Bankrupt Yellowstone Club Creditors Seek Suit against Credit Suisse

Most of $375 million Credit Suisse loan to the Yellowstone Club went into the pockets of the resort’s owners, raising doubts about similar Credit Suisse loans to other luxury community developers.

Palm Coast, Florida – February 15, 2009 – Creditors and members of the bankrupt Yellowstone Club are seeking to file a lawsuit against Credit Suisse, claiming the $375 million loan that forced the club’s bankruptcy was "fraudulent." Most of the money, they claim, went into the pockets of Tim and Edra Blixseth and should be repaid by them, not the club.
Credit Suisse collected $7.4 million in fees while $200 million was allegedly deposited directly into the Blixseth’s personal accounts. The 13,600 acre Yellowstone Club is the country’s most exclusive private skiing and golf resort for millionaires only. It boasts Bill Gates as a member.
The Official Committee of Unsecured Creditors of Yellowstone Mountain Club is seeking the bankruptcy court’s permission to file a lawsuit against Credit Suisse. The suit seeks to disallow repayment of the remaining $309 million on the loan and asks that the bank be required to repay the $146.4 million in fees, principal, and interest it has already collected.
According to the lawsuit (available here in PDF), the loan was part of a new financial product offered by Credit Suisse. Key text from the introduction of the proposed suit is quoted here:
  • "It (Credit Suisse) was offering the owners of luxury second-home developments the opportunity to take their profits out early by mortgaging their development projects to the hilt. Credit Suisse would loan the money on a non-recourse basis, earn a substantial fee, and sell off most of the credit to loan participants. The development owners would take most of the money out as a profit dividend, leaving their developments saddled with enormous debt."
  • "Credit Suisse and the development owners would benefit, while their developments bore all the risk."
  • "This new financial product enriched Credit Suisse and more than one luxury development owner, but it left those developments too thinly capitalized to survive."
  • "Enticed by the riches available from Credit Suisse, the Blixseths chose to breach their fiduciary duties, abandon the Yellowstone Club, and participate in a loan transaction that gave windfalls to them and Credit Suisse, at the expense of the Yellowstone Club."
  • "The inevitable failure of this loan drove the Yellowstone Club into bankruptcy. That failure inflicted substantial harm on the Club’s unwitting members and unsecured creditors."
Jonathan Weber reporting the story for New West adds "Loans of this type were made not only to the Yellowstone Club, but also to Tamarack Resort in Idaho (which is effectively bankrupt and operating under a receivership), Promontory in Utah (also in bankruptcy), and a number of other projects in the U.S. and abroad."
The Yellowstone Club loan seems eerily similar to the $675 million loan to two Ginn-Lubert Adler entities, the default of which ultimately resulted in bankruptcies at Tesoro and Quail West and the forced sale of Laurelmor. Ginn’s loan was also a non-recourse loan. And the Ginn loan also involved money from private investors, primarily hedge funds, who were represented by Credit Suisse.

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5 replies
  1. LouM
    LouM says:

    Nothing illegal

    "Credit Suisse collected $7.4 million in fees while $200 million was allegedly deposited directly into the Blixseth’s personal accounts."

    It worked out well for the bank, Mr. Blixseth and ONLY the public (customers)got the short end of stick.

    I am sure, any similarities with the Ginn Empire are coincidental and not relevant.

    PC give $100,000 to promote the now defunct golf tournament.

    Do we as a society ever learn from our mistakes?

  2. Hilton
    Hilton says:

    Before you slander Mr. Ginn

    Didn’t your inside sources tell you how much Mr. Ginn and his investors oured back into the properties after the Credit Suisse loan was closed? Not only did they directly inject capital, but they financed purchasers acquisition of lots in the Bahamas.

  3. JC
    JC says:


    After reading this I sense within the first paragraph you trying to draw a connection between Yellowstone’s creditors and Ginn without really saying Ginn. I just don’t understand why over and over and over again no matter the story it is somehow tied negatively back to Ginn. If it is associated with Ginn then report that, if it isn’t then leave Ginn out of it, kicking Ginn when it is down doesn’t help anything………

  4. Hilton
    Hilton says:

    Toungue-in-cheek postings

    Maybe people start getting a little punchy when the economy is falling apart and rampant fraud seems to be found under every rock.

    First of all, that’s not my post above . . . unless I’m now posting in my sleep.

    I hope the post about not kicking Ginn when he’s down is supposed to be meant toungue-in-cheek. Toby reports on Ginn because Ginn is (or was) one of the biggest developers in his area. I follow it because I, and my friends, have lost a small fortune and feel we have been conned.

    Others may be reporting about Bernie Madoff, but some of us only have so much money to spread around.

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