Snow V BLX #319 - Edra Blixseth Depo - Bankr.D.mont. - 09-00018 - 319-1 - Ex P

09-00018-RBK Doc#: 319-1 Filed: 07/02/10 Entered: 07/02/10 22:53:51 Page 1 of 379
FLYNN AFFIDAVIT
EXHIBIT P
Edra D. Blixseth
December 17, 2009
UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF MONTANA
___________________________________
)
In re
)
)
)
EDRA D. BLIXSETH,
) Case No.: 09-60452-RBK

)
Debtor.
___________________________________)
)
In re Yellowstone Club, LLC,
Debtor
)
)
TIMOTHY L. BLIXSETH,
)
)
Plaintiff,
)
)
vs.
) Case No.: 09-00014

)
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS,
)
)
Defendant.
___________________________________)
Deposition of:
EDRA D. BLIXSETH
Date:
December 17, 2009
Reported by:
Stephanie P. Borthwick
C.S.R. No. 12088
Yates Court Reporters
800.669.1866
Edra D. Blixseth
1
December 17, 2009
Deposition of EDRA D. BLIXSETH, taken on behalf of
the Plaintiff, before Stephanie P. Borthwick, a
Certified Shorthand Reporter, commencing at the hour of
9:14 a.m., Thursday, December 17, 2009, at the offices
of Yates Court Reporters, 74-967 Sheryl Avenue,
Palm Desert, California.
APPEARANCES:
For the Plaintiff Timothy L. Blixseth:
MICHAEL FLYNN, ESQ
10
Attorneys at Law
11
BY:
12
6125 El Tordo
13
Rancho Santa Fe, California
14
(858) 756-0771
15
MICHAEL FLYNN, ESQ.
92062
For the Debtor, Edra D. Blixseth:
16
LAW OFFICES OF DENNIS HOLAHAN
17
Attorneys at Law
18
BY:
19
2049 Century Park East
20
Suite 3180
21
Los Angeles, California
22
(310) 286-3344
23
///
24
///
25
///
DENNIS HOLAHAN, ESQ.
90067
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800.669.1866
Edra D. Blixseth
December 17, 2009
DESCHENES & SULLIVAN
Attorneys at Law
BY:
309 1st Avenue North
Great Falls, Montana
(406) 761-6112
GARY DESCHENES, ESQ. (via speakerphone)
59401
For Marc Kirschner, Trustee:
BAILEY & GLASSER, LLP
Attorneys at Law
10
BY:
11
209 Capitol Street
12
Charleston, West Virginia
13
(304) 345-6555
14
MULLIN HOARD BROWN, LLP
15
Attorneys at Law
16
BY:
17
800 Amarillo National Plaza Two
18
500 South Tyler
19
Amarillo, Texas
20
(806) 337-1112
21
///
22
///
23
///
24
///
25
///
BRIAN A. GLASSER, ESQ.
25301
STEVEN L. HOARD, ESQ.
79101
Page 3
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Edra D. Blixseth
1
December 17, 2009
For the Trustee BLX:
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
Attorneys at Law
BY:
2029 Century Park East
Suite 800
Los Angeles, California
(424) 204-4400
CHRISTINE K. MIN, ESQ.
90067-2909
For the Dick Samson as Trustee of the Edra Blixseth
10
bankruptcy estate:
11
DATSOPOULOS, MAC DONALD AND LIND, PC
12
Attorneys at Law
13
BY:
14
Central Square Building
15
Suite 201
16
201 West Main
17
Missoula, Montana
18
(406) 728-0810
19
DAVID B. COTNER, ESQ. (via speakerphone)
59802
For the Montana Department of Revenue:
20
Joel Silverman, Esq. (via speakerphone)
21
125 North Roberts
22
Helena, Montana
23
(406) 444-7990
24
///
25
///
59604
Page 4
800.669.1866
Edra D. Blixseth
1
December 17, 2009
For CrossHarbor, CIP Yellowstone Lending:
DUANE MORRIS, LLP
Attorneys at Law
BY:
470 Atlantic Avenue
Suite 500
Boston, Massachusetts 02210-2243
(857) 488-4230
PAUL D. MOORE, ESQ. (via speakerphone)
For Western Capital Partners:
10
HATCH JACOBS, LLC
11
Attorneys at Law
12
BY:
13
950 Seventeenth Street
14
Suite 1700
15
Denver, Colorado
16
(303) 298-1800
17
18
CHRISTOPHER J. CONANT, ESQ. (via speakerphone)
80202
Also Present:
Timothy L. Blixseth
19
20
21
22
23
24
25
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Edra D. Blixseth
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December 17, 2009
INDEX
2
3
Deposition of EDRA D. BLIXSETH
Taken on December 17, 2009
5
6
Examination By:
MR. FLYNN
MR. GLASSER
Page
15, 358
319
9
10
Information Requested:
Page
Line
298
18
15
13
17
17
21
18
11
12
13
Questions Instructed Not to Answer:
14
Q.
15
16
Have you made any cash transfers within

the last year?
Q.
Did Mr. Scalia purchase a Bentley from
17
Desert European Motors based on funds
18
that you had wire-transferred to him in
19
the amount of roughly $220,000?
20
Q.
Did you report on your income tax
21
return a gift of $220,000 wire-
22
transferred to Mr. Scalia?
23
Q.
The amount was 230,000 that you wire-
24
transferred.
25
Ms. Blixseth?
Did you do that,
Page 6
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Edra D. Blixseth
December 17, 2009
Q.
Did Mr. Scalia report it as income?
18
Q.
Within the two-year period prior to
18
13
19
22
Page
Line
36
your filing your bankruptcy petition,
Ms. Blixseth, did you transfer or give
to Mr. Scalia approximately $450,000?
Q.
Would it surprise you if I told you it
is in the range of close to half
a million dollars?
Q.
10
Is any of that cash -- was any of that

cash given to Mr. Scalia?
11
12
Answer Requested Marked:
13
A.
Well, I don't know how to answer
14
that, because I didn't have anything to
15
do with fake letters.
16
actually is the one that reached out to
17
me to say he'd like to get a copy of
18
those and I tried to get a copy of
19
them.
20
///
21
///
22
///
23
///
24
///
25
///
Tim Blixseth
Page 7
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Edra D. Blixseth
1
2
December 17, 2009
Exhibits:
8
Page
One-page letter dated
December 12, 2007, on the
letterhead of the US Department
of Justice Criminal Division
from Ronald Sharpe, Assistant
United States Attorney
One-page letter dated
letterhead of the US Department
11
of Justice Environment and
12
Natural Resources Division with
13
name of author redacted

