Former attorney of Yellowstone Club owner says $375M loan was legal, approved by resort lawyer

Lawyer says $375M loan to ritzy Mont. club legal

MISSOULA, Mont. — An attorney who led negotiations on a $375 million loan to the Yellowstone Club said Thursday that the transaction was legal, refuting claims that the club should not be held liable for it.

Michael Doyle testified that the transaction was legal under Montana law and that the chairman of the creditors’ committee filing the lawsuit over the Credit Suisse loan had approved its legality, including the transfer of money to club owner Edra Blixseth.

Stephen Brown, the creditors’ chairman and a former attorney for Blixseth’s then-husband Tim, refuted Doyle’s testimony, saying that he was never “expressly” asked to consider whether the loan was fraudulent and that he would not have been qualified to make such a determination.

The legality of the loan is at the center of a federal trial linked to the Chapter 11 bankruptcy of the club, a posh ski resort for the rich founded by the Blixseths. The couple divorced and Edra Blixseth now owns the club, but her husband was in control when the loan was made in September 2005.

Most of the loan was later moved into private accounts for the Blixseths and was spent on paying off existing debts on luxury jets and estates.

Edra Blixseth and a committee of the club’s creditors contend the loan was fraudulent and want it voided so the money does not have to be paid back to Credit Suisse. Tim Blixseth has accused his ex-wife of engineering the bankruptcy to lower the club’s price for a sale.

Mike Flynn, attorney for Tim Blixseth, argued that the attorney-client privilege between Brown and Tim Blixseth should prohibit Brown from working with the creditors on their suit.

“It’s an obvious conflict of interest, obvious compromise and obvious taint on the trial,” said Flynn, who wants the judge to force the creditors’ attorneys to hand over copies of private communications with Brown.

Brown said he was no longer a lawyer for Tim Blixseth and that he was “just a committee member like anybody else, with some organizational duties that not every one else may have.”

Bankruptcy Judge Ralph Kirscher said he was unlikely to order the communications with the creditors’ attorneys to be released.

“We can’t just bring this to a halt,” Kirscher said. “I’m not going to allow it over a request like this.”

The judge also banned the use of Twitter in the courtroom Thursday, a day after he discovered that a reporter was sending brief text messages from the courtroom about trial proceedings. He said it could give witnesses access to evidence they should not know about.

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