- Associated Press - Wednesday, February 26, 2014

BILLINGS, Mont. (AP) - Attorneys for creditors in the bankruptcy of Montana’s exclusive Yellowstone Club have asked a federal judge to incarcerate the resort’s founder for failing to heed a court order after he was found to be in contempt.

The attorneys contend Tim Blixseth defied an order to pay at least $13.8 million for selling an ocean-side luxury property in Mexico that was part of the bankruptcy proceedings. Blixseth had faced a Feb. 21 deadline to post a bond or collateral in that amount.

The attorneys also said Blixseth has failed to fully account for the sale proceeds as ordered by U.S. District Judge Sam Haddon - part of a pattern of behavior that they argued demanded a strong response such as incarceration.

The creditors’ attorneys cited Blixseth’s alleged “intentional deceit of both this court and the bankruptcy court” and “his course of behavior over years of litigation in multiple courts.”

Blixseth, a resident of Washington state, said Wednesday that he hoped to resolve the matter, but he did not offer specifics.

“It’s best to just keep my mouth shut,” he said.

The Yellowstone Club has been under new ownership since Blixseth left the private ski and golf resort near Big Sky as it spiraled into bankruptcy in 2008. A bankruptcy judge faulted him for setting the resort up to fail by diverting for his personal use hundreds of millions of dollars from a 2005 loan to the resort.

Haddon in December found Blixseth in contempt of court for not heeding an earlier court decree that that he not sell or transfer the so-called Tamarindo property in the state of Jalisco. It was sold in 2011.

Judges have broad discretion in how they police those who come into their courtrooms for civil proceedings, including sending them to jail, said Anthony Sabino, a practicing bankruptcy attorney and law professor at St. John’s University in New York.

While that typically doesn’t happen simply because creditors ask, Sabino said it becomes much more likely if a participant in a civil case refuses a direct order from a judge or otherwise crosses the court.

“His defiance of the court was done at his peril,” Sabino said of Blixseth. “To defy the judge is always a mistake. The judge will give you only so much rope, and then let you hang yourself.”

In his Feb. 3 order, Haddon told Blixseth to post a bond or collateral equal to $13.8 million or the full value of the Jalisco property, whichever was greater. Haddon said such an extreme sanction was warranted by a “deliberate, calculated course of conduct by Blixseth, culminating in the sale of the Tamarindo property.”

Blixseth originally bought the property for $40 million in a region where Mexican drug-cartel violence has since driven away many tourists. He said in an earlier statement to the court that Mexican authorities were threatening to seize it for unpaid taxes, a possibility that would have resulted in a total loss.

Haddon has not yet responded to the motion for a hearing on whether Blixseth should be incarcerated.

Last week, an appellate court hearing another Blixseth case rejected his attempt to remove the bankruptcy judge who told him not to sell Tamarindo in 2009. The three-judge panel of the 9th U.S. Circuit Court of Appeals asked Blixseth and five of his attorneys to explain why they should not be sanctioned $5,000 each for filing meritless claims in the case.

Copyright © 2016 The Washington Times, LLC.

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