10
15
16
16-page Western Capital
80
Partners, LLC, Loan Affidavit

11
17
18
54
November 8, 2007, on the
10
14
54
14-page Western Capital
97
Partners, LLC, Loan Agreement

14
Letter dated May 24, 2007, on
19
Jaffe and Clemens letterhead to
20
Mr. Hatch from Mr. Ryden
21
///
22
///
23
///
24
///
25
///
102
Page 8
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Edra D. Blixseth
1
15
December 17, 2009
11-page Plaintiff's Reply Brief
in Support of Motion for
Indemnity; Supplemental
Declarations of Edra D.
Blixseth and Robert M. Shore in
Superior Court of California,
County of Riverside Case
No. INC 066840
16
37 pages identified as First
10
Promissory Note, Loan
11
Agreement, Trust Deed and
12
Security Agreement Modification
13
17
Four-page Order re Case
14
No. CV06-00114 in the Second
15
Judicial District Court of the
16
State of Nevada, County of
17
Washoe
18
18
Two-page Order re Case
19
No. 3:06-CV-00056-PMP-VPC in
20
United States District Court,
21
District of Nevada
22
19
Six-page Federal Bureau of
23
Investigation report of SAs
24
Piser and West
25
119
111
122
125
127
///
Page 9
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Edra D. Blixseth
1
20
December 17, 2009
FBI report, Bates
128
Nos. 00119-00137, Dated
September 11, 2006
21
5
6
Three-page Second Declaration

of SA Michael A. West
22
Nine-page March 6, 2008,
Wachovia Bank letter to
Ms. Blixseth
23A
10
11
129
Five-page Collateral Assignment
135
148
of License Agreement
24
12
Pages 1-4 and 6-8 of a Software
149
License Agreement
13
28
14-page Pledge Agreement
155
14
30
Seven pages of emails
159
15
31
Eight-page Order to Show Cause
196
16
32
Five-page Minutes of
198
17
Proceedings dated August 18,
18
2008
19
33
14-page Confession of Judgment
202
20
34
14-page Confession of Judgment
207
21
35
Two-page Amended Expedited Writ
208
22
of Execution on Personal
23
Property
24
25
36
Six pages of emails
212
///
Page 10
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Edra D. Blixseth
1
37
December 17, 2009
Nine-page email packet to
Michael Sandoval and Dennis
Montgomery dated August 11,
2006
41
6
7
Five-page Edra Blixseth
51
Three-page Personal Financial

Statement of Edra Blixseth
of 10/13/2007
55
Settlement Asset List and
12
Liability as of 7/15/08
56
Four-page Edra Blixseth Post
14
15
16
56A
17
18
19
111
20
21
218
as
11
13
224
Executive Summary
10
215
Email dated July 8, 2008, from
227
230
331
247
LearG2 to Jory Russell

112
Edra Blixseth Personal
22
Financial Statement as of
23
6/30/08
24
///
25
///
249
Page 11
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Edra D. Blixseth
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113
December 17, 2009
114
Three-page email string, top
email dated July 22, 2008, from
Andrea Heller to Jory Russell
re $20mm from PEM tomorrow
115
116
11-page document entitled

Discussions between Edra/YC
13
Entitites and CrossHarbor
14
Capital Partners, August 1,
15
2008
117
Email string, top email dated
17
August 20, 2008, from Sam Byrne
18
to Edra Blixseth, Jory Russell
19
re Lot 48
20
255
Interest
12
16
253
from LearG2 to Jory Russell re
10
11
Email dated August 5, 2008,
252
118
Email string, top email dated
21
August 22, 2008, from Jory
22
Russell to Edra Blixseth re
23
Stockman check signing
24
///
25
///
256
270
280
Page 12
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Edra D. Blixseth
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119
December 17, 2009
Ten-page Memorandum dated
September 5, 2008, from Marc
Heller
122
Five-page letter on Jaffe and
Clemens letterhead dated
June 10, 2008
123
Three-page July 6, 2008, letter
to Yellowstone Club Members
from Ms. Blixseth
10
124
Document entitled Exhibit 16
11
Tim Blixseth Solvency Analysis
12
Balance Sheet Test as of
13
December 31, 2007
14
125
33-page Assignment of Company
15
Interests Agreement, Bates
16
Nos. YSC00305964-980
17
126
Six-page Amendment to Marital
18
Settlement Agreement dated
19
June 26, 2008, Bates
20
Nos. CHE02114-119
21
127
Seven-page Second Amendment to
22
Marital Settlement Agreement,
23
Bates Nos. CHE26010-016
24
///
25
///
283
245
305
319
355
357
357
Page 13
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Edra D. Blixseth
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128
December 17, 2009
55-page Marital Settlement
Agreement, Bates
Nos. CHE02059-113
129
Three-page email string, top
email dated March 20, 2008,
from LearG@ to
syankelovitz@linerlaw.com re
FYI
130
Four-page email string, top
10
email dated 3/28/2008 from Jim
11
Fultz to
12
CEO@1800-investmentgroup.com
13
///
14
///
15
///
16
///
17
///
18
///
19
///
20
///
21
///
22
///
23
///
24
///
25
///
358
358
366
Page 14
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Edra D. Blixseth
1
December 17, 2009
EDRA D. BLIXSETH,
having been first duly sworn by the court reporter,
was examined and testified as follows:
4
5
6
EXAMINATION
BY MR. FLYNN:
Q.
State your name, please.
A.
Edra Blixseth.
Q.
Ms. Blixseth, have you concealed any cash
10
amounts that are not reported on your bankruptcy
11
schedules?
12
A.
No, none.
13
Q.
Have you made any cash transfers within the
14
last year?
15
MR. DESCHENES:
I'm going to object.
The scope
16
of this deposition, Mike -- this must be why you're
17
starting with these questions -- is for your adversary.
18
It is not regarding the adversary that you filed
19
regarding objection to her discharge.
20
This is regarding the Yellowstone case and the
21
Snow case, none of which are these answers to these
22
questions relevant.
23
BY MR. FLYNN:
24
25
Q.
Please answer, Ms. Blixseth.

