DC4MS

Yellowstone Club Divorcee Entangled in Terrorist Software Suits

By Anthony Effinger



Aug. 29 (Bloomberg) -- Edra Blixseth has come a long way since she and her husband, Tim, declared bankruptcy in rain-soaked Roseburg, Oregon, in 1986. He traded timberland. She had owned a chain of four restaurants called Choo-Choo Willy's.

Neither business could support their debts.

Today, Edra lives in a 30,000-square-foot (2,800-square- meter) mansion on an estate near Palm Springs, California, called Porcupine Creek. The house, complete with servants, is surrounded by a private golf course.

Porcupine Creek, a Gulfstream II, a 2004 Rolls-Royce Phantom and a BMW 760 are some of the spoils of Edra's July divorce from Tim. After a 19-month long fight, she also got control of one big source of their wealth: a private Montana ski- and golf resort called the Yellowstone Club, where the likes of Microsoft Corp. founder Bill Gates, News Corp. President Peter Chernin and hotelier Barry Sternlicht have erected supersized chalets on lots that until the real estate crash sold for $2 million and more.

The divorce is just one of a long list of legal skirmishes for Blixseth. She's battling to keep the Yellowstone Club afloat, and in August settled a two-year-old claim by club investors that she and Tim failed to fairly distribute the proceeds from a $375 million business loan to Yellowstone from Zurich-based Credit Suisse Group.

Edra, 54, is also embroiled in a Reno, Nevada, lawsuit that makes the Montana case look like a missed putt on the Yellowstone Club's 7,200-yard (6,600-meter) golf course.

Decoding Terrorists

She's dueling in court with Warren Trepp, once a top trader for Michael Milken, who alleges that Edra and a former partner of Trepp's in a software company stole computer code that purportedly could sift through broadcasts from Qatar-based news network Al- Jazeera and find embedded messages from terrorists. Edra tried to use connections to the Republican party to sell the software to the government for $100 million, according to Michael Flynn, a lawyer who was once on Edra's payroll.

Flynn, 64, who spent much of the 1980s fighting the Church of Scientology on behalf of former members and journalists, says in court filings that he quit her employ after learning that the software was a sham.

The Trepp case is all cloak-and-dagger. The Federal Bureau of Investigation had a team of investigators working on it. Judges have sealed documents at the behest of U.S. intelligence agencies. Trepp says an e-mail was faked to make it appear that a U.S. congressman was bribed. A business associate of Edra's says he warned the U.S. government about an August 2006 plot to blow up jetliners over the Atlantic Ocean.

`Distraction'

Blixseth declined to discuss any of the legal squabbles in detail. In an e-mail to Bloomberg News, she said she's unfazed by the software controversy, calling it a ``distraction.'' She appears in public now and again with new boyfriend Jack Scalia, 56, a one-time professional baseball player and Jordache jeans model who starred on the soap opera All My Children.

Blixseth's focus these days, she says, is the Yellowstone Club. ``I am excited about the future of the Club, and working toward restoring it is my No. 1 business priority,'' she said in the e-mail.

Blixseth spent the summer trying to calm members who were irked that she and Tim, 58, had fought so publicly over the club and had drawn out the legal fight with investors. ``I have always felt that the Yellowstone Club is 'my baby,''' Edra wrote to members in a July 6 letter announcing that she had vanquished Tim and taken control. ``I make a personal pledge to never let us waver again.''

Fishing the Gallatin

The Blixseths started the Yellowstone Club in 2000 on 13,400 acres (5,400 hectares) of old logging land in the Madison Range north of Yellowstone National Park.

It's tucked into a valley adjacent to two other, less- exclusive ski resorts, Big Sky and Moonlight Basin. Yellowstone members -- most of whom remain anonymous -- play golf and fish in the Gallatin, a river featured in the Robert Redford film ``A River Runs Through It.''

The Blixseths have lived large off the Yellowstone Club. The rich thronged to the resort, paying out $205 million for 72 properties in 2005 alone -- most of them empty lots spread across wooded slopes.

That year, when high-end real estate looked like a sure thing, Credit Suisse gave the club a $375 million loan to repay old debt and ``fund a return of capital to the company's owners,'' according to a document describing the loan obtained by Bloomberg News.

LeMond Irked

Champion cyclist Greg LeMond, an early investor in the club, says the Blixseths took $209 million of the money as their return of capital and that other investors should have gotten a return, too. He filed suit in Montana state court in nearby Virginia City in May 2006.

During the Blixseths' divorce fight last year, Tim settled with LeMond, 47, and three other investors. He paid $18 million, then missed a Jan. 31 deadline for a second and final $20 million payment. The sides returned to court. After taking over the club, Edra settled the matter anew in August, paying another $8 million and pledging $13.5 million more by Nov. 15, according to settlement documents obtained by Bloomberg News.

Edra neither admitted nor denied wrongdoing.

LeMond and the three other investors have done well. They put up a $750,000 down payment each in 2000 for an empty lot, a family membership and a 1 percent equity stake in the club itself.

In his complaint against the Blixseths, LeMond says he believes part of the Credit Suisse money went to help Tim Blixseth buy a 16-bedroom chateau in France for $28 million, a golf resort on the Pacific coast of Mexico for $40 million and property in St. Andrews, Scotland, for $12 million.

High-End Network

They were to be part of a network of high-end time-share resorts called Yellowstone Club World. Members would pay $3 million plus annual dues of $37,500 to use them.

Yellowstone Club World is dead. The French chateau was listed for sale by Mint Real Estate in Los Angeles for $60 million earlier this month, until Edra won it in the divorce and took it off the market for the time being, says Tracey Broadman, a broker at Mint. Another Yellowstone Club World property, a 30,000-square- foot mansion on a private island in the Turks and Caicos Islands, is still listed for $55 million.

Tim declined to comment on the properties. Credit Suisse spokesman Duncan King said the firm had no comment on the loan.

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