Yellowstone Club founder to remain in jail while court readies special hearing on $13.8M sale

The founder of a Montana club for the ultra-rich will stay in jail until a federal judge is satisfied that he understands what happened to the money from a Mexican resort sold in violation of a court order.

After a Thursday hearing in U.S. District Court in Helena, it's clear that Yellowstone Club founder Tim Blixseth won't be freed anytime soon after spending more than two months in the Cascade County Detention Center.

U.S. District Judge Sam Haddon ordered the 65-year-old Medina, Washington, resident locked up for contempt on April 20 for not providing a full accounting of the money Blixseth made from the 2011 sale of the Tamarindo resort for $13.8 million. On Thursday, the judge said he still was unable to conclude whether Blixseth had provided the full accounting, despite 9,000 pages of financial documents Blixseth filed earlier this month.

During the hearing, Haddon returned three times to the central question: "What happened to the money?"

"We are going, gentlemen, to get this matter resolved," he said, addressing the attorneys for Blixseth and the Yellowstone Club's creditors.

Blixseth had been barred from selling any assets as part of the Yellowstone Club's bankruptcy proceedings. The club north of Yellowstone National Park went bankrupt and was sold in 2008, and its creditors say Blixseth owes them $286 million that he took from the club for personal use.

Attorneys for the creditors said they suspect, but don't know, that Blixseth laundered the money from the sale with transactions between his U.S. and Mexican companies, funneling millions of dollars to the United States for his and his family's use.

Blixseth filed documents on seven separate occasions that he said accounted for the sale, each one to the dissatisfaction of the creditors and Haddon. After Haddon jailed him for contempt for not providing a complete account, Blixseth's wife hired a firm in Idaho that created the most recent 9,000 pages of financial documents that Blixseth said was the complete record.

At Thursday's hearing, Haddon said the new documents raised more questions and could not be accepted as reliable without careful scrutiny. They also needed to be compared to Blixseth's previous filings to see how they correlate or contradict each other, Haddon said.

The judge said he may appoint an independent special master to examine the documents, and he ordered a trial-like hearing to decide whether Blixseth has accounted for the sale proceeds.

Haddon did not set a date for the special hearing, but gave the attorneys until July 10 to decide how much time they need to prepare for it. After the hearing, neither creditors' attorney Kevin Barrett nor Blixseth attorney Michael Ferrigno would speculate how long Blixseth might remain in jail waiting for that hearing.

"The court made its decision, and we are disappointed that he wasn't given house arrest," Ferrigno said.

Haddon also granted the creditors' request to bring into the legal proceedings at least 14 companies in Mexico and the U.S. owned or controlled by Blixseth. Barrett said he wants to question them on whether they aided Blixseth in moving money from the Tamarindo sale to the U.S.

Blixseth's wife Jessica, son Beau, and three Blixseth lawyers also will be brought into the case to determine whether they improperly received money from the resort sale.