MR. DESCHENES:
I'm instructing her not to
Page 15
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Edra D. Blixseth
1
December 17, 2009
answer.
MR. FLYNN:
In order not to delay,
Mr. Deschenes, I'm going to move forward, but that
obstruction -- I will state for the record once is
obstructing our discovery, the overall defenses involved
here, in pari delicto, unclean hands, a large scheme by
Ms. Byrne -- by Mr. Byrne and Ms. Blixseth to basically
steal the Yellowstone Club is what's at issue and are
the defenses in Adversary 14 and 18 and this question is
10
11
directly germane.
Q.
Ms. Blixseth, did you --
12
MR. COTNER:
13
MR. FLYNN:
14
15
Mike -Gary, I'm moving forward.
You
state your objections under the rules.

MR. COTNER:
-- this is Dave Cotner.
I just
16
want to introduce myself.
17
for all the participants and Paul had given his answer
18
and information and then everybody chimed in.
19
The court reporter had asked
And I just wanted the record to reflect that
20
Dave Cotner is also on the phone reflecting --
21
representing Dick Samson as Trustee of the Edra Blixseth
22
bankruptcy estate.
23
And, Court Reporter, I didn't catch your name,
24
but I'm happy to get you my information with respect to
25
my firm during a break, if that would help you.
Page 16
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Edra D. Blixseth
1
THE REPORTER:
MR. COTNER:
December 17, 2009
Thank you.
Thank you.
BY MR. FLYNN:
4
5
Q.
Ms. Blixseth, did you write out a $225,000
check to Jack Scalia to purchase a Bentley?
A.
No.
Q.
Did Mr. Scalia purchase a Bentley from Desert
European Motors based on funds that you had wire-
transferred to him in the amount of roughly $220,000?
10
MR. HOLAHAN:
I don't think -- I don't think
11
this has anything to do with the case that we're here
12
on, so I'm going to object to that question.
13
And if we can't limit the scope, the proper
14
scope of the deposition now, we just should stop, Mike,
15
and call the judge.
16
again.
You've done it before; let's do it
17
No, she's not going to answer the question.
18
MR. FLYNN:
19
MR. HOLAHAN:
20
Yeah.
BY MR. FLYNN:
21
22
You're instructing her?
Q.
Did you report on your income tax return a gift
of $220,000 wire-transferred to Mr. Scalia?
23
MR. HOLAHAN:
24
question.
25
///
She's not going to answer that
Page 17
800.669.1866
Edra D. Blixseth
1
2
3
Q.
The amount was 230,000 that you wire-
transferred.
Did you do that, Ms. Blixseth?
MR. HOLAHAN:
question.
BY MR. FLYNN:
Q.
8
9
She's not going to answer that
Did Mr. Scalia report it as income?

MR. HOLAHAN:
How would she possibly know?
She's not going to answer that question for the same
10
reason.
11
deposition, as you well know.
12
BY MR. FLYNN:
13
December 17, 2009
BY MR. FLYNN:
Q.
This is beyond the proper scope of this
Within the two-year period prior to your filing
14
your bankruptcy petition, Ms. Blixseth, did you transfer
15
or give to Mr. Scalia approximately $450,000?
16
MR. HOLAHAN:
There are going to be no
17
questions about Mr. Scalia that she's going to answer.
18
It's an invasion of privacy and has nothing to do with
19
the scope of this deposition, so you can go ahead and
20
ask and she's not going to answer.
21
BY MR. FLYNN:
22
Q.
Ms. Blixseth, did you, within the two years
23
before your filing bankruptcy, take out approximately
24
$9,000 routinely virtually every week during 2007, 2008,
25
in cash from your bank accounts?
Page 18
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Edra D. Blixseth
December 17, 2009
MR. HOLAHAN:
You can answer that, if you know.
THE WITNESS:
Every week, no.
BY MR. FLYNN:
Q.
Virtually every week?
A.
No.
Q.
How much money for the two years before you
filed bankruptcy did you take out in cash?
A.
I don't know.
Q.
Would it surprise you if I told you it is in
10
the range of close to half a million dollars?
11
MR. HOLAHAN:
If you're going to testify, we
12
can swear you in and then you can testify instead of
13
her.
14
This is not about her bankruptcy, so she's not going to
15
answer any questions.
We're not going to proceed down this road, Mike.
16
17
MR. FLYNN:
Mr. Holahan.
18
MR. HOLAHAN:
19
me to be quiet.
20
BY MR. FLYNN:
21
Q.
22
23
24
25
Concisely, and then you be quiet,
No, I won't be quiet.
Don't tell
Ms. Blixseth -MR. HOLAHAN:
I'm not through.
BY MR. FLYNN:
Q.
-- what did you do with the cash?

