RevolutionRadio.org

By Anthony Effinger and Amy Linn

Dec. 19 (Bloomberg) — Builders, florists and blacksmiths are counting their losses along with financiers and hedge-fund managers in the bankruptcy of the Yellowstone Club, a private ski-and-golf enclave in the Montana Rockies.

The club, where Persian rugs line the ski lodge and a trail is named “Learjet Glades,” sought protection from creditors on Nov. 10, brought down by the founders’ divorce, profligate spending, and a real estate slump. Members like investment banker Robert Greenhill, founder of Greenhill & Co., want to know where their $250,000 deposits went. A local wastewater company wants its $5,472.

Many small towns in the U.S. Rocky Mountain region rely on rich people who come to fish, ski and play golf. Now some destination spots are becoming desperation spots. Idaho’s Tamarack Resort is being run by a court-appointed manager after defaulting on a $250 million loan at the end of 2007. Creditors forced The Promontory in Utah into bankruptcy in March.

“It’s a pretty big impact on all the people who got stiffed,” said Todd King, owner of Advanced Wastewater Specialists, who hasn’t been paid for treating effluent at the Yellowstone Club. With the recession, the timing couldn’t be worse, he said. “We definitely don’t want to work for free.”

The pain is acute around Bozeman, Montana, about 45 miles (72 kilometers) north, where many of the club’s workers live. The club employs 400 to 600 people, depending on the season, and has a monthly payroll of $882,000.

Gates a Member

It remains open after getting court approval on Dec. 12 for an emergency $19.8 million loan from club member Sam Byrne, founder of CrossHarbor Capital Partners LLC, a private equity firm in Boston.

Almost all members, including Microsoft Corp. founder Bill Gates, built lavish houses at the site, creating work for local contractors. For years, cement trucks thundered up the narrow road to the club, and a parade of pick-ups lined up at the security gate each morning.

The list of 700 creditors filed in federal bankruptcy court reads like a Yellow Pages of Bozeman and the surrounding area. A local florist is owed $17,285 and a blacksmith $1,095, for shoeing horses. Scenic City Portables, which provides portable toilets, is waiting for $12,430. Even Montana’s utility company is out in the cold: NorthWestern Energy is owed $247,000.

‘As Whole as Possible’

Mary Warmoth’s company, We Dust Control and Deicing Inc., sprayed dirt roads along the 18-hole golf course to control dust last summer. The club owes her $4,147.

“The thing that was the most shocking to us was that they knew they couldn’t pay the bill when they asked us to do the work,” said Warmoth. “One of the guys up there told our driver, ‘Good luck getting paid.’”

Yellowstone Club spokesman Bill Keegan said the club is doing what it can to repay all the creditors. “The intent is to make people as whole as possible,” he said.

When Tim Blixseth and his ex-wife Edra opened the club, they billed it as the most exclusive ski resort in the world. The Blixseths signed up ski-film director Warren Miller to be director of skiing, and brought in a former U.S. Secret Service agent to be “director of privacy.”

The rich piled in, paying as much as $10 million for plots of land. Property owners also had to put down $250,000 to $300,000 for a membership.

Assets listed in the bankruptcy filing include a bronze bison ($8,260); a carved Louis XV buffet ($29,395); a Steinway piano ($13,399); and an “upright bear” ($13,708).

Dashed Hopes

The trouble started well before the U.S. recession. Cyclist Greg LeMond, an early investor and homeowner, sued the club in 2006, saying the Blixseths borrowed $375 million from Zurich- based Credit Suisse Group and took $209 million for themselves as a dividend, jilting him and other investors.

Credit Suisse spokesman Duncan King said the bank arranged the loan to the club and is acting as an agent in the bankruptcy for holders of the debt.

The Blixseths used the money to buy boats, cars, and a 16- bedroom chateau in France for $28 million, LeMond alleged. The parties settled the suit earlier this year for $39.5 million, though Edra Blixseth missed a Nov. 15 deadline to pay the $13.5 million balance still owed, according to a filing by LeMond in Montana state court.

Edra didn’t return an e-mail seeking comment.

Brett Mauri, who runs custom homebuilder Bitterroot Group in Big Sky, is among those whose hopes were dashed by the club. He put down a $250,000 membership deposit and built a 7,800- square-foot house there that he planned to sell to a wealthy club member.

Bitter Divorce

He listed the home last year, just before credit market crashed and prices tumbled. At about the same time, the Blixseths were embroiled in a bitter divorce dispute that raised questions about the club’s future and spooked buyers, Mauri said.

Edra wrested the club from Tim in July, resolving the issue of ownership, and Mauri found a buyer who offered him $6 million, $2 million less than the assessed value, he said. The sale was supposed to close in November. When the club filed for bankruptcy, the buyer walked.

“We used our kid’s college fund for that membership,” his wife Michele said, fighting back tears in U.S. Bankruptcy Court in Butte on Nov. 25. Their son, 17, is scheduled to start school in the fall.

“Now the money’s gone,” she said.

The case is In re Yellowstone Mountain Club LLC, 08-61570, U.S. Bankruptcy Court, District of Montana (Butte).

Bloomberg.com