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IN THE UNITED STATES COURT OF APPEALS


FOR THE NINTH CIRCUIT
NO. 12-35986
TIMOTHY L. BLIXSETH
Appellant,
v.
YELLOWSTONE MOUNTAIN CLUB, LLC
YELLOWSTONE DEVEOPMENT, LLC
BIG SKY RIDGE, LLC
YELLOWSTONE CLUB CONSTRUCTION CO., LLC
Appellees.
MICHAEL J. FLYNNS RESPONSE TO ORDER TO SHOW CAUSE
Appeal from the United States District Court for the District of Montana
Case No. 2:11-73-BU-SEH
Michael J. Flynn
Suite 240
One Center Plaza
Boston, MA 02108
mike@mjfesq.com

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Attorney Michael Flynn herewith responds to this Courts order to show
cause why Appellant and his attorneys should not be sanctioned for filing the
appeal in this matter. Mr. Flynn herewith adopts the arguments and briefing of his
co-counsel, and incorporates their positions herein as if fully stated. Mr. Flynn
also invokes F.R.A.P. 46(c) and Circuit Rule 46-2(d),(e) and requests a hearing.
The purpose of this Response is to present the facts and the law as the undersigned
analyzed it as an advocate for Mr. Blixseth as trial counsel in AP 14 having
actually observed Judge Kirscher during the AP 14 trial.
1.

RELEVANT PROCEDURAL HISTORY


The underlying motion to disqualify Montana bankruptcy Judge Ralph

Kirscher for appearance of bias was filed pursuant to 28 U.S.C. 455(a) after
scrupulous examination of the facts and the law. It was not filed with any intent to
smear Judge Kirscher, but rather to safeguard the rights of our client Tim
Blixseth in the face of the most substantial departure of the federal rules and
constitutional protections that I have ever experienced in 44 years of litigation.
Both at the time of filing and now, pursuant to our sworn duty as advocates in our
adversarial system of jurisprudence, all counsel held a good faith belief in the
merits of this appeal. Advocacy within the rules, the statutes and the Constitution
is a duty and a sacred trust that the undersigned has held and practiced in the

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utmost good faith for 44 years in hundreds of American courtroom appearances


throughout the United States.
As recited in the attached Declaration, the facts and the law supported
counsels good faith advocacy in this matter. After extreme due diligence in the
collection and assessment of facts, and our observations of Judge Kirscher, we
reasoned that at the time of filing the disqualification motion and this appeal, that
our client, Mr. Blixseth, had been denied fundamental due process by a judge
exhibiting partiality. We applied the applicable legal standard of appearance of
bias. The phone call of Judge Kirschers law clerk, Terry Healow, to Ross
Richardson advising him to get his money from Mr. Blixseth in a separate case,
also then pending before Judge Kirscher, because Judge Kirschers ruling against
Blixseth was imminent in AP 14, coupled with another law clerk giving her home
and cell phone numbers to attorney Patten to discuss the Blixseth cases, and where
Mr. Patten had also been provided case authority to be used against Mr. Blixseth
by the senior Montana bankruptcy judge, these facts in and of themselves justified
our good faith belief that the disqualification motion and subsequent appeals were
well founded and should have been granted. See order of Kirscher, J at ER 71
denying responsibility; Healow conversations at ER 579-580,594; record of senior
judge sending case authority at ER 590; law clerk home and phone exchange at ER
597, 588, 592; and see post hearing response on these issues at Dkt 67-1 .
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When Judge Kirscher in his order on disqualification did not deny that the
Healow conversation took place, but denied responsibility, and considering the 16
additional grounds for disqualification, all before additional and more damning
evidence was discovered and provided to the Judicial Council, it was the
undersigneds professional opinion as trial counsel in AP 14, that it was our sworn
duty to continue to obtain appellate relief outside the state of Montana in this
Court. Experienced appellate counsel agreed. The Byrne emails during the heart
of the bankruptcy proceedings referencing the use of political pressure and the
Burkle / Byrne meeting on January 15, 2009 with Montanas Governor, coupled
with our observations of Judge Kirscher and the legal foundation for his rulings
between January and June, 2009, provided evidence of potential political
intrusion into the judicial process. (Flynn Dec. 9). As this type of evidence
increased, as recited herein, the attorneys felt duty bound to submit it to the
Judicial Council.
As we discovered the following additional compelling evidence of political
influence in the judicial process, stated as admissions by Edra Blixseth, the
primary beneficiary of Judge Kirschers erroneous or abnormal rulings, and
effectively represented by Mr. Patten, who engaged in the improper ex parte
emails, we submitted it to the Judicial Council:
1.

Edra Blixseth said to her attorney: We need this case [the divorce
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case] moved back to Montana at all costs. SB [Sam Byrne] and BS [Brian
Schweitzer] have spent enormous capital and political favors to ensure they
get the right outcome from the Montana bankruptcy judge. I suspect TB
[Tim Blixseth] and MF [Mike Flynn] have known this for some time, and gave
up fighting that battle. (Flynn Dec. 10, Ex. 2). Edra Blixseth was correct
about our suspicions having observed Judge Kirscher, but incorrect about Mr.
Blixseths continued investigation.
2.

Edra Blixseth said to her attorney: I think this helps us to justify

why we are filing our motions on the MSA in the BK courts in Montana, don't
you? Remember we have added help there from the BK Judge who loves us,
and hates Tim and Mike Flynn. At this point they could not get a decent
ruling in their favor from that Judge if they tried. Either way, SB and BS
have things in place in that courtroom to help us. We need to make sure the
validity of the MSA never ends up being decided by Judge Waters. That
would be a nightmare for all of us. (Flynn Dec. 11, Ex. 3, p. 7).
3.

Documentary evidence of Judge Kirschers private email account with

his former law firm to whom he awarded a $22 million judgment with no trial,
including a Sacramento Bee article reciting one of the emails between Judge
Kirscher and Mr. Patten about Mr. Blixseth (Flynn Dec. 13).
4.

Documentary evidence of approximately $1.5 million in donations


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between August and September, 2008, by the new owners of the Yellowstone Club
to then Governor Schweitzer, right at the time of the implementation of the scheme
to put the Club into an unnecessary bankruptcy in November, 2008.

This

documentary evidence confirmed the reliability of the Edra Blixseth admissions.


(Flynn Dec. 12).
5.

The foregoing evidence, the disqualification evidence in the appellate

record, and the law, supported all of the lawyers good faith reasoning that
investigation by the Council and the continuance of this appeal were not only
warranted but the lawyers duty under the Rules of Professional Conduct. My
conscience, the law and facts dictated my decisions in this matter as they have for
44 years in my litigation practice. I continue to hold an unwavering belief based
on incontrovertible evidence that my client has been the subject of improper
judicial conduct and serious deviations from due process.
The per curiam opinion of the panel, including the imposition of punitive
sanctions, is incomprehensible to me, particularly considering the foregoing facts
and law, the Chief Judges prior opinions in analogous cases. (Flynn Dec. 17 ).
The letter to the Judicial Conference that I sent to afford Mr. Blixseth all of his
rights at all levels of appeal, appeared to me to explain the imposition of sanctions
as retaliation for my advocacy for my client. (Flynn Dec. 15). The later
dismissal of that judicial misconduct complaint, notwithstanding the apparent non
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reappointment of Judge Kirscher, and the blanket sanctioning of myself and three
young lawyers with young children who prepared the appellate briefs, along with
experienced appellate counsel, while awarding fees to the attorneys for the
billionaires and Credit Suisse who repeatedly violated the law, has shocked me and
lead me to question everything I have believed about our system for the past 44
years. It has forever chilled my ability to represent clients under the rules. (Flynn
Dec. 16).
Counsel utilized an objective standard in evaluating the facts without regard
to any personal animus toward Judge Kirscher. In fact, as the record demonstrates,
oral argument before him and Judge Haddon reflected only respect, while
requesting application of this Courts strong admonitions in In re Manoa Finance
Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986). Based on Manoa, we believed that
Judge Kirschers multiple roles in these cases stemming from the hotel deal
raised significant issues relating to appearance of bias that compelled appeal to
this Court. The Judge not only oversaw the administration of the Yellowstone
Mountain Club, LLCs (YMC) bankruptcy, and all of its numerous adversary
proceedings which targeted Mr. Blixseth, he administered Edra Blixseth
bankruptcy.
While Manoa admonished against such multiple roles, Judge Kirscher was
faced with surrendering all of the Tim Blixseth targeted cases when the Supreme
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Court issued its epochal decision in Stern v. Marshall, 131 S.Ct. 2594 (2011)
mandating an Article III judge for state common law claims. He refused and then
issued rulings which circumvent the letter and spirit of Stern. These circumstances
further directed the lawyers to seek appellate review and our request for a jury trial
in the District Court. The cases and the articles support our reasoning. See Skelton
and Harris, Bankruptcy Jurisdiction and Jury Trials: The Constitutional
Nightmare Continues. 8 Bank Dev. J. 469 (1991).
Significantly, Edra Blixseths personal bankruptcy and the bankruptcies of
companies she owned, and the Yellowstone Club bankruptcy all arose out of the
recent Blixseth divorce pursuant to a complex Marital Settlement Agreement in
which she obtained the Yellowstone Club by means of a $35 million loan from Mr.
Byrne. As advocates for Mr. Blixseth, we viewed this Agreement and her secret
side deal with Mr. Byrne (SER 2758) as a premeditated scheme to put the
Yellowstone Club into a fraudulent bankruptcy. Established precedent held such a
scheme to be fraudulent. Nevertheless, Judge Kirscher approved it and refused to
remove himself from the Tim Blixseth matters, notwithstanding Manoa and Stern.
As the myriad of motions, hearings, and discovery proceeded before Judge
Kirscher, and his rulings, opinions and orders followed, we viewed the targeting of
Mr. Blixseth arising out of a clandestine meeting at a hotel not the court house with Judge Kirscher present and Mr. Blixseth and his attorneys not present,
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mandating Judge Kirschers recusal. As advocates, these facts alone also


mandated judicial review of disqualification outside Montana. (See SER 2758, par
56(g); also see 9th Cir Case No. 13-35246, ER 1523, 1542).
This is reportedly the largest bankruptcy in Montana history. Millions have
been awarded in fees by Judge Kirscher to members of the local bar, with Tim
Blixseth as the sole target to pay for a fraudulently bankruptcy petition filed by his
ex-wife, who was effectively represented by Mr. Patten in the Yellowstone Club
bankruptcy, who had the ex parte communications. Mr. Patten engaged in the
email exchanges with the law clerks. All of the above facts evidenced plain
violations of the bankruptcy process, and the evidence increased as this appeal
proceeded. See Lopucki, Courting Failure: How Competition for Big Cases Is
Corrupting the Bankruptcy Courts, 97-122. (2005).
In his multiple roles, Judge Kirscher has exonerated and improperly
exculpated Edra Blixseth and the owners of the Yellowstone Club, contrary to 9th
Circuit precedent and Judge Haddons order. Their ostensible motive was to
leverage the Credit Suisse loan. Due to the improper Montana bankruptcy rulings,
Ms. Blixseth has so far escaped all responsibility notwithstanding overwhelming
evidence of criminal conduct and bankruptcy fraud. (SER 2740-2787 ). Thus, to
a 40 year seasoned trial lawyer, the hard core facts demonstrated the appearance

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of bias in the Montana Bankruptcy Court and compelled appellate review outside
Montana.
In my litigation experience and everything I have been taught since being a
law clerk to the justices of the Massachusetts Supreme Judicial Court, and
everything I understood under the rules and the case law, all held sacred the
absolute prohibition of the ex parte communications at issue in this matter. In the
context of the undisputed facts in this case, the appeal was not only meritorious, I
believed it could only be successful. (Flynn Dec. 2-8).
This appeal has outpaced the appeals of others related, including the appeals
of the YMCs reorganization plan and AP-14, which is still pending in the District
Court for the District of Montana. Therefore, the aim of this appeal was not
retribution for decisions made in cases currently on appeal, but whether Judge
Kirschers ruling on the disqualification motion was proper; and whether Judge
Kirscher should have continued to preside over the pending cases and issue orders
that ultimately, in my professional opinion based upon controlling precedent,
further established a pattern of improper partiality.
The fundamental unfairness of the ex parte communications at issue here in
a close knit rural bankruptcy bar before the sole bankruptcy judge, coupled with
Edra Blixseths admissions, compels appellate review for disqualification outside
Montana. The fact that Judge Kirscher refused to step aside, declared himself
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unbiased, and ruled himself on these issues, compelled appellate review. His
multiple roles in the context of state common law claims when Stern essentially
told him to step aside, thereby exceeding his constitutional authority, all justified
counsels good faith belief that the totality of the facts and circumstances,
including facts not nearly as egregious as those here, supported our decision
making throughout this process. In re Manoa Finance Co., Inc., 781 F.2d 1370,
1373 (9th Cir. 1986) In re Bearingpoint, Inc., 453 B.R. 486, 492-493 (S.D.N.Y.
2011); see also In re Martinez-Catala, 129 F3d 213,221 (1st Cir 1997) (as the 1st
Circuit recognized, the whole is sometimes greater than the sum of the parts. The
cumulative effect of a judges individual actions, comments and past associations
could raise some question about impartiality, even though none (taken alone)
would require recusal.).
The present appeal was first reviewed by Judge Haddon who affirmed Judge
Kirschers February 25, 2011 order on November 16, 2012. However, despite
Judge Haddon ruling against Mr. Blixseth, the District Court for the District of
Montana, which is charged with oversight of its Bankruptcy Court, did not
sanction the Appellant or his lawyers nor find his appeal---however unpleasant--meritless.

Significantly, Judge Haddon did not have the judicial misconduct

complaint and the compelling facts therein before him, but this court did. Yet, this
Court has imposed sanctions and fees.
11

A compelling inference is that these

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punitive sanctions have been improperly imposed because of the judicial conduct
complaint---not the merits of this appeal.
The arguments submitted to this Court were substantially similar to the
issues raised in Judge Haddons court. The legal issues presented in this appeal,
especially given the ex parte communications and other circuits view of potential
pitfalls unique to bankruptcy courts, were proper for this Circuit to consider.
2.

ARGUMENT
A.

