For the second time, a federal judge has turned back an attempt by Montana authorities to force former billionaire Tim Blixseth into bankruptcy to recover $57 million in alleged back taxes.
U.S. Bankruptcy Judge Bruce Markell in Las Vegas dismissed the state’s lawsuit in a ruling July 10 that said the case failed to meet the requirements for a forced bankruptcy under federal law.
At least three undisputed creditors must participate in such a case, but Markell noted Blixseth had challenged his Montana tax bill and others submitted by Idaho and California. The other states dropped out of the case after Blixseth settled their claims against him by agreeing to pay them less than $2 million.
But Montana had far more at stake, and Department of Revenue spokeswoman Mary Ann Dunwell said July 10 the state was not giving up its efforts to force Blixseth to pay. She promised an appeal.
“We believe the involuntary bankruptcy case should proceed in order to protect the state’s ability to collect taxes for the benefit of all Montana citizens,” Dunwell said.
Montana authorities argued Blixseth, a resident of Washington state, owes the taxes on a 2005 loan he diverted from the Yellowstone Club, a luxury ski and golf resort he founded near Yellowstone National Park. Blixseth and his former wife, Edra, spent the money buying up luxury estates around the world, along with jets, vehicles, jewelry and furniture.
He said at the time he wanted to create an international version of the ultra-exclusive Yellowstone Club. But that never happened, and when the Montana resort started to founder, Tim Blixseth turned it over to Edra Blixseth during their 2008 divorce and took most of their remaining assets.
The Yellowstone Club went bankrupt several years later.
Markell had dismissed the case once before, after Blixseth said it was filed in the wrong venue. But the state was able to revive its lawsuit after a successful appeal in which it argued most of Tim Blixseth’s assets are held in a Nevada-based trust.
Markell is retiring, so the case would be heard by a different judge if Montana succeeds a second time on appeal. If state revenue authorities ultimately prevail, a bankruptcy trustee could be appointed to liquidate Blixseth’s assets and satisfy Montana’s claim.
Tim Blixseth once was worth an estimated $1.3 billion, but in recent years that figure has declined to roughly $230 million, according to court documents.