MR. HOLAHAN:
Don't tell me to be quiet.
Page 19
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Edra D. Blixseth
December 17, 2009
represent her.
questions, you're going to listen to the entire
objection -- even if takes seven hours -- and then we'll
leave, so don't try to tell me to be quiet.
5
6
MR. FLYNN:
Mr. Holahan, you're obstructing and
prejudicing my client's rights.
7
8
If I have an objection to any of your
MR. HOLAHAN:
You're out of record.
BY MR. FLYNN:
Q.
Ms. Blixseth, what did you do with the cash
10
that you took out in the two years prior to filing
11
bankruptcy?
12
MR. HOLAHAN:
Object to the form of the
13
question.
14
this -- this case and this exam.
15
16
You can answer if you know.

overbroad.
17
18
19
20
It's irrelevant and beyond the scope of
It's also vague,
If you -- if you can possibly --
THE WITNESS:
I don't know.
BY MR. FLYNN:
Q.
Did you deposit it into any other bank
accounts?
21
A.
Not that I recall.
22
Q.
How did you spend it?
23
A.
A variety of ways.
24
Q.
What are the variety of ways?
25
A.
I don't really recall.
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Edra D. Blixseth
1
Q.
December 17, 2009
So for two years if you were taking out
routinely $9,000, you don't know what you were doing
with it; is that your testimony?
A.
That's not my testimony; that's your testimony.
My testimony was I don't recall and my testimony was I
did not take out 9,000 a week.
Q.
How much did you take out?
A.
I'm not sure.
Q.
What's your best estimate?
10
A.
I'm not sure.
11
I don't want to guess on
answering questions.
12
Q.
More than a hundred thousand dollars or less?
13
A.
I don't want to guess on answering questions.
14
Q.
More than $500,000 or less?
15
A.
My answer is the same.
16
Q.
And you have no idea what you did with that
17
money; is that correct?
18
A.
I didn't say that.
19
Q.
Did you give any of that cash to your children?
20
A.
I don't recall.
21
Q.
Is any of that cash currently in bank accounts
22
23
I said I don't recall.
that you have not reported on your bankruptcy schedules?

A.
No.
24
I mean, do you want me to answer?
25
But no.
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Edra D. Blixseth
1
2
3
4
MR. HOLAHAN:
December 17, 2009
Let him ask two more.
BY MR. FLYNN:
Q.
Is any of that cash -- was any of that cash
given to Mr. Scalia?
MR. HOLAHAN:
She's not going to answer any
questions about Mr. Scalia.
this and it's an invasion of privacy.
8
9
MR. FLYNN:
It's on the record and we'll
take that up with the judge at the appropriate time.
10
11
Okay.
That's beyond the scope of
MR. HOLAHAN:
Good.
BY MR. FLYNN:
12
Q.
Did you graduate from Manteca High School?
13
A.
No.
14
Q.
Have you testified before that you graduated
15
from Manteca High School?
16
A.
No, I just finally graduated from high school.
17
Q.
What high school did you graduate from?
18
A.
San Leandro.
19
Q.
What year did you graduate from that high
20
21
school?
A.
22
23
I'm trying to think of the year.

'72 or '73.
Q.
You were given notes by Michael Sandoval in the
24
approximate amount of $8 million to resolve claims
25
between you and Mr. Sandoval; is that correct?
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Edra D. Blixseth
1
2
A.
December 17, 2009
There were notes given, I don't recall exact
amounts.
Q.
What is your best estimate of the amounts?
A.
I think there was one for 5- and then there was
another one and I don't remember what that amount was.
Q.
Was it for 3-?
A.
I don't recall.
Q.
Okay.
today?
10
A.
Where, physically, are those notes
I would assume they're in the -- I would assume
11
they're in the files with the settlement with Opsprings
12
and xPatterns, but I'm not positive.
13
had them and Jory is not with us, so I'm not sure.
I didn't -- Jory
14
Q.
Did you give the notes to Mr. Samson?
15
A.
He's aware of them.
16
I don't -- I don't think
that he has them physically.
17
Q.
Who do you think has them?
18
A.
I just said I'm not -- I'm not sure.
19
Q.
You said they're in the files, I believe, of
20
Opsprings.
21
A.
Who has those files?
I believe Pat would have those now.
Jory had
22
them and so most of the things Jory had Pat now has, Pat
23
Yarborough.
24
25
Q.
Is Pat Yarborough the same Pat Yarborough --
the Pat Yarborough that is currently your bookkeeper, is
Page 23
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Edra D. Blixseth
December 17, 2009
that the same Pat Yarborough that has been convicted of
embezzlement?
A.
I have no idea.
Q.
When did you hire Pat Yarborough?
A.
I didn't hire Pat Yarborough.
6
7
8
9
10
11
12
13
Jory brought
Yarborough on and I don't recall when it was.

Q.
Is it your testimony that Jory Russell made the
decision and not you?

A.
He brought her to me as a recommendation to be
hired and I okayed it.

Q.
What did you know about her background when you
brought her on?

A.
Just the information that I had been given
14
through Jory and I believe -- I believe at that time it
15
was either Steve Crisman and/or Nick Rhodes that were
16
part of that as well, but they just gave me the
17
information and recommended her.
18
Q.
Did you get a resume?
19
A.
I don't think I ever saw her resume, but I may
20
have.
I don't recall.
21
Q.
Has she concealed any funds for you?
22
A.
No, she has not.
23
Q.
Has she diverted any funds to bank accounts
24
25
that are not reported on your schedules?

A.
No, she has not.
Page 24
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Edra D. Blixseth
1
2
3
Q.
December 17, 2009
And do you have any knowledge or understanding
from any source about her prior criminal background?