Attorneys Duty of Zealous Advocacy

All lawyers have the ethical and professional duty to be zealous advocates
for their clients. See ABA MODEL RULES OF PROFESSIONAL CONDUCT, PREAMBLE
(As advocate, a lawyer zealously asserts the client's position under the rules of the
adversary system.). A lawyer also has the duty to challenge official actions while
upholding the legal process. Id. (While it is a lawyer's duty, when necessary, to
challenge the rectitude of official action, it is also a lawyer's duty to uphold legal
process). Lawyers arguments are required to be based in law and fact and may
include arguments for an extension, modification or reversal of existing law. See
Rule 3.1, ABA MODEL RULES OF PROFESSIONAL CONDUCT.
Encompassed within upholding the legal process, lawyers must respect our
system of justice so dearly that he or she is willing to challenge its integrity
without risk of punitive sanctions.

The Supreme Court has held that there is a

strong presumption of open access to all levels of the judicial system as well as a
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strong presumption against the imposition of sanctions for invoking the process of
law, even if the claim is unmeritorious. See Talamini v. All-State Insurance Co.,
470 U.S. 1067, 1071, (1985) (Stevens, J., joined by Brennan, Marshall and
Blackman, concurring) (There is, and should be, the strongest presumption of
open access to all levels of the judicial system. Creating a risk that the invocation
of the judicial process may give rise to punitive sanctions simply because the
litigant's claim is unmeritorious could only deter the legitimate exercise of the right
to seek a peaceful redress of grievances through judicial means.... [T]he strong
presumption is against the imposition of sanctions for invoking the processes of the
law.) (Emphasis added).
Equally relevant, sanctions are known to have a chilling effect upon lawyers.
Regarding other type of sanctions found within the Federal Rules of Civil
Procedure (i.e., Rule 11 sanctions), the law of this Circuit is that such sanctions
have a chilling effect on lawyering and are reserved for the rare and exceptional
case where the action is clearly frivolous, legally unreasonable or without legal
foundation, or brought for an improper purpose. Operating Engineers Pension
Trust v. A-C Co., 859 F.2d 1336, 1344 (9th Cir 1988). The appeal here does not
meet this standard. Indeed, the opposite is true.
Significantly, the per curiam opinion of this panel follows Judge Berzons
expressed concern about at least one of the ex parte communications relating to
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Terry Healow, which the Chief Judge said at oral argument never occurred.
However, that is not what the appellate record shows. Rather, it shows that Judge
Kirscher never denied that the ex parte communication of Terry Healow occurred;
he denied responsibility for it. See ER 71. That communication alone legitimizes
Mr. Blixseths right to have this appeal heard and to have his appeal granted.
There is an undercurrent of facts involving Judge Kirscher relating to the
complaint for judicial misconduct, just recently dismissed after Mr. Blixeth sent a
letter to the Judicial Conference, some of which are not in the appellate record on
the disqualification issues, which may also explain the Chief Judges reference and
repeated use of a judicial misconduct standard at oral argument, and the
reference to smearing in the Courts decision. But all these submissions to the
Judicial Council have been made under the rules backed up by substantial,
documented evidence. Counsel specifically refrained from citing those facts in
their briefing, or supplementing the record on this appeal knowing such facts were
before the Judicial Council, although many of those facts are now being further
explicated in an on-going investigation, particularly Judge Kirschers ex parte
communications on an email account at his former law firm, Worden Thane,
whose clients received a $22 million judgment against Mr. Blixseth from Judge
Kirscher with no trial.

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The Chief Judge has previously recognized that such niceties of due
process may support judicial misconduct.

If so, then clearly such niceties

support an appearance of bias in connection with this appeal. Although penned


in a dissent, Chief Judge Kozinski opined that the niceties of due process lend
legitimacy by showing judicial action is based on the law, not a judges whim. In
re Complaint of Judicial Misconduct, 425 F.3d 1179, 1185 (9th Cir. 2005)
(Kozinski, J., dissenting) (it is wrong and highly abusive for a judge to exercise
his power without the normal procedures and trappings of the adversary system-a
motion, an opportunity for the other side to respond, a statement of reasons for the
decision, reliance on legal authority. These niceties of orderly procedure are not
designed merely to ensure fairness to the litigants and a correct application of the
law, though they surely serve those purposes as well. More fundamentally, they
lend legitimacy to the judicial process by ensuring that judicial action is-and is
seen to be-based on law, not the judge's caprice.). Such a strong position
regarding due process should be adopted by this Circuit. Instead, the Court looks
to now impose sanctions upon counsel for advocating this very position that was
advanced in the foregoing dissent.
Such sanctions will only serve as a potent deterrent to any lawyer to ever
challenge a potentially biased judge, all of which will erode the constitutional
safeguards of our adversarial system of justice.
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All told, the due process violation argument presented in the briefing was
firmly grounded upon sound law and facts and therefore the appeal was
meritorious. Appellant and his lawyers, after reviewing the facts in their entirety
coupled with the policy implications unique to bankruptcy courts and the
misapplication of the recusal standard by Judge Kirscher, justified this appeal.
Some of the following arguments, which were contained in the briefing and not
considered by the Court in its opinion, further support the position that sanctions
should not be issued.
(1)

The Policy implications of In re Manoa, In re Bearingpoint


and Frates v. Weinshienk had merit

Appellants argument substantially involved policy implications found in In


re Manoa Finance Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986) and In re
Bearingpoint, 453 B.R. 486 (Bankr. S.D.N.Y. 2011). The rule of this Circuit is
that judges sitting in bankruptcy be especially solicitous in maintaining both the
appearance and reality of impartiality when adjudicating matter with which they
have had close involvement, erring of the side of recusal. In re Manoa Finance
Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986).

In re Bearingpoint appeared to

unpack Manoas holding of especially solicitous in practical ways.

In

Bearingpoint, the South District of New York, one of the most prominent
bankruptcy courts in the country, held that it is manifestly improper for a judge
to adjudicate a matter based upon evidence outside of the record.
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Given these two cases, the Appellants argument that Judge Kirschers use
of information obtained in administrative proceedings to inform him in other
proceedings to such a large degree that the impartiality of Judge Kirscher was
rightfully questioned was worthy of appellate review. For example:
Judge Kirscher allowed the administrative resolution of YMCs
reorganization plan to dictate the timetable for the resolution of
AP-14. Opening Br., pp. 53-54.
Judge Kirscher helped in a global resolution between certain
parties within the context of administrative tasks (YMCs bidding
procedures), without Mr. Blixseths involvement. A few days
after the global resolution talks take place, a global settlement is
reached between the parties who spoke with Judge Kirscher. The
global settlement made Mr. Blixseth the sole litigation target and
exculpated Credit Suisse at the same time. Opening Br., pp.35-36.
According to the Tenth Circuit, an appearance of partiality can arise where
the judge appears boxed in by prior rulings such that he is forced to reach a
certain result in an adversary proceeding regardless of the merits. Frates v.
Weinshienk, 882 F.2d 1502, 1504 (10th Cir. 1989) (emphasis added). The degree
by which Judge Kirscher went outside of the record, including facts in different
bankruptcy cases, in ruling against Mr. Blixseth, rightfully questioned Judge
Kirschers partiality under Frates. Mr. Blixseths position that a case should rise
and fall on its record and not the record established in other proceedings is
meritorious, except for matters on judicial notice which is not applicable. Here,
the record demonstrates that Judge Kirscher went outside the record, including:
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Using evidence from an adversary proceeding in the Yellowstone


Mountain Club, LLCs (YMC) bankruptcy to rule on the merits
of an adversary in Edra Blixseths personal bankruptcy. See
Opening Br., pp. 28-29.
Rejecting BLXs reorganization plan because it may conflict with
AP-14 ruling in the YMC case. See Opening Br., pp. 29.
Taking judicial notice in AP-14 from related bankruptcy cases
and adversary proceedings but did not distinguish what case or
facts. Opening Br., pp. 22-23.
Thus, given the clear dictates under Frates, Appellants argument that Judge
Kirscher appeared boxed in was supported by the record and a good faith
extension of Ninth Circuit law is not only warranted, but meritorious. At the very
least, the questions concerning the practical effects of a Judge Kirscher presiding
over both administrative and adversary proceedings, particularly in the context of
recusal, are important questions that should not be chilled via sanction awards.
(2)

Entering a $40 million judgment by attorney affidavit


without the opportunity to respond

The record is clear Judge Kirscher did not allow Mr. Blixseth the
opportunity to respond the YCLTs motion to reconsider prior to entering $40M+
that was requested.

Opening Br., pp 19-20.

The law also recognizes ruling

without allowing both sides the opportunity to present their sides can lead to the
appearance of bias. See Webbe v. McGhie Land Title Ins., 549 F.2d 1358, 1361
(10th Cir. 1977).

By granting the motion prior to allowing Mr. Blixseth the

opportunity to respond, the Bankruptcy Court entered judgment for damages that
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are highly disputed and should never have been included. While those arguments
are currently being appealed in a different matter, Judge Kirschers conduct would
lead a reasonable person to question the partiality of the judge.
(3)

Applying the wrong standards to the record

While not articulated in oral argument, but raised in Mr. Blixseths briefing,
was whether the bankruptcy judge applied the wrong legal standard to the facts.
Given the standard under 28 U.S.C. 455, whether a reasonable person would
find the appearance of bias given the totality of circumstances, that the trial judge
did not dispute some evidence, and some of his statements, establish an appearance
of bias. Opening Br, pp. 5-6.
Judge Kirscher, despite reciting the standard within 28 U.S.C. 455, did not
analyze the arguments from that of a reasonable person, nor from the totality of
circumstances. Most notably:
Regarding the emails raised by Mr. Blixseth, Judge Kirscher stated [he]
certainly [did] not find any bias or prejudice . . . the emails, in and of
themselves, do not establish bias or prejudice. (No objective standard
analysis, just the Courts subjective conclusion based upon the emails, not
the totality of the circumstances).
Concluding the recusal is unnecessary because Blixseth failed to establish
actual bias nor an appearance of impartiality. See ER 93. (No mention of
reasonable person nor from the totality of circumstances).
Applying the wrong legal standard is an abuse of discretion and an appeal of a
Judges decision who did not apply the correct standard is meritorious.

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(4)

Ex parte emails between counsel that were ignored by both


the Bankruptcy Court and the District Court.

The November 7th and 10th between Andy Patten and the courts clerk were
disregarded by Judge Kirscher entirely. Although this Court did not mention these
emails in its written opinion, these emails cannot be characterized as harmless or
merely administrative. These emails are highly personal in nature (i.e, calling Mr.
Patten, Andy) and allowing weekend access or personal contact information.
Generally administrative tasks occur during normal administrative hours (i.e., 9:00
a.m.-5:00 p.m.) through typical administrative channels. Not only do those emails
not fall under a reasonable concept of day-to-day managerial tasks of a court, but
they were completely disregarded by Judge Kirscher when he ruled that he was not
biased, which allowed him to retain control of this high-profile bankruptcy case.
Reviewing the evidence of those emails, the courts historic rebuff of ex parte
communication and Judge Kirschers failure to address these emails, a good faith
basis existed to appeal, based in part on these emails.
3.

CONCLUSION
The sanctions imposed on this appeal are manifestly unjust, deviate from

standards upholding appellate advocacy, and chill Mr. Blixsths due process rights.
These punitive sanctions are being imposed on two young sole practitioners with
young children who fought zealously for their client within the law, another young
lawyer serving as local counsel who respectfully argued this matter before Judge
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Haddon, an experienced appellate lawyer with successful appeals to this Court, and
a 69 year old, 44 year trial lawyer and sole practitioner ---the undersigned---who is
on the verge of retirement after fighting his entire career for justice, including
justice in the Montana bankruptcy court for the last 5 years. None of Mr.
Blixseths counsel can afford to pay these fees. The fees are being awarded to
billionaires, who acquired through Judge Kirscher approximately $800 million in
Blixseth community assets for less than $10 million plus an $80 million note based
on two deals, one of which occurred in a hotel with Judge Kirscher present that
targeted Mr. Blixseth and exonerated those present, and the other between Mr.
Byrne and Edra Blixseth to unlawfully obtain the Yellowstone Club through a
premeditated bankruptcy. In short, these punitive sanctions are unjust and they
will hurt the legal community. They send a strong message to all lawyers to never
challenge a judge. That should never be the message from any court.
Dated: March 18, 2014
/s/ Michael J. Flynn
Michael J. Flynn
Counsel for Mr. Blixseth

21

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CERTIFICATE OF COMPLIANCE
Pursuant to this Courts Order to Show Cause, I certify that this Response is
proportionally spaced in serif font (Century style), has a typeface of 14 points, and
contains 4,734 words, excluding the parts of the brief exempted by Fed. R. App. P.
32. This Brief was prepared using Microsoft Word and the word court was
determined using the Microsoft Word word count application.

March 18, 2014

/s/ Michael J. Flynn


Michael J. Flynn

22

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PROOF OF SERVICE
I hereby certify that I electronically filed the foregoing with the Clerk of the Court
for the United States Court of Appeals for the Ninth Circuit by using the appellate
CM/ECF system on March 18, 2014.
Participants in the case who are registered CM/ECF users will be served by the
appellate CM/ECF system.
I further certify that the following individuals are not participants in this appeal but
will receive service of the foregoing as they are interested parties to this appeal. I
have mailed the foregoing document by First-Class Mail, postage prepaid, or have
dispatched it to a third party commercial carrier for delivery within 3 calendar days
to the following non-CM/ECF participants:
Evan R. Levy
George A. Zimmerman
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
March 18, 2014

/s/ Michael J. Flynn


Michael J. Flynn

23

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Exhibit 1

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From:
Sent:

To:
j0"^ Subject:
Jack and I

LearG2@aol.com
Saturday, August 2, 2008 6:12 PM

Chris.Wright@pinntech.com; Sam Byrne <sbyme@CrossHarborCapital.com>


Re: What is the plan for tonight?
and we hope you and others, are going to go down to the BBQ to have a presence and meet and greet

yada yada
then around 8:00ish, we will all head up the Sunrise Ridge model for dinner with the Gov and his wife
(Ann). Franklin Hall (sounded sort of like maybe his chief of staff?) Casey, you guys and us are all that will be there.
John of course as well. He said VERY Montana casual. Hans has offered to help if anything goes sideways with a quick

phone call. That's all I know Chris. See you tonight. Are you going to stop by the BBQ? Hoping Todd and others that
might not be as friendly, ifyou know what I mean, might also be at the BBQ. I did let Hans know that we plan to close on
Monday and thanked him for how he has handled this difficultweek. Edra

AAA AAA A AA AAAAA

Looking for a car that's sporty, fun and fits in your budget? Read reviews on AOL Autos.
(http://autos.aol.com/cars-BMW-128-2008/expert-review?ncid=aolaut00050000000017)

Subject to Protective Order


CHE02051

(36 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-3, Page 3 of 7
From:-^

Matthew Kidd

Sent:

Wednesday, January 14, 2009 6:38 PM

To:

Sam Byrne <sbyrne@CrossHarborCapital.com>

f^ Subject:

RE: cell phones

I am at home. Did you try to calL.my cell phone may have been off, but you can try now if you want.
We are doing our best to fund...I have been asking for a budget since the weekend and have yet to see one, so that ball is
in their court. I have sent the subordination agreements (you were on the email yesterday), but acknowledged the # may
change depending on the budget. I can just make it $5 MM though if that's what you want to do.
Disappointing about Yankhauer...l was hoping you cut a deal so we could all just take a vacation, j/k. How were your
meetings with the Gov and Burkle?

