BILLINGS, Mont. — Former billionaire and Yellowstone Club founder Tim Blixseth is in contempt of court for selling an ocean resort in Mexico despite a court order not to sell the property that was part of bankruptcy proceedings, a judge has ruled.
A bankruptcy judge previously ordered that the Tamarindo resort was not to be sold or transferred while those proceedings were pending.
Blixseth sold the hotel and condominiums in 2011 in violation of the court order, attorney Shane Coleman, who represents Yellowstone Club Liquidating Trust trustee Brian Glasser, said in a court filing.
Coleman requested that U.S. District Judge Sam Haddon find Blixseth in contempt. After a Dec. 23 hearing, Haddon did so, according to court records.
Blixseth’s attorney, Patrick Fox, responded that the resort was sold “out of absolute necessity under circumstances outside of Blixseth’s control.”
The resort was in the State of Jalisco, a hot spot for Mexican drug-cartel violence. The resulting drop in tourism and commercial flights to the area was causing the resort to lose $80,000 a month, Fox wrote.
Mexican authorities were threatening to seize it for unpaid taxes, a possibility that would have resulted in a total loss, Blixseth said in a statement to the court.
“I had absolutely no choice but to quickly sell El Tamarindo for the purposes of paying off El Tramarindo’s outstanding obligations,” Blixseth wrote.
He sold it for $13 million — after buying it for $40 million — and all of the proceeds have been spent, he said.
Blixseth said he did not believe he was violating any court order by selling the resort, because his attorneys advised him that an earlier reversal of the Yellowstone Club reorganization plan had nullified the injunction preventing the sale.
Coleman called Blixseth’s justifications for the sale “increasingly lame excuses.”
Blixseth filed two separate motions to obtain relief from the bankruptcy plan around the same time, illustrating that he believed the plan was still valid, Coleman said.
Haddon referred the case to U.S. Magistrate Judge Keith Strong to recommend sanctions against Blixseth. Both sides will have the opportunity to weigh in on proposed sanctions.
Blixseth, a Washington state resident, founded and enriched himself off Montana’s ultra-exclusive Yellowstone Club before the resort went into bankruptcy in 2008. He’s put most of his assets into a Nevada trust out of the reach of his creditors.
The club has since been reorganized and emerged from bankruptcy under new ownership.
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