A.
You keep referring to that she has a criminal
background.
so I can't answer that.
Q.
I'm not aware of any criminal background,
Okay.
Who currently has -- strike that.
Where are the Opspring files with the Sandoval
notes?
A.
I think I answered that.
I'm assuming they're
10
with the things that Jory turned over that were with his
11
records, but I'm not sure.
12
Q.
I believe what you testified to was that
13
they're with, the Opspring files are with Pat
14
Yarborough; is that correct?
15
16
A.
You asked me again, so I thought maybe you
wanted further explanation of that.
17
Q.
I do.
18
A.
They're with all the other files of the
19
Where are those files, Ms. Blixseth?
companies and BGI and everything with Pat.
20
Q.
Where?
21
A.
At Pat's home office.
22
Q.
Where is her home office?
23
A.
I don't have the address in my head.
24
Q.
What country is it in, Ms. Blixseth?
25
A.
It's in the United States.
Page 25
800.669.1866
Edra D. Blixseth
December 17, 2009
Q.
What state is it in?
A.
California.
Q.
What city is it in?
A.
She lives in the LA area, but I'm not sure of
the exact city.
Q.
There's a lot of cities in LA.
So is it your testimony she has all of the
Opspring Blxware files and you don't even know what city
they're in?
Is that your testimony?
MR. HOLAHAN:
That's -- I'm going to object to
10
that question.
11
argumentative and it misstates her testimony.
12
BY MR. FLYNN:
13
The form of that question is
Q.
Okay.
15
A.
No, I do not.
16
Q.
How do we find Ms. Yarborough?
17
A.
I have an address in my office and there's a
14
18
Do you have your cell phone here with
you?
phone number.
19
Q.
Okay.
20
A.
Sam -- Dick Samson has all of her information,
21
22
23
At the break --
her email address.

Q.
He's got everything.
What is your best understanding of where
Ms. Yarborough lives?
24
A.
In the LA area.
25
Q.
When did she get possession of all the Opspring
Page 26
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Edra D. Blixseth
1
2
3
December 17, 2009
Blxware files?
A.
I'm having to guess on this, but I'm assuming
when Jory Russell -- you asked two different questions.
MR. HOLAHAN:
If you don't know, don't guess.
THE WITNESS:
Okay.
MR. HOLAHAN:
If you don't know, just say you
don't know.
8
9
10
11
THE WITNESS:
I'm not sure.
BY MR. FLYNN:
Q.
Is it a fact that Jory Russell turned over all
the files to you, Ms. Blixseth?
12
A.
Jory Russell turned over no files to me.
13
Q.
What is your best understanding of how many
14
15
files comprise the Opspring Blxware files?

A.
I really don't know.
Other people handled that
16
and I only asked for things when I needed it for
17
specific things.
18
19
Q.
So if Mr. Russell testified he turned over
everything to you, is he incorrect?
20
A.
I just said nobody turned over files to me.
21
Q.
Do you have any Opspring Blxware files at
22
Porcupine Creek?
23
A.
Not that I'm aware of.
24
Q.
Do you have any of those files at any of your
25
other locations?
Page 27
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Edra D. Blixseth
December 17, 2009
A.
I don't have any other locations.
Q.
Do you own homes in Montana?
A.
No, I don't.
Q.
Do you have any files at all at Porcupine
Creek?
A.
I didn't really retain files.
The files stayed
in the offices and when I needed something, somebody
would email me the information or send me the
information, I'd use it and return the files.
10
11
12
13
I don't have a file-keeping system right now.

Q.
Have you made any effort to find the Michael
Sandoval notes, the actual notes he gave you?

A.
You keep asking me about those and I keep
14
saying that I'm assuming Jory had them.
15
Jory gave them to Pat.
16
those notes and do something with them.
I'm assuming
Nobody has asked me to find
17
Q.
When did you first meet Michael Sandoval?
18
A.
Right before I met you, so whatever time frame
19
that was.
20
Q.
When did you first meet Dennis Montgomery?
21
A.
Same day I met you.
22
Q.
Now in late 2005 you were in possession of
23
proceeds of the Credit Suisse loan; is that correct?
24
A.
I wasn't personally, no.
25
Q.
Did you have access to any of the proceeds of
Page 28
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Edra D. Blixseth
1
2
December 17, 2009
the Credit Suisse loan in late 2005?

A.
If Tim made any proceeds available to me for
specific things then I would have access to, but only
through Tim.
Q.
In early 2006 how much money did you give to
Michael Sandoval and Dennis Montgomery from the Credit
Suisse loan proceeds?
8
9
10
A.
I don't know if it was from the Credit Suisse
loan proceeds.
It came through from Tim wiring the
money in, but I believe the initial part was $5 million.
11
Q.
12
companies?
13
A.
Correct.
14
Q.
And those technology companies were Azimyth,
15
And that was an investment in the technology
xPatterns and Opspring?
16
A.
That is not correct.
17
Q.
What is incorrect about that, those three
18
companies?
19
A.
There was never an investment in Azimyth.
20
Q.
Only in Opspring and xPatterns?
21
A.
Correct.
22
Q.
How much did you invest?
23
A.
I believe there were two payments of 5 million
24
that were divided between xPatterns and Opsprings.
25
don't recall without notes in front of me exactly
Page 29
800.669.1866
Edra D. Blixseth
December 17, 2009
when -- xPatterns came first, Opsprings came second and
it was additional monies after that as well.
Q.
As you sit here today is it your testimony,
Ms. Blixseth, that you do not know that those monies
came from the Credit Suisse loan?
A.
I know they came out of bank accounts that Tim
set up that -- some of which were opened and remained
open with some of the funds of Credit Suisse loans, but
I don't know what other monies went in or out of there,
10
11
12
no.
Q.
What was the total amount of your investment in
the technology company?
13
A.
I believe it was around 16 million.
14
Q.
When did you first obtain possession of the FBI
15
reports indicating that Dennis Montgomery and the
16
technology he purportedly possessed were fraudulent?
17
A.
You're going to have ask that question again.
18
Q.
When did you first see the FBI reports that
19
disclosed that Dennis Montgomery and any technology he
20
possessed was a fraud?
21
22
23
A.
I have not to this day seen FBI reports that
said that they were a fraud.