I am surprised there are direct flights from MSP to C-ville. Are you meeting with the VRS in Charlottesville, not
Richmond?

Matthew E. Kidd

CrossHarbor Capital Partners LLC


(617)624-8326
PRIVILEGED AND CONFIDENTIAL COMMUNICATION

This communication is intended only for the use of the individual or entity named as the addressee. It contains information
which is privileged and/or confidential under applicable law. If you are not the intended recipient or such recipient's
employee or agent, you are hereby notified that any dissemination, copy or disclosure of this communication is strictly
prohibited. If you are the intended recipient of this communication, you are hereby notified that any dissemination of this
communication to others, or any disclosure of the information that is contained within it, is strictly prohibited. If you have
received this communication in error, please immediately notify me at (617) 624-8326 or via return Internet e-mail to
mkidd@crossharborcapital.com and expunge this communication without making any copies. Unintended transmission shall
not constitute waiver of the attorney-client or any other privilege. Thank you for your cooperation.

From: Sam Byrne


Sent: Wednesday, January 14, 2009 6:29 PM
To: Matthew Kidd

Subject: RE: cell phones

Where are you? I thought we were working towards funding tomorrow of Friday under the new loan? Is itjust in her court
to get the subordinations now? Do they have them?

Have you agreed to the budget?

Why cant we get them to subordinate to a big number and get that done; a) so that they can go focus on something and
make ittheir issue, and ; b) so that we can use any number smaller than that? Make it for $5m and make her go get
them?

Today was surreal - Yankauer is impossible. Sitting in MSP waiting on a 3 hour puddle jumper to Charlottsville. Where
are you?

From: Matthew Kidd

Sent: Wednesday, January 14, 2009 6:17 PM


To: Sam Byrne

Subject to Protective Order


CHE67398

(37 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-3, Page 4 of 7
Subject RE: cell phones.
She is being crazy. She also had Jory send me an email simply asking if I could wire funds for payroll tomorrow, as
everyone thinks they are getting paid.
I have explicitly told both her and Jory that the only thing we were able to pay as a protective advance were the utilities

(which were paid today) and that everything else would have to wait until we had executed subordination agreements
from the junior lienholders. I have been clear with Jory that the next steps are as follows:
1) Put together full budget for payment of relevant payables and operations for next 120 days (not to exceed $3 MM) - he
is telling me he is done with this, but waiting for Edra's approval to send
2) I will review the budget with him in great detail and confirm that $3 MM is the right number (nothing more)
3) Once we have approved the budget, we will remove the brackets on the subordination agreements and they will need
to be executed.

4) Then we can fund assuming I have internal approval and all other relevant loan docs are executed.
As to the cell phones, we can pay them for the reduced staff once the new loan is in place. How was today?

Matthew E. Kidd

CrossHarbor Capital Partners LLC


(617)624-8326
PRIVILEGED AND CONFIDENTIAL COMMUNICATION

This communication is intended only for the use of the individual or entity named as the addressee. It contains information
which is privileged and/or confidential under applicable law. If you are not the intended recipient or such recipient's
employee or agent, you are hereby notified that any dissemination, copy or disclosure of this communication is strictly
prohibited. If you are the intended recipient of this communication, you are hereby notified that any dissemination of this
communication to others, or any disclosure of the information that is contained within it, is strictly prohibited. If you have
received this communication in error, please immediately notify me at (617) 624-8326 or via return Internet e-mail to
mkidd@crossharborcapital.com and expunge this communication without making any copies. Unintended transmission shall
not constitute waiver of the attorney-client or any other privilege. Thank you for your cooperation.

From: Sam Byrne


Sent: Wednesday, January 14, 2009 6:03 PM
To: Matthew Kidd

Subject: Fw: cell phones

From: LearG2@aol.com

To: Sam Byrne; joryr@blxware.com


Sent: Wed Jan 14 16:14:49 2009

Subject: cell phones


Sam -1 am told thai Joe and Matt are saying that the cell phones for PC Resources, you guys do not determine as needed for

operations. You have seen PC and know how spread out things are. Can you please have them reconsiderthis. As I told you, the
phones have been cut off since Monday. This will add labor to us as employees can't communicate. Please reconsider. Edra

This message and any attached documents maybe confidential, privileged orboth. If youare notthe intended recipient, youare notauthorized toopen, read, copy,store, distribute
orusethisinformation in anyway.Failure to complywith thisnotice maybe aviolation of applicable laws concerning thereceipt of electronic mail.If you havereceived this

Subject to Protective Order


CHE67399

(38 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-3, Page 5 of 7
transmission in error, please notify the senderimmediatelyby replyingto this e-mailandthendeletethis message.Thank you.

A Good Credit Score is 700 or Above. See yours in just 2 easy steps!
(http://pr.atwola.eom/promoclk/100000075x1215855013x1201028747/aol?
redir=http://www.freecreditreport.com/pm/default.aspx?sc=668072%26hmpglD=62%
26bcd=DecemailfooterN062)

Subject to Protective Order


CHE67400

(39 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-3, Page 6 of 7
tr>n..

Sam Byrne

Sent:

Sunday, November 9,2008 9:12 AM

To:

joe@gryphonsolo.com; Matthew Kidd <MKidd@CrossHarborCapital.com>

Subject:

FW: YC / Call with Mo and his team

We need tostart working the "all hands in favor ofthe CrossHarbor DiP" program and PR around CS and the
membership.

From: Sam Byrne

Sent: Sunday, November 09, 2008 9:10 AM


To: 'Scott Prince'; Jim Davidson

Subject: RE: YC / Call with Mo and his team

Ilike theidea ofthe members supporting the alternative to CSand also putting some political pressure on CS. Ithink this
could be effective. Everyone agreed yesterday to press forward with ourDiP and itis being redrafted now to reflect a
mechanism to fund the remainder of the ski season (assuming Edra can borrow another $8m in the bankruptcy on

Farcheville) ifa plan is not confirmed by February 13th.


Ithink itwould be helpful to have a call with Bingham this afternoon as wesee thefiling progress. Iwould suggest around
3 pm our time ifthat works.

From: Scott Prince [mailto:SPrince@skybridgecapital.com]


Sent: Sunday, November 09, 2008 8:46 AM
To: Jim Davidson; Sam Byrne

Subject: FW: YC / Call with Mo and his team

I am worried that the judge might approve a CS plan that could be badfor us so Ithink we might need to be more

aggressive with CS togetthem to back down. Here aresome ofmy initial thoughts on the message that should be
delivered to CS and possibly the judge in Virginia City...

Members were sold a construct whereby the member deposits and real estate sales were the important providers of

capital used to fund theclub's development and theoperating deficits that were required until the club reached critical
mass. The members have been shocked to learn that even with successful growth in membership to over 300 members
and an additional $375mm raised in the debt market,the club is out of capital, the member's deposits are clearly at risk

and there is discussion by the lender of increasing memberdues. The members shouldn't be asked to pay twice-

members prepaid the additional dues with their deposits and are now being asked to pay again with increased dues. This
is particularly egregious given the emerging facts that point tothe lender's complicity in allowing funds to be diverted from
the club. We understand that a significant portion of the proceeds fromthe bond raise never even hit the club's account
and were immediately diverted for non-club use.

Members wont agree to paying higher dues and can live with a missed ski season. Members are comfortable skiing Big
Sky and Moonlight Basin and could live with a scenario where developmentof the club ceased as oftoday. Our current
member dues could easily fund security, snow-plowing and other essential services enabling access to our homes. The
real losers in that scenario are the equity and debt holders who will see the value of their 500 plus undeveloped lots
disappear.

CS thinks 10k is a small price for the members to pay for access to skiing and I think we need to play hardball right back.
I would be inclined to let them know this right away and also bring up the fraudulent conveyance issue as well.
Thoughts?
Scott Prince

Managing Partner
SkyBridge Capital
527 Madison Avenue
16th Floor

New York, NY 10022

Subject to Protective Order


CHE04324

(40 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-3, Page 7 of 7
2,t?,5.0122 (p)
212.485.3139(f)
sprince@skvbridaecapital.com

Securities offered through Hastings Capital Group, LLC, a member ofFINRA and SIPC
From: Sam Byrne [mailto:sbyrne@CrossHarborCapital.com]
Sent: Saturday, November 08, 2008 7:59 PM
To: Scott Prince; jim.davidson@SilverLake.com
Subject: Fw: YC / Call with Mo and his team

From: Schuyler Joyner

To: Sam Byrne; joe@gryphonsolo.com ; Matthew Kidd


Cc: Michael Meldman ; Joey Arenson
Sent: Sat Nov 08 19:53:30 2008

Subject: FW: YC / Call with Mo and his team


fyi

From: Schuyler Joyner


Sent: Saturday, November 08, 2008 5:53 PM
To: Michael Meldman; Joey Arenson; 'LearG2@aol.com'

'

Subject: YC / Call with Mo and his team

Mo asked me togeton a conf call to day to discuss theshort term cash worksheet.

He said that the lender group had offered aterm sheet for 4wks and wanted to revisit the short term cfworksheet to defer

andI minimize ttw costs dunng that period. He said using the prior worksheet and the fact that YC^^S^^t
on Friday, CS thinks the 4wk number is about $4.3M plus $200K for their DIP loan fee (Total about $4 5M)
PV
They gave afew examples of things they thought might be deferrable or being spent too quickly (inventory utilities DLC
initatives) When Iasked iftheir version ofthe budget was really intended to get the club openTl^S* Mo answered
yes weakly and mentioned successful outcome of discussions post-filing, etc
answered
Mo said 3-4 times that the lender wanted the 4wks to get everyone to sit down and come up with the a reasonable soln to

the issues everyone has and to workout away to get the ski hill open to make the members happy Itc.reaSOnaWe S0,n to
' Sa wK8t*D,!l?0V7y
helpful
for theto next
few davs'
but that
verytow
soon
there its
would
be funding for W..U,d
at leastbe133Swks
and inasanP0ssib,e
ami similar
last years
budget,
that *wasn't
Discoveryclear
would
outhat
to orotect

St^g?^ece'ntT6^00'** "* ^"^** DISC0Ve^ aP<>eared to be h&ng andTaKng'a K


nftnein^^hether
^ Wf
sti" tofocused
"n*er
on
to explain how important
it was
some inonthe
lenderdues
group.as their one big issue and Mo said not reallyy

but then went

Itold Mo that Iwould update the CF sheet tonight to advance it another week and look for items that are deferrable or

there is no time left spend pre-season. Ijust finished speaking with Hans and am updating thecash flow now

My takeaway is that it seems like CS is preparing to hold the ski season hostage for the members to qet an extra $10k+

Permember in dues during the 4wks period, not open for ski season ifthere's adispute, and pa?{Janta^Sn^

-Sky

Subject to Protective Order


CHF04395

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Exhibit 2

(42 of 92)
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(43 of 92)
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Exhibit 3

(44 of 92)
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Notes on the MSA, including amendments and the mini settlements


(Edra's comments in Green)
Full MSA- Pages 1 -42- Case No. RIDIND91152 in the Riverside County. CA

1 of Page 1 says, "This Stipulation is entered into for the purpose of


compromising and settling contested issues between the parties. If for any reason
the waivers and releases in this Stipulation are not accepted by the Court and this
Stipulation becomes null and void, or this Stipulation fails for any other reason
whatsoever, nothing contained herein shall be an admission of fact or a statement
against interest. Each party has refrained from making contentious statements, or
asserting positions, which might cause the other to be upset, so that compromise
and settlement could be promoted and achieved."

Doesn't this right here give us the "out" to go after anything we want and to have the
entire MSA null and void?
Also, remember that I was completely frozen out of all the companies and any
information from shortly after I filed for divorce (Dec 06) until just at before the closing
of the final MSA.

4 of Page 2- Read all of it and A- C

They could use this as an argument that we agreed not to go back to the values of the
assets we agreed to take. I will go into the different assets as we go through this, but one
thing that should be pointed out here, is Tim's very own testimony in the family court.
He made many false statements. When I would point that out to the Judge Waters, her
response was always that Tim, being given the Caption of the Ship title for our assets by
her, had a fiduciary responsibility to me, if it was found that he was not telling the truth.
A few examples of this would be Tim stating that their was no community cash flow,
when he was taking funds from Big Springs Reality (not paying commissions to the sales
people), Sunrise Ridge (not paying the partners their share when he took funds), selling
community assets and using the funds without a division given to me, and there are more
examples.
Tim also lied in a hearing when I was trying to stop CH from buying the golf course lots.
First, he had a sales person, Eric Ladd, not the VP of Sales, which would be more
standard, submit an affidavit supporting Tim's claim of the value ofthe Lots. Tim stated
that no commissions were being paid for the sale of these Lots to CH. Yet, later we fmd
out that none other then Eric Ladd was promised 500k, of which 250k was paid to him.
Eric later filed a suit and got a judgment against me for greater then this amount.

8 ofPage 4 all of page 5- Can you read and tell me if you think this is binding or
it goes to the fraud that we talked about?

(45 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-5, Page 3 of 8

16 of Page 6 and all references to BGI stock below

This is where things could get a little grey to what is written, what was said and what was
intended. Me taking the BGI stock was the way to finally get PC and Casa Captiva into
my legal ownership after being awarded it in the second mini settlement. If you will go
back and read those, you will find that Tim and his accountants were to find a way to get
both of these assets into my name without creating tax issues. Taking the BGI stock now,
in the final MSA, I was told would resolve this. Also, since I was also taking the YC
entities, it seemed like a natural to simply take Tim's ownership of the stock.
(Remember, if though all of the stock was in Tim's name, it was still a community
property asset.)
I went into this agreement still with the understanding that both Tim and George Mack
had told me that the BGI notes to YDI as well as the Tim Blixseth notes to BGI (which I
ended up with as well.) would have a way of working them out as years went along as
"forgiven" when we needed the tax write offs. Tim had always said that. I will go into
this in more detail when I talk about the Tamerendo transfer, but Tim also said that about
the 40mm for that.
If the above would have been as it was told to me, then the YC's would have paid the CS
loan off with the proceeds from Lot sales.
Upon the closing of the MSA, the bank accounts had been drained and/or were
overdrawn. Pat can go into more details of that as well. I, of course, was not counting on
this. Both American Bank and Palm Desert accounts were like this.
In addition, the books and records that were turned over cannot be reconciled. The trail
balances do notjave. Again, Pat can go into more detail on this.
There were contracts and payables that Tim entered into after knowing we were going to
be closing the MSA. Bob Sumpter employment contract for one.

