Sandoval and former Congressman Jack Kemp to sell software they claimed could recognize patterns and objects hidden in video streams. They invested in several companies named Blxware, xPatterns, and OpSpring, and promoted their technology to the U.S. government as being able to identify hidden messages from Al-Qaeda terrorists in Al Jazeera broadcasts and find terrorists in pictures taken by CIA predator drones. According to the New York Times, Mr. Kemp used his friendship with Vice President Dick Cheney to set up a meeting in 2006 at which Mr. Kemp, Montgomery and Ms. Blixseth met with a top Cheney adviser, Samantha Ravich, to talk about expanding the government's use of the Blxware software. Blixseth reportedly sought to sell the software to the government for $100 million; however, investigations later revealed it to be a "hoax" with CIA officials reporting they knew the technology to be fake as early as 2003. The software was reportedly responsible for false terror alerts which grounded international flights and caused Department of Homeland Security Secretary Tom Ridge to raise the government's security level. In February 2006, the FBI opened an economic espionage and theft of intellectual property investigation. The U.S. Air Force office of Special Investigations also investigated. Bloomberg news reported that Blixseth family attorney Michael Flynn represented Edra Blixseth, Montgomery and Blxware against various charges until he claimed he learned the software "was a sham," characterized Montgomery as a "con man" and quit.