Q.
When were you first put on notice,
24
Ms. Blixseth, that Dennis Montgomery could not write
25
source code and that he was a fraud?
Page 30
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Edra D. Blixseth
December 17, 2009
A.
I was never put on notice that he was a fraud.
Q.
Did you have a meeting with Joseph Jonas, a
sit-down, face-to-face meeting with Joseph Jonas, in
January 2007 where he told you that Montgomery did not
possess any of the technology that he had represented to
you?
A.
I don't recall who Joseph Jonas is.
Q.
So is it your testimony you don't recall the
9
10
11
12
meeting?
A.
I don't recall who he is, so I certainly
wouldn't recall a meeting.

Q.
Do you recall a meeting in your office on
13
April 12th and 13th, 2009, with Jack Kemp and myself and
14
Dennis Montgomery where we reviewed the FBI reports?
15
A.
In 2009?
16
Q.
Strike that.
17
2007.
18
A.
In what office?
19
Q.
In your office at Porcupine Creek on the second
20
floor.
21
A.
I don't recall that.
22
Q.
How much did you initially loan to Dennis
23
24
25
Montgomery?
A.
There was an employment contract with Dennis
Montgomery that Michael Sandoval had drawn up, had legal
Page 31
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Edra D. Blixseth
December 17, 2009
counsel draw up, and there was a signing bonus for
Dennis and I believe it was either a million or a
million and a half.
one it was.
I don't recall specifically which
And then it was talking about his salary, which
was a hundred thousand a month.
additional loans or bonuses based on performance and
turning over certain specific things that I don't think
that he ever actually got.
10
11
12
13
He had the right to
He got some additional monies when he was

purchasing a home, but I don't recall the exact amount.
Q.
Okay.
Did you give him loans totaling
$3 million in April of 2006?
14
A.
I don't believe so, no.
15
Q.
What is your best memory of the total amount of
16
money you loaned to him from Credit Suisse loan proceeds
17
in April 2006?
18
A.
I can't testify to anything from Credit Suisse
19
loan proceeds.
20
account into -- wiring into the xPatterns or Opsprings
21
accounts.
22
Q.
They came from the Tim Blixseth personal
Did Mr. Blixseth tell you that he opposed this
23
investment and didn't want you to use the Credit Suisse
24
loan proceeds to give to Mr. Montgomery?
25
A.
No, he did not.
Page 32
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Edra D. Blixseth
1
Q.
December 17, 2009
What is your best memory, regardless of the
source of the funds, as to how much you loaned Dennis
Montgomery in April 2006?
A.
I've already testified to that.
My best
recollection is it was a signing bonus, which was either
a million or a million and a half, and I don't recall
which one it was.
Q.
So that was a loan?
A.
That was part of -- I think it was a signing
10
bonus, actually.
If it was a loan, it was a loan.
11
don't remember the contract.
12
contracts and things between that time frame so --
There's been a lot of
13
Q.
Did you ever forgive that loan?
14
A.
No, I did not.
15
Q.
Did you report those loans on your bankruptcy
16
schedules?
17
A.
Those were monies that were into corporations
18
that I reported what was invested in the corporations,
19
but it wasn't for me personally.
20
Q.
Are those loans still outstanding?
21
A.
That's within the Opsprings Blxware books.
22
have to go back and look.
23
if that's how they were and they weren't signing
24
bonuses.
25
Q.
I'd
To the best of my knowledge,
Just so we're clear, Ms. Blixseth, the loans
Page 33
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Edra D. Blixseth
1
2
December 17, 2009
have never been forgiven; is that correct?

A.
I'm telling you I'm not sure if they were loans
or signing bonuses.
if they were loans of any monies being repaid from
Dennis Montgomery to the companies.
personally.
Q.
I'm telling you that I'm not aware
It wasn't to me,
Did Mr. Montgomery ever turn over to you the
source codes that were being given to you in exchange
for those loans?
10
A.
The reason he wasn't given the additional
11
money, whether it was loans or not loans, was because
12
the source codes had not been turned over.
13
14
Q.
To this day have the source codes ever been
turned over?
15
A.
Not to my knowledge.
16
Q.
And what is the total amount of money you have
17
given either in loans or salary, signing bonuses or any
18
other characterization to Dennis Montgomery as we sit
19
here today?
20
A.
I don't recall off the top of my head.
21
Q.
Is it over $5 million?
22
A.
No, it's not.
23
Q.
Isn't it a fact -- strike that.
24
25
How long did you continue to pay him a hundred

thousand dollars a month?
Page 34
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Edra D. Blixseth
1
2
A.
December 17, 2009
Until we couldn't afford to keep the company
running.
Q.
Yeah.
When was that?
A.
I think April or May of this year.
Q.
So from April '06 to April or May of '09 you
paid him a hundred thousand dollars a month; is that
correct?
A.
That is correct.
Q.
What role, if any, did you play in having him
10
arrested for the $1.9 million casino fraud that he was
11
involved in?
12
A.
I had no role in it.
13
Q.
In the last 60 days have you been texting
14
messages with Mr. Montgomery?
15
A.
Yes, I have.
16
Q.
Have you texted messages with Mr. Montgomery
17
relative to the fake target letters that you and he
18
contrived to try to destroy the --
19
20
21
22
MR. HOLAHAN:
Stop.
Stop.
BY MR. FLYNN:
Q.
-- sale of the Yellowstone Club?