(a) of Page 7

CB Sunrise Partners, LLC is the one that Moses Moore (YC's controller) told me that
Tim had taken the funds when things sold and had not paid the partners in this.
Tim had also signed agreements fro some management for St. Andrews after our signing
of knowing I was getting this. He did this both in YDI and in YCW.

(c) of Page 7 - This did not happen and we had issues trying to make it happen.

(e) ofPage 7 - Talk to Andy Patten about this. It was brought up in the UCC vs.
CS and Tim Blixseth with how Tim bought and sold this to himself By the time I
got it, he had taken the value out of it during the time I was frozen out of the
businesses. YC had an expert testify with how this was handled.

(46 of 92)
Case: 12-35986, 03/18/2014, ID: 9021625, DktEntry: 78-5, Page 4 of 8

B. of Page 9 - YCW was insolvent when I received it. The way this is written, I
would have no way of knowing that.

C of Page 10 and (1)- (3)

Again, Andy Patten will be helpful here. Tim did not disclose that he had taken millions
out of Big Springs Reality before this and had not paid commissions. There has been
something filed against him on this. Andy will have the details. This is also where he
states that Eric Ladd was paid a commission for the Golf Course Lot sale to CH. In
family court he testified that there was no commissions to be paid, but he already had the
deal with Eric, which I believe is how he got Eric to give the statement of value. The VP
of Sales should have done that, if it were to be done, but he could not be "bought". AND
500k was not nearly what was owed to the sales people. I know that Charlie would be
happy to talk with you about the exact amounts, but this should also be in what was filed.
At the time Tim did not pay them, which was much longer then "30- 60 days in arrears"
he told them that the money was needed to YC operations. They later found out that the
funds were used for boat slips and other things for Tim. This was also during the "frozen
out" part for me, but Big Springs was in Tim's name and therefore a community property
asset. At the time he was taking funds out of Big Springs for his use, he was also stating
in family court that there was no community cash flow.

D of Page 10 I already addressed Big Sky Ridge, above. Please note that Big Sky
Ridge was part of the YC Chapter 11.

E of Page 11 Again this was already addressed regarding Sunrise Ridge and
Moses Moore stating that Tim told the funds as "his own personal piggy bank"
and did not pay the partners. Tim did not disclose this. This was also community
cash flow.

G of Page 11 This is a good one for the Western claims.

H ofPage 11 This did not happen and ended up being part of the YC BK.

All of the assets listed that Tim got, starting on I. of page 12, had the value
that was perceived and no unforeseen liability.

17. ofPage 14

At the time of signing this, Tim told me that the LeMond group would do this, just
to be rid of him, by getting 1.0 to 2.0mm on closing. I ended up having to pay them
8mm of the 35mm I got from CH, to get them to sign off. I was to get this back from
YC, as they were going to be the owners ofthese B shares and not me personally. Of
course you know that did not happen. (Remember as well, I did not really get
35mm from CH, but only 22mm. Tim had borrowed 13mm from them in 2007 and
I took over that promissory note when I got the Family Compound back.)

(47 of 92)
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20. ofPage 14 This is not a big deal, but Tim took most ofthis out. Somethings
were brought back by the YC employees that removed it per his direction once
they knew that he was not to take it, but not nearly all. (Maybe this is where he
got the idea that I would take more out of 176?)

(3) of Page 15 including (a)- (d)

This is where Tim transferred Tamarindo to himself, before the final divorce decree. He
stated to me that George could help me do the same on this promissory note to YDI as
they had intended to do with the other notes for the money that was taken from the CS
loan. He went out of his way to make this clear, as he also stated that he did not want to
have any tax issues from getting Tamarindo in his name when the funds that purchased it
were from the CS loan. Of course no taxes were paid on any of that money, 208mm, as it
was booked as a loan and not a dividen. This is the point of the UCC filing against Tim.
That suit continues in Feb 2010. Andy Patten and Troy Greenfield can be helpful here.

C ofPage 16

Turks and Caiscos property was also purchased with CS loan funds, yet Tim was
awarded this without having to pay back the funds for the purchase price. I think this,
Tamemdo and the other things go to show that, having me take on the entire promissory
notes for all the funds taken out by BGI and then Tim, would not be a fair division of
property, I in fact, I had to pay back those notes and Tim got all of those properties. In
other words, just Turks and Tamerendo alone account for over 70mm of the 208mm
taken out, plus the other things that he got in the final MSA and the two mini settlements.
If he had not told me that those notes could be worked out another way and they were
never intended to be paid back, would I have thought taking that on AND giving him
these assets free and clear was a fair division? NO.

0 . ofPage 18

I later found out that who that was transferred to was Jim Dolan. There are several things
that were transferred to him during the time of my "frozen out". Jim Dolan is also a third
partner of Tim's in Western Pacific Timber Company. He is also who Tim sold, well
under valued, our personal interest in the FBO in Bozeman. Jim Dolan is also the one
that promised to be paying the BFI note on time, yet admitted to me and others that he
was talking with Tim at the same time about the payment. Tim was telling others that
Jim was not going to be making the payment to keep me out of money.
I don't know where this fits in, but there is not any part of my assets that I was awarded
that Tim did not call people and interfere with me being able to do things for the good
and benefit of myself. He contacted Alan Rye about my loans, which put Alan in fear of
his collateral in my share ofBFI. Tim had no current business with Alan and his bank.
He contacted Warren Trepp regarding Blxware and caused all kinds of issue there where
we could not move forward. He hired Mike Flynn, who was Dennis M lawyer and

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handled things for Blxware. He and Mike Flynn started a press campaign against me.
Many reporters have confirmed that Tim or Flynn would call them and tell them where to
go and look things up that were filed in the Reno courts. These were filed by Flynn.
Many times Judge Cook would not let them stand, but the damage was done as the
reporting had already happened. We must knock Mike Flynn off the MSA matter. We
need to do whatever it takes, nor matter what we have to file.
He does still have business with Palm Desert National Bank, but continued to give them
misinformation about my businesses and me.
As you guys well know I had to borrow money from my friends like Burt Sugarman and
others to stay alive during this time.

25. of Page 20

This is another area that Andy Patten can help you understand. There has been
something filed against Tim in regard to the handling of this Lot. He had just before he
"sold it to himself with no cash down and a promissory note of 2mm" had placed a value
of3.4mm on it. YC has filed this against him. Paul Moore might also have additional
information.
After the closing of the MSA, I found out that Tim ended up somehow getting this Lot to
the man that he purchased Tamerndo from. I believe that Tim never intended to pay this
2mm to YC, just like all the other promissory note he had signed with YC/YDI.

C. ofPage 22 Read and tell me what you think of this one.

E./F .G. of Pages 22/23

We never received proper books and records, minutes and other things. Pat can go into
this more. We still, a year later, have not been able to figure much of this out with how
they turned what they did over.

J.ofPage23

It states here that as of June 1, 2008 I was to receive all cash etc ............. again, Pat can
tell you how things were turned over to us. Tim also entered into several contracts that I
two of which I have mentioned already. Tim also told me that he had paid all ofYC
payables current with a deal he did with Wayne Prim (the other third owner ofWPT)
This turned out not to be true. I talked to Wayne about this. In Judge Tuckers
courtroom, Bob Sumpter, on Tim's behalf, in April or May of2008, stated as much as
well.

Pages 24/25/26/27 in reference to taxes I want to talk about in our meeting, as


it is too hard to put in all in this overview.

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(a) of Page 27

Interesting that they admit here that there was community cash flow from Big Springs,
Big Sky Ridge LLC and Sunrise Ridge LLC and that Tim took all of that money. This
was during the time that he was stating that there was no community cash flow. I had to
borrow money to just live during this time, as I did not get a penny of temporary spousal
support nor long term after. I did not catch this before.

33. of Page 29

This is where Troy Greenfield had a "field" day during the UCC vs CS and Tim Blixseth.
Tim stated on the stand that the "cornerstone of the MSA for him" was me taking over
his fiduciary responsibility for any and all of his actions in the business that he had run
and I got. It would be worth a phone call to him on this one. Andy Patten was there as
well. Troy told me that he did not think that this area of the MSA would stand up as I
could not hold Tim harmless nor take on his actions if there were fraud and other things
involved. I, of course, until Tim stated that in court, did not think in anyway that the
"cornerstone" of the MSA, but I was surely aware that it was important to him. How can
I get around this issue ??

35. ofPage 30

Here is where I think we have a HUGE upside if you can find in the law where this
waiver cannot stand. As I told you, when Jaffe put together the filing for spousal support,
it penciled out at over 2.0mm per month, but I never expected to get that.
Tim repeatedly said at some point that there was no more community cash flow. We
have since found out that this was not true. He just kept all the money for himself.
Because he was saying there was no cash flow, I had to borrow money to live on, when
there was in fact funds for the community.
If the assets would have been what I was lead to believe they were AND if Tim had not
started his campaign to "crush and destroy her" ........ (it then turned into "keep after her
until she is crushed or dead") ....... .I would not have needed the spousal support.
But the facts are now clear that there was cash flow that I should have received at the
time I was frozen out. The assets and more over the liabilities that I was mislead about,
were such (or not such as far as assets go) to maintain my lifestyle, which is the letter of
the family law, let alone, any lifestyle. I am sitting here in a Chapter 7.
Last year at about this time, just before signing the MSA, I had manageable liabilities, no
money borrowed against Porcupine Creek nor Casa Captiva. The fact is that Tim knew
exactly what he was doing and what I was getting myself into, which is why the
cornerstone of the MSA to him, was what it was.

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If I had known any of this, I would not have settled in the way I did. I would have been
granted both temp and long-term spousal support. I would not have had to continue to
borrow money to live. I would not have borrowed 35mm to get the MSA closed.
Remember, of the 35mm, I personally only got just over l.Omm of that. The rest went to
Tim or to YC. The part that went to YC should have been paid back to me, if things there
were as they were presented.
In CA family law, a 25 year marriage with the income and tax returns that we had, would
have given me a very nice annual income from spousal support.

36.-44. of Pages 30 - 34 You guys are going to have to read and tell me what
you think.

Really for you guys ....... . .it's all the reps and warranties you will have to tell
me what you think.
64. ofPage 41

I think this helps us to justify why we are filing our motions on the MSA in the BK courts
in Montana, don't you? Remember we have added help there from the BK Judge who
loves us, and hates Tim and Mike Flynn. At this point they could not get a decent ruling
in their favor from that Judge if they tried. Either way, SB and BS have things in place in
that courtroom to help us. We need to make sure the validity of the MSA never ends up
being decided by Judge Waters. That would be a nightmare for all of us.
Obviously I have not mentioned the collapse of the US economy in this document, and
don't want to go down that road. Don't let that become an issue in the MSA matter.
Okay, I most likely gave you more then you wanted and it's not in great order. Sorry.
Let me know if something does not make sense. I think Joe E might be of some help here
too.
You guys should also read the Assignment Of Company Interests Agreement and the
Assumption Agreement. There are several things in the mini settlements, like Tim was to
keep paying the overhead for PC, but that ended as he said there was no community cash
flow. We now know there was, so I am not sure where we can fit that in.
Hope this helps. Edra

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Exhibit 4

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Michael J. Flynn, Esq.


PO Box 690
Rancho Santa Fe,
CA 92067
tel: 858 775 7624

Philip Stillman, Esq.


100 South Point Dr.
Unit TH 15
Miami Beach, FL 33139
tel: 888 235 4279

Robert Huntley, Esq.


815 West Washington St.
PO Box 2188
Boise, Idaho 83702
tel: 208 388 1230

James Sabalos, Esq.


2 Via Ravello
Henderson, NV 89011
tel: 949 355 6084

CJ Conant, Esq.
730 Seventeenth St.
Suite 200
Denver, CO 80202
tel: 916 230 3841

May 29, 2013


Jack Smith, Esq.
Chief, Public Integrity Section
U.S. Department of Justice
Criminal Division
950 Pennsylvania Avenue, NW
Washington, D.C. 20530
RE:
1. Letter and Memorandum Dated May 4, 2012 Requesting Investigation of
Montana Political and Judicial Corruption; Appointment of Independent
Counsel; Requesting Subpoena for Records of Federal Task Force Career
Investigative Agents.
2. This Supplement Requesting Investigation into the Targeting of Timothy L.
Blixseth by State and Federal Agencies, Including the IRS; And the
Preservation of all IRS and DOJ Files Relating to Mr. Blixseth.
3. Request for Immunity for Whistleblower.
Dear Mr. Smith:
Please consider this letter and the documents attached hereto to be a supplemental request
to the Letter and Memorandum we provided to your office approximately one year ago
on May 4, 2012. Those documents are herewith attached again for your convenience.
With the broad scale revelations of targeting by the IRS now supported by the
Inspector General, the Public Integrity Sections investigation into Montana political and
judicial corruption, specifically involving the targeting of Mr. Blixseth by state and
federal agencies, including the IRS, as demonstrated herein, is both timely and required
by law.
The previously submitted evidence, and the following facts in the context of a chronology
supported by the documentary evidence attached hereto, mandates that the Public
Integrity Section demand, subpoena and request from the IRS and all departments within
Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,
Public Integrity Section

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the Department of Justice, and all relevant state and federal agencies, all files and
documents relating to the targeting of Mr. Blixseth by the Holder / Breuer controlled
Department of Justice and by the IRS. Although Mr. Breuer resigned in February, 2013
as the head of the Criminal Division, and has now returned to the law firm Covington and
Burling, which has represented Credit Suisse throughout all relevant periods involved in
these matters, his previous misconduct relating to the issues involved herein has not been
remedied by the DOJ.
This Supplemental letter also seeks immunity for the whistleblower named in paragraph
25 hereto. To date, Attorney General Holder and Mr. Breuer, have blocked immunity in
order to conceal their participation in the matters recited herein and recited in the May 4,
2012 Letter and Memorandum.
CHRONOLOGICAL STATEMENT OF FACTS
1. September 30, 2005: Credit Suisse loaned $375 million to the Yellowstone Club
(YC) as part of an Equity Recapitalization loan scheme to violate FIRREA
and USPAP which was part of a larger, fraudulent scheme involving at least
fifteen master planned communities. The scheme itself is a derivative of the
securitized mortgage bundling schemes then ravaging the U.S. economy mostly
predicated on fraudulent appraisals without direct connections between the
securitizing banks and the appraisers; but the Credit Suisse loans involve direct
collusion by and between Credit Suisse and its directly commissioned appraiser,
Cushman & Wakefield, to inflate appraisals on the sixteen master planned
communities in violation of FIRREA and USPAP. Credit Suisse attempted to
circumvent FIRREA by issuing the loans through its Cayman Islands Branch,
but this part of the scheme failed because the loan documents made the loans
purchasable by federally regulated banks. See generally May 4, 2012 Letter and
Memorandum attached hereto, (Exhibits Omitted).
2. The Credit Suisse created YC loan documents explicitly authorized YC to loan
$209 million of the $375 million loan proceeds to its owner Blixseth Group, Inc.
(BGI) without recourse to Mr. Blixseth, the owner of BGI. For the next three
years, until September, 2008, BGI paid over $40 million in interest to YC
pursuant to duly authorized notes, quarterly KPMG audited financial statements,
and adherence to all corporate protocols. The YC loan and the BGI loan were
approved by the YC lawyers in writing.
3. On March 13, 2008, Mr. Blixseth culminated a two year divorce battle with Edra
Blixseth pursuant to a comprehensive Marital Settlement Agreement, (MSA).
Edra received the YC ($500 million); and Porcupine Creek ($200 million); and
other assets, ($100 million +/-), in appraised assets. Unknown to Tim, Edra had
defrauded banks and lenders of about $50 million during the divorce while
conspiring with Samuel Byrne / Cross Harbor Capital Partners to kill Tim's sale of
YC. Edra gave fabricated Department of Justice Target Letters to Byrne to give
to his investors to kill the sale; and then she borrowed $35 million from Byrne
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with his knowledge that she had defrauded $50 million from the banks. See
documented bank fraud evidence and Byrne loan documents in the May 4, 2012
memorandum. See fabricated Target Letters attached hereto again as Exhibit 1.
Notwithstanding the documented felony violations by Edra Blixseth involving the
fabrication of the DOJ Target Letters to kill the YC sale as part of hers and
Byrnes scheme to use the Montana Bankruptcy Court to effectively steal
hundreds of millions of dollars with the political capital and favors of
Montana Governor Schweitzer hereinafter recited, Breuer and Holder thwarted
the criminal investigation, which was being conducted by a team of career FBI,
Treasury, and IRS agents; and then used the IRS and the DOJ to target Mr.
Blixseth on behalf of Breuers billionaire friend, Ron Burkle.
4. In July - November, 2008 just before and after the divorce closing, unknown to
Mr. Blixseth, as part of her deal with Byrne, Byrne partnered with Ron
Burkle (Yucaipa Capital controlling a billion dollars of California CALPERS and
CALSTRS Pension funds) in their scheme to put the YC into bankruptcy pursuant
to their brilliant but evil, billion dollar conspiracy to use political pressure
involving numerous meetings and large donations to Schweitzer. Edra stated in
one document:
SB (Byrne) and BS (Schweitzer) have spent enormous political
capital and political favors to ensure they get the right outcome from
the Montana bankruptcy judge. (Exhibit 2, attached hereto)
This scheme enabled Burkle, Byrne and Schweitzer to use Judge Kirchers rulings
and Burkles connections to Lanny Breuer, for the following purposes:
(a) to target Mr. Blixseth with the Credit Suisse loan (notwithstanding that it is a
non-recourse loan);
(b) eliminate Edras divorce obligations to Mr. Blixseth under the MSA
(approx $23 million);
(c) use the Holder / Breuer controlled DOJ to conceal Edras fake Target letters
and bank frauds; terminate a Fed Task Force investigation into their scheme; and
target Mr. Blixseth with fabricated civil and criminal claims by state and federal
agencies, including the IRS, the Breuer controlled Criminal Division, and the
Montana Department of Revenue. This cabal of private actors and public officials
accomplished all of the above under the protection of Holder, Breuer and Kirscher
while hacking into Mr. Blixseths and his lawyers attorney client privileged
emails, in connection with which the undersigned victims of the email hacking are
requesting immunity for the hacker in order to expose the misconduct of Judge
Kirscher and the criminal conduct of others participating in the scheme. See
Paragraph 25 below. See Exhibit 3 hereto (Byrne email re brilliant but evil
billion dollar plan); Exhibit 4 (Jan 14, 2009 meeting between Burkle, Byrne and
Schweitzer); Exhibit 5 (Byrne political pressure email); See exhibits previously
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submitted with attached May 4, 2012 Letter and Memorandum re Burkle


relationship with Breuer whereby Burkle paid millions of dollars to convicted
felon, Anthony Pellicano, now in prison for twelve years, on behalf of the
Clintons during the impeachment proceedings to spy on and illegally collect
alleged evidence against Clinton enemies when Breuer was White House counsel
and dealing directly with Pellicano. The Burkle connection to Byrne also enabled
Byrne to obtain $100 Million from the California pension funds, and more
recently Byrne made a capital call to California for $23 million.
5. In March, 2008, when Edra and Byrne killed the YC sale, Byrne met with
Schweitzer to formulate their scheme for the YC bankruptcy before Kirscher. See
Byrne admissions concerning meeting with Schweitzer in testimony attached to
May 4, 2012 Memorandum and exhibits thereto. Schweitzer was up for re election
in 2008 when Byrne and Edra arranged the $35 million Byrne loan in August,
2008 in order to consummate the MSA and, as part of their scheme, to file a bad
faith YC bankruptcy. The chronology of events is telling:
(a) Between July 10, 2008 (four days after Edra announced to YC
members on July 6, 2008 she was taking over the YC out of the
divorce), and September 23, 2008, Burkle, Byrne and Schweitzer
funneled through the Democratic Governors Association, (DGA
Schweitzer was then Chairman) to the Montana Democratic Party,
$1,245,000 by having Byrne and Burkle and their friends and cronies
in the YC scheme, donate said sum to the DGA. The DGA then gave
the money to the Montana Democratic Party who used it in the
Schweitzer reelection campaign. See documents under separate cover
identifying the Burkle and Byrne friends and cronies donations.
(b) On August 1, 2008, Edra and Byrne agreed on the $35 million loan to
gain control of the YC. See Exhibits to the May 4, 2012
Memorandum.
(c) The next day, on August 2, 2008, Byrne and Edra met with Schweitzer
at the YC to discuss their takeover of the YC. Exhibit 6 attached
hereto.
(d) The next day, on August 3, 2008, the DGA received $750,000 from
the Burkle cabal to give to the Montana Democratic Party. All of these
financial transactions were done in the context of the Burkle / Byrne
scheme to loan $35 million to Edra to secure control of the YC and
then to put the YC into bankruptcy to ensure they get the right
outcome from the Montana bankruptcy judge. For the $750,000
transaction see documents under separate cover.
This money laundering scheme having Burkle / Byrne and their friends donate
to the DGA and then to the MT Dem Party, and then to Schweitzer - appears
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designed to conceal Burkle and Byrnes financial relationship with Schweitzer


while at the same time Burkle and Byrne were taking over the YC and using their
relationship and political capital and political favors with Schweitzer to do it.
The illegal purpose of the scheme was to make political donations to corrupt the
bankruptcy judicial process and steal the YC, a corruption mechanism routinely
used by Byrne and Burkle by Byrne in bankruptcy proceedings and by Burkle to
obtain control over public funds. See Article Yucky Yucaipa and related
publications.
6. After his reelection, in 2009, Schweitzer created two slush funds from the Burkle
/ Byrne money, The Council for a Sustainable America and The American
Sustainability Project and funneled over $335,000 of the Burkle / Byrne money to
the slush funds. The American Sustainability Project, a 501 (c) (4) organization
was quickly approved by the IRS without examination notwithstanding overt
illegalities in the use of the money and in specific transfers. During the same time
period, in May, 2009, Kirscher issued a series of rulings ultimately giving Byrne
and Burkle over $800 MILLION of Blixseth marital community assets for less
than $10 MILLION; and the IRS, as recited below, began a campaign to target
Mr. Blixseth. For documentation of the slush funds, see documents sent under
separate cover letter. The chronology of bankruptcy corruption is recited and
documented in detail in the May 4, 2012 Memorandum and is supplemented as
follows.
7. On Nov. 4, 2008 Schweitzer was reelected. On November 8, 2008, Byrne, Edra
and Burkle put the YC into bankruptcy before Kirscher; and hired Kirscher s
best friend, Attorney Patten, who used his relationship to gain access to
Kirscher before the bankruptcy was filed, and to brief Kirscher on the filing. See
email exhibits to Motion to Disqualify Kirscher attached to May 4, 2012
Memorandum. On November 9, 2008, the day after the bankruptcy petition was
filed by Patten, Byrne sent an email to his colleagues stating that they needed to
start using political pressure to insure that their DIP (Debtor in Possession)
plan would be approved by Kirscher. See Exhibit 5 hereto. The DIP plan gave
Burkle and Byrne control over the bankruptcy. On January 14, 2009, Burkle,
Byrne and Schweitzer met to implement their political favors scheme using
Judge Kirschers connections to the Montana Democratic cabal, and more
specifically his connections with specific lawyers and a specific law firm
representing wealthy members of the YC who were seeking over $20 million
from the proceedings before him. See Exhibit 4. See Immunity Proffer. After
January 14, 2009, all of Kirschers rulings favored Burkle, Byrne and Edra and
blatantly violated Mr. Blixseths substantive and procedural due process rights,
and the rights of other parties involved in the Montana bankruptcy proceedings.
See May 4, 2012 Memorandum.
8. On May 18, 2009, Kirscher approved a back room deal after personally
engaging in illegal ex parte meetings in a hotel with Byrne, in which Byrne and
Burkle obtained the YC and other assets for ultimately less than $10M. On that
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date, Kirscher approved an overtly illegal bankruptcy plan creating a Liquidating


Trust controlled by Credit Suisse, whose primary purpose was to target Mr.
Blixseth for the nonrecourse Credit Suisse loan while exculpating Edra,
Byrne, Burkle, Credit Suisse from any liability to Mr. Blixseth, or to the YC for
the FIRREA and USPAP violations, (see May 4, 2012 Memorandum and
exhibits) thereby depriving Mr. Blixseth of all of his due process rights and jury
rights to sue and litigate the entire scheme against Burkle, Byrne and Credit
Suisse, with no rights to be heard and in total abrogation of the Federal rules of
Civil Procedure. Such reckless abuse of judicial power has no place in America,
and it is more akin to a country ruled by despots than by a republic. Credit
Suisse, with Judge Kirschers approval then appointed Marc Kirschner as Trustee
of the Liquidating Trust to sue Tim. The financial connections between
Kirschner, Burkle and Burkles California bought politicians to control the
California pension funds money to pull off the YC theft with Judge Kirscher are
direct and provable. Kirschner was on the Board of Directors of Spectrum Brands,
59% of which is owned by Harbinger Group Inc. The State of California has over
$330 million invested with Harbinger, and a billion dollars invested with Burkle,
and over $100 million invested with Byrne, all as a result of political donations.
See documents under separate cover. On April 5, 2011, California schemed with
Kirschner and the Montana Department of Revenue (MDOR), to put Mr.
Blixseth into an involuntary bankruptcy in order to preclude his appeals of
Kirschers rulings. The scheme was deterred when an impartial Nevada
bankruptcy judge saw through it, dismissed the petition on venue grounds, which
the Ninth Circuit reversed. Now, that same judge is hearing Mr. Blixseths
renewed motion to dismiss MDORs involuntary petition as well as Mr.
Blixseths claim for damages against MDOR in June of 2013. Recently, in March
- April, 2013, Kirschners role in this entire cesspool of corruption was exposed
and he either resigned, or his Director position was terminated as a Director of
Spectrum. At the same time, in April, 2013, Kirschner resigned or was removed
as Trustee of the Liquidating Trust.
9. In June, 2009, just after the Kirscher rulings and blatant violations of Mr.
Blixseths due process rights, Mr. Blixseth formally requested an FBI / Treasury
and IRS Fed Task Force investigation of the entire matter to be conducted by
career agents not under the control of the Montana Democratic Party and the
Holder / Breuer Democratically controlled DOJ. See May 24, 2012 Memorandum
and Exhibits.
10. At some time after the September, 2005 Credit Suisse loan, the IRS had initiated
an audit of BGI for the years 2005, 2006 relating to the loan; but in October,
2009, before the Kirscher rulings on August 16, 2010 relating to Mr. Blixseths
alleged liability to the Credit Suisse controlled Liquidating Trust and to several
minority shareholders of YC, (see May 4, 2012 Memorandum and exhibits), the
IRS was compelled by the evidence to conclude that the $209 million BGI loan
was in fact a loan with "No Change" to the filed tax returns. The IRS decision
not to issue any changes with respect to BGIs 2005 return was initially made on
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November 2, 2009, agreed to and signed off by Mr. Blixseth on December 8,


2009 and finalized by the IRS on January 4, 2010. See Exhibit 7 attached hereto,
(IRS January 4, 2010 notification of No Change). However, at the behest of
Kirschner and the Liquidating Trust, notwithstanding the IRS audit results and its
No Change January 4, 2010 ruling, on August 16, 2010, and while concealing
his relationships with the attorneys and parties benefitting from his rulings,
Kirscher issued more absurd rulings. See May 4, 2012 letter and Memorandum
and exhibits. See Immunity Proffer of the whistleblower sent under separate
cover, specifically regarding the misconduct of Judge Kirscher and his
relationships with attorneys and their clients financially benefitting from his
illegal rulings in amounts over $20 MILLION!
11. In early 2010, the Montana political machinery operated by Schweitzer under the
financial influence of Burkle and Byrne then turned directly to the Holder /
Breuer DOJ to directly target Mr. Blixseth with a baseless criminal
investigation, and derail the Montana federal career agent investigation of Edra.
At that time, Judge Kirscher was concluding the AP 14 trial in February, 2010 and
preparing his decision. Meanwhile, the senior judge who was aware of the
involvement of the Schweitzer / Burkle political influence, recommended the
continuation of the Edra Blixseth criminal investigation. (See May 4, 2012
Memorandum). Beginning in May, 2010, at the same time Kirscher was elevated
to the BAP the Montana Democrats were flexing their muscle - Breuer
appointed one of his appointed DOJ attorneys to open a criminal investigation of
Mr. Blixseth allegedly based on a transaction involving property in the Turks and
Caicos which Mr. Blixseth was selling to fund the continuation of his legal
defense. Mr. Blixseth fully cooperated with the DOJ knowing that Breuer was
behind this witch hunt and intimidation campaign to make him drop his legal
defenses in Montana. The internal Montana enormous political capital peddling
in the overall scheme became so overt, remarkably, Breuer even appeared in 2011
on nationwide TV to target Tims foreign purchaser of the Turks property for the
purpose of killing the Turks sale thereby depriving Mr. Blixseth of the funds to
defend himself. In October, 2011, Breuer even had the DOJ file suit and place a
lis pendens on the buyer's property in Malibu to assist in killing the sale. After
achieving this purpose to kill the sale and deprive Mr. Blixseth of funds, the
investigation was abandoned. But Breuers use of federal agencies to threaten and
intimidate Mr. Blixseth continued.
12. On October 19, 2010, Federal Immigrations, Customs and Enforcement agents
drove from Los Angeles and intercepted Tims plane at the airport in Thermal,
California while Mr. Blixseth was preparing to depart, (apparently having
wiretapped his phones) and with his permission, searched the plane. Of course,
there was no basis whatsoever for the search and it was fruitless; but Breuer
succeeded in delivering his message of intimidation. See Exhibit 8, email from
Tims counsel to, inter alia, the DOJ lawyer appointed by Breuer to conduct the
Turks criminal investigation. No sooner had Mr. Blixseth responded to this

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intimidation on Oct. 19, 2010, then the IRS responded with reopened audit
notices. Later, the Coast Guard intercepted Mr. Blixseths yacht in Los Angeles.