MR. HOLAHAN:
Objection to that question.
It
23
assumes facts not in evidence and this entire line of
24
questioning, I think, is beyond the scope of this
25
deposition.
Page 35
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Edra D. Blixseth
1
2
December 17, 2009
I don't know how you want to answer that

question or if you want to answer it.
You want to --
Could you read that question, back, please.
THE REPORTER:
Question, "Have you texted
messages with Mr. Montgomery relative to the fake target
letters that you and he contrived to try to destroy the
sale of the Yellowstone Club?"
**
that, because I didn't have anything to do with fake
THE WITNESS:
Well, I don't know how to answer
10
letters.
11
out to me to say he'd like to get a copy of those and I
12
tried to get a copy of them.
13
MR. FLYNN:
14
15
Q.
Would you mark that, please.
You just testified you didn't have anything to
do with the fake letters.
16
17
Tim Blixseth actually is the one that reached
Is that truthful testimony, Ms. Blixseth?

A.
You just asked me if I had contrived and had
18
something to do with making the fake letters.
19
asking if I was aware of the letters -- I can't answer
20
your question the way you worded it.
21
22
23
Q.
If you're
When did you first become aware of the letters,
Ms. Blixseth?
A.
Dennis told me he -- actually, I'm only aware
24
of one.
Dennis told me he had a letter saying that Tim
25
had received a target letter that he was being
Page 36
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Edra D. Blixseth
1
December 17, 2009
investigated.
Q.
The question was "when," Ms. Blixseth?
A.
I don't remember.
Q.
What does "quite a while ago" mean?
A.
I think it was sometime in '07, but I don't
It was quite a while ago.
really recall.
Q.
Was the discussion about the fake letters --
A.
I didn't know them to be fake.
that there was letter that was told -- I was told there
10
was a letter, so I can't answer.
11
letters I can't answer that in that way.
12
to this day they're fake.
13
I only knew
Q.
When you say fake

I don't know
In the last three months have you received any
14
notification from any state or federal agency as to
15
whether you are the subject of a state or federal
16
investigation of any type?
17
A.
No, I have not.
18
Q.
In the last 30 days have you had any
19
conversations with Mr. Blixseth about the fake target
20
letters?
21
A.
Well, you keep referring to fake.
I've had
22
conversations with him and I've had texts with him about
23
the letters.
24
texted me and said it meant a lot to him to get them and
25
I said, "I don't have them.
He wanted the letters.
He called me, he
Why don't you do a deal
Page 37
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Edra D. Blixseth
1
December 17, 2009
with Dennis and see if you can get them?"
2
3
I tried to help him do that.

Q.
When you first learned about the letters, and I
believe your testimony was sometime in '07, who did you
learn about it from?
A.
Dennis Montgomery.
Q.
This was when you were paying him a hundred
8
9
thousand dollars per month?

A.
I think I've already answered that, that he was
10
being paid a hundred thousand dollars a month working
11
for the technology company.
12
13
14
15
16
Q.
Did you know at that time that he was hacking
into computers on your behalf, namely late '07?

A.
I'm not aware of him ever hacking to this day
into computers and -- nor on my behalf.

Q.
Isn't it correct, Ms. Blixseth, that given all
17
of the money you've paid Mr. Montgomery, including the
18
hundred thousand dollars a month in salary, that he has
19
never produced any source code or any technology or any
20
product that you've been able to market to anybody?
21
A.
No.
22
Q.
How much money have you paid Mr. Montgomery in
23
24
25
That is not true.
the year 2009?

A.
I think he got his salary.
He was owed back
salary when I couldn't pay starting, I believe it was,
Page 38
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Edra D. Blixseth
1
December 17, 2009
September, October, for the burn rate of Blxware.
He got that caught up, I believe, it was in
January and then after that I still didn't have money to
be paying him.
were working on and, to the best of my knowledge, he
was -- his salary was paid through, I think, May or June
of this year.
8
9
Q.
Some funds did come in on something we
When the $2.5 million was paid by the
government, the United States government, for the return
10
of the archives that Mr. Montgomery had in his
11
possession in February of 2009, how much of that
12
$2.5 million did you give to Montgomery?
13
A.
That wasn't what the money was for.
14
Q.
Is that truthful testimony, Ms. Blixseth?
15
MR. HOLAHAN:
16
MR. FLYNN:
17
18
Q.
Yours or hers?
Hers.
Is it truthful testimony that the 2.5 million
was not for the return of the archives?
19
A.
No, it was not.
20
Q.
Now how much of the 2.5 million, regardless of
21
22
the designation of the funds, went to Montgomery?

A.
I'm not sure that the instructions were to get
23
everyone paid current when the money came in.
There
24
were certain people loaned money for Blxware to continue
25
during that time.
The instructions were to get them
Page 39
800.669.1866
Edra D. Blixseth
December 17, 2009
paid back for loaning the money to keep it going, so I
really don't have an accounting of exactly what Dennis
Montgomery got.
4
5
It was supposed to be his back salary and any

out-of-pocket expenses that he had not been reimbursed.
Q.
Was it approximately $600,000?
A.
I don't have it in front of me.
Q.
Well, was it approximately $600,000?
A.
Same answer.
10
Q.
Okay.
I don't know.
At the time he got the money was he in
11
Washington, DC, and did he email you that he was
12
resigning from Blxware?
13
14
MR. HOLAHAN:
answer first?
15
MR. FLYNN:
16
MR. HOLAHAN:
17
into two questions.
18
BY MR. FLYNN:
19
20
21
Which question do you want her to
Q.
Both.
Okay.
You want to divide it up
When he got the money, did he resign from
Blxware?
A.
Dennis is emotionally volatile, so I don't
22
know.
23
not -- I'm not aware of getting a resignation from him
24
at that time, no.
25
Q.
He could have -- he could have done that, but I'm
Are you aware that an article's coming out in
Page 40
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Edra D. Blixseth
December 17, 2009
Playboy Magazine relating to Mr. Montgomery's fraud in
connection with the technology we're discussion?
A.
Tim Blixseth told me about the article and I
was -- through my PR person was approached by the
reporter, but I'm not ware of anything about the article
and I never spoke to the reporter.
Q.
Okay.
As you sit here today, Ms. Blixseth,
have you inquired of Mr. Montgomery whether his
technology is legitimate or fraudulent?
10
A.
Have I inquired?
11
Q.
Yeah.
12
Have you ever asked him, "Is it real,
Dennis?"
13
A.
Years ago, yes.
14
Q.
You sent him many emails asking whether it was
15
16
17
18
real, didn't you, Ms. Blixseth?