13. While the Breuer controlled DOJ pursued its intimidation tactics, Kirscher, with
full knowledge and participation in the Schweitzer / Burkle / Breuer political
favors campaign, (see Immunity Proffer) on Aug. 16, 2010 issued his 135 page
Memorandum of Decision in AP 14, in favor of the Credit Suisse controlled
Liquidating Trust. This decision was based on Kirschers previously engineered
back room deal which exonerated Edra, and encompassed rulings in favor of his
friends and attorneys in a separate case (AP 18) in which he had not even
afforded Mr. Blixseth a trial, while knowing that the career agents in Montana
were investigating Edra (as recommended by a senior judge) and while in
possession of the documents evidencing bank fraud, bankruptcy fraud, destruction
of evidence, obstruction of justice and perjury. See May 4, 2012 Memorandum
and exhibits; See Immunity Proffer. In a blatantly absurd ruling, and without
admitting the evidence used by the IRS to approve the loan, Kirscher ruled that
$209 Million of the Credit Suisse loan proceeds was a taxable shareholder
distribution notwithstanding the $40M plus in interest paid by BGI, and the
KPMG approved audited financial statements. Kirscher IGNORED the IRS
approval of the transaction and all of the documentary evidence making it a loan!
Kirscher also ignored hundreds of documents and rejected evidence of the entire
fraudulent scheme. At the same time, the Montana Democratic Party succeeded in
getting Kirscher elevated to the Bankruptcy Appellate Panel.
14. In connection with the requested Immunity Proffer under separate cover, Judge
Kirschers relationships with several Montana attorneys and wealthy Montana
business men who stand to receive over $20 million from his blatantly erroneous
rulings in AP 18, which the judge entered without even conducting a trial and
hearing evidence on the case, the undersigned respectfully request an expeditious
response to this letter. In the event the Public Integrity Section gives immunity to
a specific witness as requested below, it is expected that additional specific facts
involving Judge Kirschers and Mr. Breuers misconduct will be exposed. See
Immunity Proffer.

15. After the Kirscher ruling, and under the influence of the Holder / Breuer
controlled DOJ and the Montana Democratic Party, and as part of the Breuer use
of the DOJ in its intimidation campaign, in October, 2010, while Breuer was
having ICE intercept Tims plane, and pursue the bogus Turks criminal
investigation, in a dramatic flip flop the IRS reopened the BGI audit, and
expanded its audit to Mr. Blixseths tax returns, after Mr. Blixseth and his
attorneys sent the October, 19, 2010 email - an intimidation tactic Breuer
consistently pursued as Mr. Blixseth resisted the rapidly growing political and
judicial corruption enveloping his cases. Exhibit 9 (IRS notifications). The
undersigned respectfully request that the Public Integrity Section specifically
Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,
Public Integrity Section

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obtain internal DOJ / IRS communications in the context of a chronology reciting


the Breuer intimidation tactics in response to Mr. Blixseths efforts to obtain
justice in the Montana judicial proceedings.
16. On March 23, 2011, Mr. Blixseth and his counsel met with the IRS and its lead
auditor, Paul Doerr. Mr. Blixseths counsel stated that the facts proved,
particularly in light of the demonstrable Montana corruption and the involvement
of Burkle and Byrne, and Burkles connection to Breuer, that the reopened audit
was a politically motivated attack from Holder, Breuer and Burkle in order to
crush Mr. Blixseth financially, and to use the IRS to seize Tims assets, thereby
preventing Mr. Blixseth from challenging on appeal the MT rulings. Counsel
informed Mr. Doerr that the Montana Department of Revenue was involved in the
same scheme. Mr. Doerr acknowledged that the Montana decision was involved
in the reopened audit but would not disclose any facts involved in the internal IRS
processes, contacts and decision making to target Mr. Blixseth.
17. In Aug, 2011, the career agent dominated Fed Task Force sent a Target Letter to
Edra Blixseth. Breuer and Burkle then immediately used their financially
obtained political capital to quash the investigation with the complicity of
Breuer.
18. In Sept, 2011, the Fed Task Force was disbanded by Breuer and Holder; the Edra
Blixseth Target Letter was withdrawn and the YC was declared "Off Limits" by
the DOJ. See May 4, 2012 Letter and Memorandum.
19. In September, 2011, at the same time as Breuer quashed the investigation into
Edra, Judge Kirscher blatantly defied the appellate ruling which had overturned
the plan to target Mr. Blixseth and exculpate the others; and re- confirmed the
plan to target Mr. Blixseth. See May 4, 2012 Letter and Memorandum.
20. In Oct. 2011, the IRS further expanded the audit. Exhibit 10 attached. The
Democratic cabal had taken control.
21. On Nov. 15, 2011, five of Tim's representatives met with six IRS officials
including lead auditor Paul Doerr, his boss, Hugo Ramirez, and IRS counsel
Susan Sexton. Tims counsel explained in detail the facts establishing the
legitimacy of the loan, including over $40 million in interest payments, and
KPMG quarterly audited financial statements documenting the loan; and that
evidence established that the IRS flip flop, was politically motivated and
pursued based on the Breuer / Burkle / Schweitzer political machinery driving the
audit. Some of the Breuer intimidation tactics were cited. Privately to counsel,
Doerr, apologetically stated words to the effect: " If MT goes away, this audit
goes away.
22. On May 4, 2012, multiple attorneys and victims of the Kirscher / Burkle cabal
filed the Public Integrity Report attached hereto. Four months later, we received
Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,
Public Integrity Section

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a letter stating that it had been found in the Mail Room. This mailing mishap
occurred during the height of the Obama reelection campaign. Exhibit 11 attached
hereto.
23. On May 22, 2012, the IRS revoked its previous "No Change" decision regarding
whether taxes were owed for tax year 2005, which turned entirely upon the
characterization of the proceeds from the Credit Suisse loan as a loan versus a
distribution. Exhibit 12 attached hereto.
24. On July 2, 2012, the IRS sent a "Notice of Deficiency" of approximately $24
Million for a loan it had previously approved as a loan, not a shareholder
distribution. The IRS ruling directly resulted from the Montana political and
judicial corruption which spawned the Kirscher rulings; and from the Holder /
Breuer controlled DOJ use of federal agencies to target Mr. Blixseth. Exhibit 13
attached hereto. Although the July 2, 2012 Notice of Deficiency does not contain
any direct citations to Judge Kirschers findings, the Notice of Proposed
Adjustment issued on March 16, 2012 cites extensively from Judge Kirschers
ruling and relies heavily upon that courts findings. A true and complete copy of
the March 16, 2012 Notice of Proposed Adjustment is attached as Exhibit 14.
Significantly, throughout the time period that Burkle and Byrne schemed to obtain
the YC through Montana bankruptcy proceedings from March, 2008 through the
completion of the scheme in September, 2011 when Judge Kirscher defied the
appellate ruling vacating the illegal bankruptcy plan giving the YC to Burkle and
Byrne, they were hacking into Mr. Blixseths emailed attorney client privileged
communications. The extent to which the information obtained from these
feloniously procured communications was transmitted to public officials,
including Kirscher, Breuer, the DOJ, the Montana Department of Revenue, and
the IRS, is a substantial basis for granting immunity in connection with the
Immunity Proffer submitted herewith. The politically driven flip flop by the
IRS, in the context of the circumstances herein, including the direct involvement
of Mr. Breuer, mandates that the Public Integrity Section grant immunity without
seeking approval from the Holder controlled DOJ.
25. Throughout relevant time periods in this matter, a Whistle Blower on behalf of,
and paid by Edra Blixseth hacked into the computers of Mr. Blixseth and his
counsel. The hacked information was provided to a laundry list of Mr. Blixseths
enemies in a list created by Edra Blixseth. In June, 2012, the Whistle Blower
severed their relationship. The Whistle Blower informed Mr. Blixseth that he and
the DOJ had been hacking into Tim's and Tims counsel's emails; and he and the
government were wiretapping their phone calls on behalf of Edra and Burkle.
Edra had paid the Whistle Blower over $6.0M to conduct her requested hacking,
at the rate of $100,000 per month from April, 2006 through January, 2009 plus
millions in bonuses. The Whistle Blower and Mr. Blixseths counsel have been
attempting to secure immunity for the Whistle Blower for the past year to blow
the whistle on this entire matter, but the Holder controlled DOJ has thwarted it at
the risk of exposing their own corrupt conduct. (See Immunity Proffer and
Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,
Public Integrity Section

10

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documents sent under separate cover.) In the event The Public Integrity Section
gives immunity to the Whistle Blower will expose the entire YC scheme, the
misconduct of Judge Kirscher in connection with very specific electronic
evidence, and the criminal conduct of Burkle, Byrne and Schweitzer in their
scheme to use the Montana Bankruptcy Court to perpetrate the brilliant but evil,
billion dollar plan.

Very Truly Yours,


/s/ Michael J. Flynn
Michael J. Flynn

/s/ Philip Stillman


Philip Stillman

/s/ Robert Huntley


Robert Huntley

/s/ James Sabalos


James Sabalos

/s/ C.J. Conant


CJ Conant

Request for Investigation of Montana Bankruptcy Court and Credit Suisse by Department of Justice,
Public Integrity Section

11

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Exhibit 5

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Exhibit 6

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Timothy Blixseth
71-434 Sahara Rd.
Rancho Mirage, CA 92270
tel: 760 776 6622

Michael J. Flynn, Esq.


PO Box 690
Rancho Sante Fe, CA 92067
tel: 888 235 4279

Christopher J. Conant, Esq.


730 Seventeenth St.
Suite 200
Denver, CO 80202
tel: 916 230 3841

February 20, 2013


Via Overnight Mail
Office of the Circuit Executive
P.O. Box 193939
San Francisco, CA 94119-3939
Attn: Reappointment of U.S. Bankruptcy Judge Kirscher
Fax: (415) 355-8901
Dear Reappointment Committee:
In response to the Committees requests for public comment regarding the reappointment
of Ralph Kirscher as judge for the U.S. Bankruptcy Court for the District of Montana, the
undersigned provide the following comments and on behalf of ourselves and our clients, we urge
that the Committee not recommend the reappointment of Judge Kirscher. We ask that the
contents of this letter remain confidential as we have pending matters before Judge Kirscher and
do not want our concerns to be used against our client.
Before delving into the details as to why Judge Kirscher should not be re-appointed, we
believe that it is important for the Committee to first appreciate the historical and unique nature
of the Montana judicial system. With that context in mind, we believe the Committee will
immediately appreciate the inherent problems presented by the one active bankruptcy judge in
Montana being re-appointed for another 14 years. Those inherent problems are manifested in the
facts described below and will only become worse if Judge Kirscher is reappointed. In short, as
recognized by the Montana Supreme Court just last year, judicial officers in Montana are
inherently susceptible to outside influences and this problem becomes more acute in the context
of an insular and specialized court such as the Montana bankruptcy bar and bench. 1 Judge
Kirscher has been the sole active bankruptcy judge in Montana for 14 years now and as such has
had a captive bankruptcy bar with whom he has become too relaxed with respect to selected
practitioners and trustees and this has resulted in impermissible ex parte communications and
judicial assistance as well as a disregard for the adversary system, as discussed below. As the
1

Many scholars have already recognized the problems inherent with the bankruptcy system as it relates to the
relationship between bankruptcy judges and the bankruptcy practitioners who appear before them on a daily basis
and whose fees the judges are asked to approve just as regularly. See Lynn M. LoPucki, Courting Failure: How
Competition for Big Cases is Corrupting the Bankruptcy Courts; Troy A. McKenzie at pp. 40-48; Judicial
Independence, Autonomy, and the Bankruptcy Courts, 62 Stan. L. Rev. 747, 797-800 (March 2010).

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sole active bankruptcy Judge in Montana he has also served his tenure without fellow bankruptcy
judges in his district to keep him accountable to his duties under the Judicial Code of Ethics.
Moreover, newly discovered and authenticated evidence reveals that Judge Kirscher has been
directly corrupted by politicians and hedge-funds. There are many qualified bankruptcy law
experts who could adequately serve as the next bankruptcy judge in Montana with the dignity
commensurate with the office. Judge Kirscher has had 14 years so now is the appropriate time to
replace with him a qualified person from outside of Montana, lest the good ole boy culture of
the Montana bar and bench continue.
Background
The facts discussed below have been developed over the course of almost four years in
litigation involving the Yellowstone Mountain Club bankruptcy and the plethora of adversary
proceedings that have spawned therefrom. Our client, Timothy L. Blixseth, was the former
owner of the Yellowstone Club until his ex-wife, Edra Blixseth, obtained full ownership of the
Club as a result of their divorce in California. The Blixseths were engaged in a two year hotly
contested and litigated divorce in California. They finally settled their divorce and agreed,
amongst other things, that Edra would receive the Yellowstone Club and other Blixseth
community assets worth over $500 million. As part of their settlement, they mutually agreed to
waive and release each other of all claims against each other both personally and on behalf of the
entities that they received out of the divorce. Thus,. Edra Blixseth on behalf of the Yellowstone
Club agreed to waive and release all claims that the Club had against Mr. Blixseth. The
California Superior Court approved these waivers and releases after conducting an evidentiary
hearing concerning the same.
Almost immediately after receiving the Yellowstone Club in the summer of 2008, Edra
Blixseth and her partner, Sam Byrne of the Boston-based hedge-fund CrossHarbor Capital
Partners LLC put the Yellowstone Club into bankruptcy in Montana in November of 2008. The
Yellowstone Club bankruptcy was and is the largest bankruptcy case in the history of the State of
Montana and brought with it enormous participation from the most elite bankers and hedgefunds in New York and Boston. Judge Kirscher admitted to presiding over ex parte settlement
negotiations between CrossHarbor Capital Partners LLC, the Club run by Edra Blixseth and
Credit Suisse which resulted in a plan of reorganization that gave CrossHarbor Capital Partners
LLC ownership of the Club for a purchase price of only $115 million but made Mr. Blixseth the
sole litigation target to be pursued by the Yellowstone Club trustee to collect over $300 million
in judgments in litigation to be presided over by Judge Kirscher and despite the fact that the
California Superior Court had ordered that the Yellowstone Club waived and released all claims
against Mr. Blixseth less than a year earlier, said waivers and releases having been approved by
its counsel, Stephen Brown, who was then approved as Chairman of the Creditors Committee by
Judge Kirscher. Success of the Clubs plan of reorganization, a plan that Judge Kirscher helped
craft during ex parte settlement negotiations, depended on the Club obtaining over $300 million
in judgments against Mr. Blixseth in litigation presided over by Judge Kirscher. On numerous
occasions, Mr. Blixseth requested Judge Kirscher to disqualify himself based on the above and
on numerous other grounds set forth herein in and the attachments hereto. Judge Kirscher
refused and unsurprisingly has now entered a $40 million judgment against Mr. Blixseth based
on facts that he admits were not introduced at trial but which he simply took judicial notice of
2

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based on his general knowledge of the Yellowstone Club a practice specifically prohibited by
case precedent - and after setting aside the orders of the California Superior Court entered in the
Blixseth divorce. Judge Kirscher continues to preside over numerous other adversary cases
where the Yellowstone Club trustee seeks the balance of his $300 million.
Newly discovered and authenticated evidence obtained from Edra Blixseths computers
now reveals what Mr. Blixseth has suspected all along. That CrossHarbors principal, Sam
Byrne, through his close relationship with the governor of Montana has spent enormous capital
and political favors to ensure they get the right outcome from the Montana bankruptcy judge.
This explains why CrossHarbor was able to purchase the Yellowstone Club out of bankruptcy for
less than $10million when it had contracted with Mr. Blixseth just a year earlier to purchase it for
$455 million.
The Historical Context for Reappointment of a Judge in Montana
Reappointing any judge in Montana requires, in the first instance, consideration of
Montanas unique characteristics that make its judges and legal practitioners susceptible to
political corruption and improper influence. Montanas own Supreme Court has recently noted
the states historical and present vulnerability to corrupting influences, both politically and
within its judiciaries: As Montanas Supreme Court stated:
Issues of corporate influence, sparse population, dependence upon agriculture and
extractive resources development, location as a transportation corridor, and low
campaign costs make Montana especially vulnerable to continued efforts of
corporate control to the detriment of democracy and the republic form of
government.

The people of the State of Montana have a continuing and compelling interest in,
and a constitutional right to, an independent, fair and impartial judiciary. The
State has a concomitant interest in preserving the appearance of judicial propriety
and independence so as to maintain the public's trust and confidence.

Montana judicial elections would be particularly vulnerable to large levels of


independent spending, both in terms of fairness and in terms of the public
perception of impartiality. Litigants appearing before a judge elected after a large
expenditure of corporate funds could legitimately question whether their due
process rights were adversely impacted. In the 2008 contested election for Chief
Justice of the Montana Supreme Court, evidence presented by the State in the
District Court indicated that the total expenditure for media advertising was about
$60,000. It is clear that an entity like Massey Coal, willing to spend even
hundreds of thousands of dollars, much less millions, on a Montana judicial
election could effectively drown out all other voices. The historic Heinze

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Anaconda conflict noted above illustrates the obvious negative and corrupting
effects of a bought judiciary.
Western Tradition Partnership, et al. v. Attorney General, et al., 271 P.3d 1, 11-13, (Mont.
2011), (certiorari granted, judgment reversed by American Trad. Partnership, Inc. v. Bullock,
132 S. Ct. 2490 (2012)). Given Montanas history of corruption coupled with the conduct by
Judge Kirscher and his court in connection with the largest bankruptcy case in the State of
Montana in which big-money from out of state were the primary players, the undersigned
attorneys cannot recommend Judge Kirscher for reappointment.
We are willing to meet with any representative of the reappointment committee to discuss
these critical matters.
I.

Material players in the Yellowstone Mountain Club (YMC) Bankruptcy, Case No.
08-61570 have admitted to improperly influencing Judge Kirscher.

Canon 2(B) of the U.S. Code of Conduct for United States Judges states in part, A judge
should not allow family, social, political, financial or other relationships to influence judicial
conduct or judgment. Despite this straightforward rule, material players in the YMC
bankruptcy have authenticated evidence that confirms individuals have improperly influenced
Judge Kirscher.
In December of 2012, Edra Blixseth, who formerly owned the YMC, authenticated a
document referring to Judge Kirscher and the YMC bankruptcy that stated, Remember we have
added help there from the BK Judge who loves us, and hates Tim and Mike Flynn. At this point
they could not get a decent ruling in their favor from that Judge if they tried. Either way, SB and
BS have things in place in that courtroom to help us. Ex. 1 at 7. A true and complete copy of
this document, along with the transcript in which Edra Blixseth authenticates the same is
attached as Exhibit 1. 2 SB was identified as Sam Byrne.
Likewise, Edra Blixseth sent another document that discussed keeping issues involving
the Blixseths divorce in front of Judge Kirscher and not the California court who adjudicated
their divorce. The document states, [w]e need this case moved back to Montana at all costs, SB
and BS have spent enormous capital and political favors to ensure they get the right outcome
from the Montana bankruptcy judge. I suspect TB and MF have known this for some time, and
gave up fighting that battle. A true and complete copy of this document is attached as Exhibit
2.
Both Edra Blixseth and Sam Byrne have substantial interests in front of Judge Kirscher.
Edra Blixseth is a Debtor before his court in In re Edra Blixseth, Case No. 09-60452. For his
part, Mr. Byrne is the owner of CrossHarbor Capital Partners LLC, which through its affiliates
and subsidiaries had Judge Kirscher approve: (1) CrossHarbors $35 million DIP loan; (2) the
Clubs plan of reorganization through which CrossHarbor purchased the Clubs assets for what
2

All the exhibits are contained in the attached DVD. However, for convenience, the smaller exhibits are being
provided in hardcopy as well.

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appeared to be $115 million which was a nearly 75% discount from the $455 million purchase
price it had contracted for only eight months before the Club filed its petition, but which in actual
dollars is less than $10 Million; and (3) is a significant beneficiary of and holds an Advisory
Board position on the Yellowstone Club Liquidating Trust and will obtain millions (if not tens of
millions) of dollars from the YCLT should it ever succeed in litigation against Mr. Blixseth; and
(4) CrossHarbor through its affiliates also had Judge Kirscher approve its purchase of an
exclusive golf community in Bozeman, Montana at a significant discount.
Given the admissions of judicial misconduct by significant players in the Montana
bankruptcy courts, including hedge-funds that have made significant investments through Judge
Kirscher, there is simply no reason to reappoint Judge Kirscher when numerous other candidates
from outside the State of Montana can be identified and who can give the Montana bankruptcy
system a fresh start.
II.

Judge Kirschers Allows his Chambers To Engage In In appropriate Conduct With


The Local Bankruptcy Bar and Select Practioners.

Canon 3(A)(4) of the U.S. Code of Conduct for United States Judges states, in part, a
judge should not initiate, permit, or consider ex parte communications or consider other
communications concerning a pending or impending matter that are made outside the presence of
the parties or their lawyers. This Canon applies to the Judges law clerks as well. See Com.
Canon 3(A)(4)(A judge should make reasonable efforts to ensure that law clerks and other court
personnel comply with this provision.). Any ex parte communication is an invitation to
corruption. See In re Complaint of Judicial Misconduct, 425 F.3d 1179, 1188 (Jud. Council 9th
Cit. 2005)(Kozinski, J., dissenting)(ex parte communication at the very least . . . will expose
the judge to one-sided argumentation . . . at worst, [it] is an invitation to improper influence if
not outright corruption.). Here, Judge Kirscher and his law clerks have created a culture of
favoritism with certain lawyers in the Montana bankruptcy bar that exposes the judge to the same
critiques raised by Chief Judge Kozinski.
A.

MATERIAL EX PARTE COMMUNICATION

Judge Kirscher and his staff (i.e. law clerks) have engaged in both ex parte advocacy and
ex parte communications with parties and their attorneys. 3
Judge Kirschers staff allows unparalleled access (i.e., weekend and cell phone) to Judge
Kirscher through improper ex parte communication to a privileged few, namely attorney Andy
Patten, who was the attorney for the YMC debtors. The following ex parte communications
between members of Judge Kirschers court and Mr. Patten have occurred:

Some scholars have opined that routine ex parte communications that comes with an administrative function leads
to the partiality of the bankruptcy judges being questioned. See McKenzie, 62 Stan. L. Rev. at 799 (citing LYNN M.
LOPUCKI, COURTING FAILURE: HOW COMPETITION FOR BIG CASES IS CORRUPTING THE BANKRUPTCY COURTS 97122) (2005).

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Law Clerk Kelli Harrington sent ex parte communications to Mr. Patten offering her
assistance in helping him getting the Yellowstone Club bankruptcy case initiated and
even offered her home phone number and cell number to Mr. Patten. True and complete
copies of these emails are attached as Exhibits 3 and 4.

Law Clerk Kelli Harrington sent ex parte communication to only Andy Patten, attorney
for the YMC, regarding steps by which Mr. Pattens cash collateral motion may be
approved. True and complete copy of this email is attached as Exhibit 5.

Law Clerk Kelli Harrington emailed only Andy Patten for a copy of modified bidding
procedures regarding the bidding of the Yellowstone Club on April 6, 2009. True and
complete copy of this email is attached as Exhibit 6.

Mr. Patten asks Law Clerk Kelli Harrington if he could give Judge Kirscher a heads up
about a new case and if the court could keep the heads up confidential. Ms.
Herrington willingly agrees. True and complete copy of this email is attached as Exhibit
7.

Law Clerk Kelli Harrington sent ex parte communications informing Mr. Patten that
Judge Kirscher would be entering a generic order unless Mr. Patten wanted to submit
proposed order. True and complete copy of this email is attached as Exhibit 8.

Law Clerk Terry Healow had ex parte communication with Ross Richardson where Ms.
Healow encouraged an attorney to finalize a settlement before Mr. Blixseth could
renege. True and complete copy of this email describing confirmed called is attached as
Exhibit 9.

Judge Kirscher admits to presiding over ex parte settlement negotiations between


CrossHarbor and Credit Suisse that resulted YMCs plan of reorganization that resulted
in Mr. Blixseth being the sole litigation target of the plan that required that such litigation
against Mr. Blixseth be successful for the plan to succeed. Judge Kirscher then presided
over and continues to preside over this litigation against Mr. Blixseth and, unsurprisingly,
has entered one $40 million judgment against him and undoubtedly will enter more.
Exhibit 10, Order denying Blixseths Motion to Disqualify at 45. Remarkably, as a
result of the ex parte settlement conference, Judge Kirscher then approved a Liquidating
Trustee controlled by Credit Suisse, exculpated Credit Suisse from any liability to the
YMC members and to Mr. Blixseth, notwithstanding three 9th Circuit precedents directly
prohibiting such third party exculpation, and approved Credit Suisse as an owner of the
YMC with Byrne and Burkle after their January 15, 2009 meeting with the Governor of
Montana! Thus, in effect, Byrne, Burkle and Credit Suisse effectively stole over $600
million of Blixseth assets for less than $10 Million. There is currently litigation by YMC
members against Credit Suisse for over $ 4 Billion in which Credit Suisse is defending
based on its exculpation by Judge Kirscher. This third party litigation involves
criminal fraud in the YMC loan and appraisal process by Credit Suisse, and overt fraud
by Edra Blixseth, Byrne and Burkle, which facts were essentially swept under the
judicial rug by Judge Kirscher.

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In the ex parte settlement communications, and in other ex parte communications, Judge


Kirscher met directly with Sam Byrne, (who was paying Andy Patten), which followed
Byrnes and Burkles multiple meetings with the Montana Governor beginning in March,
2008, when Byrne first proposed a pre-packaged bankruptcy, and thereafter, including
a meeting on January 15, 2009 with the Governor during a critical time in the bankruptcy
proceedings when Byrne was seeking to apply political pressure (his words) to obtain
the results he wanted from the bankruptcy court -a result that netted Byrne and Burkle
over $600 Million.

Not only has Judge Kirschers staff created too cozy a relationship with a privileged few,
but the Judge has also taken it upon himself to engage in ex parte communication. Judge
Kirscher directly communicated ex parte with Sam Byrne to effectuate a settlement for Byrne
and Ron Burkle after their meeting with the Montana Governor. These facts are all captured in
emails and Judge Kirscher has either concealed or refused to address them.
Moreover, Judge Kirscher directly communicates with some lawyers regarding pending
matters by email instead of addressing these matters in open court. For example, attached is a
copy of an email from Judge Kirscher to Andy Patten. Exhibit 11. Such conduct is the precise
invitation that Chief Judge Kozinski warns about and is improper. See In re Complaint of
Judicial Misconduct, 425 F.3d at 1188.
Judge Kirscher has created a culture of ex parte communication with a privileged few.
Such conduct is in stark contrast to both the U.S. Code of Conduct for United States Judges and
Chief Judge Kozinskis warning.
III.

Judge Kirscher Rushed Hearings Rather Than Provide Adequate Due Process to
Litigants.
Canon 3(A)(4) of the Code of Conduct for United State Judges states:
A judge should accord to every person who has a legal interest in a proceeding,
and that persons lawyer, the full right to be heard according to law. . . a judge
should not initiate, permit, or consider ex parte communications or consider other
communications concerning a pending or impending matter that are made outside
the presence of the parties or their lawyers

Moreover, it is generally understood that because administrative fees and professional


fees are paid out of the bankruptcy estate, expeditious resolution is a critical goal of bankruptcy
judge, which can lead to organizing and condensing the typically-lengthy United States federal
litigation process . . . Timothy B. DeSieno and Rupal Shah Palanki, The United States
Specialized Bankruptcy Courts, at Forum for Asian Insolvency Reform (Feb. 7-8, 2011),
available at http://www.oecd.org/dataoecd/ 7/8/1873680.pdf. Rather than allow the full
development of a cause of action in an Article III court, negotiations are the lifeblood of
bankruptcy that lies outside of the channels of Article III appellate review. Troy A.
McKenzie, Judicial Independence, Autonomy, and the Bankruptcy Courts, 62 Stan. L. Rev. 747,
784 (2010). Rather than protect the interests of all litigants, the mechanics of bankruptcy push
7

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for expeditious settlements that are outside the review of Article III supervision. In such
instances, the protections afforded by the Federal Rules of Civil Procedure are often abandoned.
Judge Kirscher has in fact admitted numerous times to rushing through litigation against Mr.
Blixseth for the purpose of facilitating settlement negotiations that resulted in the YMCs plan of
reorganization. See Exhibit 12, Order Denying Motion for Continuance at 3, Exhibit 10 DQ
Order at 42; Exhibit 13, Partial and Interim Order at 3, 19 (Courts logic on interim order was to
assist in confirmation issues).
Here, Judge Kirscher participated in ex parte communication and other communication
about pending matters (i.e., AP-14) without Mr. Blixseth or his lawyer being present. Judge
Kirscher also failed to provide litigants the full right to be heard.
A.

SETTLEMENT TERM SHEET

Judge Kirschers conduct fails in line with protecting the few through the guise of
expeditious settlements that was outside the review of the District Court. Here, the docket is
clear that Judge Kirscher commenced AP-14s trial against Mr. Blixseth on April 29, 2009 even
though the debtors only named Mr. Blixseth a defendant on April 27, 2009. UCC v. Credit
Suisse, et al., Adv. No. 09-14, UCCs Answer and Countercl., ECF No. 98, which is attached as
Exhibit 14. After the end of phase one of AP-14, Judge Kirscher admits that he attended
settlement discussions between Credit Suisse, CrossHarbor and the debtor during the pendency
of AP-14. Exhibit 10. Those settlement talks occurred at the Crowne Plaza hotel, and the
eventual settlement reached, via ex parte communications, was the Settlement Term Sheet,
which makes Mr. Blixseth the sole litigation target of the Debtor and its liquidating trust.
Exhibit 15. 4 Judge Kirscher not only attended ex parte settlement negotiations that affected Mr.
Blixseth, but also failed to require the proper statutory notice before his court could approve this
type of settlement. See Exhibit 16 at pp. 3- 5, Judge Haddons order reversing the plan and
settlement term sheet.
Not only did the Settlement Term Sheet align the YMC, CrossHarbor (DIP financier),
and Credit Suisse (largest secured creditor) against Mr. Blixseth as the chief litigation target, but
the Settlement Term Sheet also contained an impermissibly broad exculpation clause, that even
exculpated Credit Suisse from the very conduct that shocked the conscience of the bankruptcy
court a few days earlier. A relevant portion of Judge Kirschers May 9, 2009 Interim Order is
attached as Exhibit 17. The exculpatory clauses were a very important component to the
settlement which paved the way for third amended plan being confirmed. Exhibit 18.
In light of In re Manoas (781 F.2d 1370 (9th Cir. 1986)) mandate for bankruptcy judges
to not adjudicate matters that they have close involvement with, Judge Kirscher should not have
been involved in the global settlement, especially since that settlement involved exculpating
Credit Suisse. Canon 3(A) should have also guided Judge Kirschers decision to not facilitate
communication between parties (i.e., YMC and Credit Suisse) during the pendency of AP-14

The enforcement of the BGI Notes was part of the subject matter for AP-14. After Credit Suisse, who were the
Prepetition Agent, was exculpated by the debtor (Ex. 15 at 5(g)), Mr. Blixseth was the sole litigation target for
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without Mr. Blixseth being present. Frankly, the ultimate settlement of the reorganization plan
cannot be separated from the outcome in AP-14.
Not only did the global settlement involve closed-door discussion ex parte, but Judge
Kirscher violated clear rules governing the approval of settlements like the Settlement Term
Sheet. Despite Canon 3(a), Judge Kirscher approved the Settlement Term Sheet without proper
notice. Thus, he rushed approval of this settlement by ignoring creditors due process rights to
notice, which directly violates both the Federal Rules of Bankruptcy Procedure but also Canon
3(A). Ultimately, the order approving the Third Amended Plan of Reorganization was reversed
due to the failure of notice and the fact that the exculpation clauses in the Third Amended Plan
violated Ninth Circuit Law. Exhibit 16 at 3- 5.
Here, Judge Kirscher presided over the reorganization plan that could not have been
confirmed but for closed door settlement discussions, which ultimately made one party, Mr.
Blixseth, the litigation target of all the others. Judge Kirscher created a vested interest in the
success of the plain; thus, he has a vested interest in Mr. Blixseth being the litigation target in
litigation over which Judge Kirscher then and subsequently presided.
IV.

Judge Kirscher Fails To Apply The Law Impartially.

Canon 2(A) demands that [a] judge should respect and comply with the law and should
act at all times in a manner that promotes public confidence in the integrity and impartiality of
the judiciary. Thus, a judge is required to follow the law impartially, including following his
appellate mandate.
Courts have found that bias because of the dual hats of a bankruptcy judge can arise
where the judge appears boxed in by prior rulings such that he will be forced to reach a certain
result in an adversarial proceeding regardless of the merits. Frates v. Weinshienk, 882 F.2d
1502, 1504 (10th Cir. 1989). Bankruptcy judge may [prejudge] adversarial proceedings or . . .
[place] himself in a position where it appears he will be forced to decide one or more of the
adversary proceedings in [a partys] favor. Id.
A.

JUDGE KIRSCHER USES FACTS OUTSIDE OF THE RECORD.

Here, Judge Kirscher is boxed in by his prior rules to such a high degree that his
impartiality can be questioned. First, Judge Kirscher uses facts outside of the record when ruling.
In direct contradiction to In re Manoa, Frates, Canon 2(A) and(3)(A)(4), as well as In re
BearingPoint, Inc., 453 B.R. 486, 492-93 (S.D.N.Y. 2011)([it is] manifestly improper for [him]
to determine adjucative facts on evidence from outside that record, or based on knowledge or
perceptions developed in the course of the earlier chapter 11 case,), Judge Kirscher referred to
facts outside of the record in determining motions for summary judgment by finding disputed
factual issues based on the past 22 months in the Yellowstone Club and associated proceedings.
See In re Blixseth, No. 03-100-RBK, 2011 WL 3824183, at *13-14 (Bankr.D.Mont. Sept. 27,
2010). Moreover, in his 135 page Memorandum of Decision in which he imposed a $40 million
judgment against Mr. Blixseth, Judge Kirscher started his opinion by stating that his decision was
based on facts he learned in other cases (although which cases and which facts he did not specify)
and took judicial notice of those facts for the purposes of imposing a $40 million judgment
against Mr. Blixseth. As one bankruptcy judge noted, this practice is manifestly improper and the
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Ninth Circuit said is a practice that must be avoided. In re Manoa, [CITE]; In re BearingPoint, Inc.,
453 B.R. 486, 492-93 (S.D.N.Y. 2011)([it is] manifestly improper for [him] to determine
adjucative facts on evidence from outside that record, or based on knowledge or perceptions
developed in the course of the earlier chapter 11 case,).
B.

JUDGE KIRSCHER HAS ALLOWED HIMSELF TO BE SO BOXED-IN


THAT HE EVEN DISREGARDS HIS APPELLATE MANDATE.

Judge Kirscher even disregarded his appellate mandate See Blixseth v. U.S. Bankruptcy
Court for District of Montana, No. CV-11-62-BU-RFC, Br. Supp. Writ of Mandamus 5-8, ECF
No. 2, attached as Exhibit 20. There, the district court reversed the bankruptcy court's order
confirming the Third Amended Plan of Reorganization on the ground that "the language of
Section 8.4 [the exculpation clause], whatever its intended scope may have been, goes well
beyond the limitation of Section 524 (e). Its approval was plain error." Exhibit 16 at 5. In direct
derogation of the district court's November 2, 2010 order, Judge Kirscher issued an order after
remand on September 30, 2011, stating "The exculpation clause in the case sub judice is not
barred by Ninth Circuit Law." In re Yellowstone Mountain Club, LLC, No. 08-61570-11, Mem.
of Decision 36, Sept. 30, 2011, ECF No. 2352, which is attached as Exhibit 21. Judge Kirscher
is so boxed in that he has even defied the clear a rule from the District Court. Judge Kirschers
plainly improper rulings, specifically involving exculpation, now form the primary defense
enabling the perpetration by Credit Suisse of billions of dollars of frauds being litigated in other
federal courts involving third parties.
As another example, Judge Kirscher has admitted in other bankruptcy cases that he will
not enter any ruling that is contrary to his findings in AP-14. Exhibit 22 at pp. 13-14. Judge
Kirschers unwillingness to enter any order contrary to his decision in AP-14 becomes
problematic when he continues to preside over cases involving facts that overlap with those in
AP-14 because reflects that regardless of what new or more fully developed facts reveal in a
different case, he has predetermined other cases that implicate facts related to those in AP-14.
As the courts and Canons make clear, this predetermination demands that Judge Kirscher recuse
himself but he has refused to do so. Frates v. Weinshienk, 882 F.2d 1502, 1504 (10th Cir. 1989)
(The appearance of partiality questioned where the [bankruptcy] judge appears boxed in by
prior rulings such that he will be forced to reach a certain result in an adversarial proceeding
regardless of the merits.); Stivers v. Pierce, 71 F.3d 732, 741 (9th Cir. 1995) (quoting Kenneally
v. Lungren, 967 F.2d 329, 333 (9th Cir. 1992))( due process requires reassignment to a different
judge where it appears that the judge has prejudged, or reasonably appears to have prejudged,
an issue.); see also Alexander v. Primerica Holdings, Inc., 10 F.3d 155, 166 (3rd Cir. 1993)
(When the judge is the actual trier of fact, the need to preserve the appearance of impartiality is
especially pronounced.). 5

Much of this inappropriate conduct was brought by Mr. Blixseth in a Motion to Disqualify Judge Kirscher in the
YMC bankruptcy. Not only did Judge Kirscher deny Mr. Blixseths request, but Judge Haddon also denied Mr.
Blixseths appeal of the order denying the appeal. Mr. Blixseth has appealed Judge Haddons order and is currently
before the Ninth Circuit in Case No. 12-35986. A copy of Mr. Blixseths Amended Motion to Disqualify is
attached as Exhibit 23.

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V.

Judge Kirschers awards of huge fees to local practioners with little to no review
attests to his cozy relationship with the local bar.

The national concern regarding bankruptcy judges being too generous in awarding fees to
the local bar is patently at play with Judge Kirscher. See McKenzie, 62 Stan. L. Rev. at 799
(citing LYNN M.)(citing LoPucki at 40-48). It is undisputed that the reappointment of bankruptcy
judges is largely based upon support of the local bar. See Scholl v. U.S., 54 Fed. Cl. 640, 642-43
(Fed. Cl. 2002). Here, Judge Kirscher awarded $707,078.00 in fees to a local trustees firm in
connection with its representation of the debtor while two different firms on behalf of the estate
were awarded $1,876,262.00 and $1,625,533.00 for their work in the bankruptcy many of
which were not reduced at all. In re Yellowstone Mountain Club, LLC, No. 08-61570-RBK, ECF
Nos. 189, 320, 663, 1051, 1223, 1018, 1135, 1224, 1229, and 1702, which are attached as
Exhibit 24.
Certainly, the Montana bankruptcy bar is turning a blind eye to Judge Kirschers
questionable conduct when he continues to provide generous fee awards. It is difficult to
disregard the self-interested nature of the bankruptcy bar and its influence over the Judge
Kirscher.
VI.

The spectacle around the YMC has led to significant question regarding Judge
Kirschers looking past criminal conduct of material players involved in the YMC
bankruptcy.

Besides the facts set forth above, additional facts have surfaced that key players in the
YMC bankruptcy were being investigated by federal authorities, including the FBI. One of the
chief concerns related to an ongoing investigation related to criminal conduct by individuals who
filed the YMC bankruptcy petition. Despite the lead investigators recommendation that
criminal charges should be filed, the Department of Justice abruptly terminated the investigation
without explanation. As is detailed in a report sent to U.S. Houses for Government Reform and
Judiciary as well as the Public Integrity Section at the U.S. Department of Justice, both Judge
Kirscher and the Department of Justices is looking the other way. True and complete copies of
the requests for investigation, memorandum and corresponding. Exhibit 25.
Conclusion
Given Judge Kirschers failure to uphold the Code of Conduct for United State Judges,
including his lack of impartiality and bias favoring the few instead of giving all parties equal
access, we cannot recommend Judge Kirscher be reappointed. The level of ex parte access
provided to a few privileged individuals are badges of corruption that cannot exist in any court,
much less a bankruptcy court, which wields substantial equity and power of ordinary citizens
financial affairs. We ask this panel to commence an exhaustive investigate of these factual
allegations seriously before making any determination.
The undersigned further request an investigation, with our participation, into all ex parte
communication by Judge Kirscher involving Mr. Blixseth, including any communication with
District Judge Sam Haddon, District Judge Gary A. Fees, Bankruptcy Court Judge Peterson, and
District Judge Patricia A. Seitz of the South District of Florida.
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Each of the undersigned is willing to cooperate by any means with the committee and
look forward to hearing from you in the immediate future. Please forward all requests for
information to Michael J. Flynn, who is the lead attorney in this matter.
Very truly yours,

/s/ Timothy L. Blixseth


Timothy L. Blixseth

/s/ Michael J. Flynn


Michael J. Ferrigno

12

/s/Christopher J. Conant
Christopher J. Conant

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Exhibit 7

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