A.
That's not a
correct response, no.

Q.
19
20
I would not say that's true.
The answer is no?

Let's go back to the target letters.
Did you
send or read the target letters to Lisa Myers of NBC?
21
A.
No.
22
Q.
Did Lisa Myers visit you in early March 2008
23
just before Mr. Byrne terminated the sale of the
24
Yellowstone Club and you gave her a copy of the fake
25
target letters?
Page 41
800.669.1866
Edra D. Blixseth
December 17, 2009
A.
Q.
Did you give a copy or read a copy of the fake
target letters to Jim Popkin during the early part of
2008, Ms. Myers' executive producer?
A.
Not that I recall.
Q.
You may have, but you don't recall?
A.
I -- I -- not only do I not recall, I don't
have any recollection at all of doing that.
Q.
John Wilke, you knew Mr. Wilke before he passed
11
A.
Yes, I did.
12
Q.
And you, in fact, had fed Mr. Wilke information
10
on?
13
relating to Governor Gibbons and purported bribes; is
14
that correct?
15
A.
16
Q.
Did you engineer the Wall Street Journal
17
article on November 1, 2006, relating to Governor
18
Gibbons?
19
A.
Absolutely not.
20
Q.
Did you pass -- did you have any discussions
21
with Mr. Wilke prior to November 1, 2006, relative to
22
the bribery of Governor Gibbons?
23
A.
I don't have any information on that.
John
24
Wilke's name was given to me on, at that time, our boat
25
by Robert Frank with Wall Street Journal saying he would
Page 42
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Edra D. Blixseth
December 17, 2009
be someone that might be interested in looking at what
Dennis was saying with the allegations.
Q.
During the settlement with Warren Trepp where
you confessed $26.5 million in judgments, did
Mr. Montgomery withdraw his allegation that Trepp had
bribed Gibbons?
A.
I don't believe so.
Q.
Did you confess to a $5 million judgment
9
10
11
relating to defamation in connection with Montgomery's

claims that Trepp had bribed Gibbons?
A.
There was discussion from Warren Trepp's -- it
12
was important to Warren Trepp's wife that something be
13
acknowledged of that because of the press and I don't
14
remember how it was worded, but it was not worded where
15
Dennis had to take back anything that he had stated.
16
Q.
Did he admit during those settlement
17
discussions that he had fabricated two emails
18
purportedly from Warren Trepp or his wife relating to
19
the bribery of Gibbons?
20
A.
Not only did not admit that he had fabricated
21
them, he told me that he absolutely did not fabricate
22
them.
23
Q.
When did he tell you that?
24
A.
When I asked him when we were there.
25
Q.
Prior to November 1, 2006, did you talk to him

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Edra D. Blixseth
December 17, 2009
about the emails and whether or not he had fabricated
them?
A.
I talked to him about -- in general about
anything that -- is there anything to do with the things
that you're saying happened that's not true and he told
me that it was all true.
Q.
With regard to John Wilke, did you give a copy
of the fake target letters to John Wilke of the Wall
Street Journal?
10
A.
I did not.
11
Q.
Did you read the fake target letters to John
12
Wilke?
13
A.
I did not.
14
Q.
Did you have Dennis Montgomery give a copy of
15
the fake target letters to John Wilke?
16
A.
I didn't have Dennis Montgomery do anything.
17
Q.
Did you have Dennis Montgomery give Lisa Myers
18
19
20
21
22
a copy of the fake target letters?

A.
I think I've answered that.
I didn't have
Dennis Montgomery do anything.

Q.
Did you give Robert Frank a copy of the fake
target letters?
23
A.
I didn't give anybody a copy of the target.
24
Q.
How long had you been a friend of Robert Frank?
25
A.
We'd known him on and off for a while.
He was
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Edra D. Blixseth
December 17, 2009
working on -- he'd done some articles on Yellowstone
Club working on his book.
called, but it came out in '07.
4
5
I can't remember what it's
So, you know, we had had dinners with him.

had spent time with him.
Q.
And how many times had you used Robert Frank to
spread stories in the media against your opponents,
Ms. Blixseth?
9
10
A.
I don't know how to answer a question like
that.
11
12
MR. HOLAHAN:
MR. FLYNN:
14
MR. HOLAHAN:
15
MR. FLYNN:
19
20
MR. HOLAHAN:
23
Oh, yeah.
We will see.
We will, sir.
Trust me, we will
Okay.
BY MR. FLYNN:
Q.
Ms. Blixseth, is it your testimony under
oath -- strike that.
21
22
We'll see, Mr. Holahan.
see.
17
18
The question assumes facts not in
evidence.
13
16
We
Did you have any discussion with Robert Frank

relative to the fake target letters?
A.
I don't recall having any, but I could have.
24
It was John Wilke that was working with Dennis, so not
25
that I recall, no.
Page 45
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Edra D. Blixseth
1
Q.
December 17, 2009
You don't specifically recall, but you may have
discussed the fake target letters with Robert Franks
[sic]; is that your testimony?
A.
You keep saying "fake target letters."
At the
time and to this day I don't know if they're fake, but
the letter I was shown that was a target letter.
Q.
What letter were you shown, Ms. Blixseth?
A.
It was a letter addressed to Tim saying --
informing him he was the target of investigation.
It
10
came about the same time that I had gotten calls from an
11
investigation to the death of Denise Touhey and to the
12
investigation of IRS, both of which told I didn't
13
believe Tim had anything to do with it and I had no
14
information for them.
15
16
17
Q.
When did you first speak to Sam Byrne about the
fake target letters?

A.
I told him about them -- it was during the same
18
time that we all heard about the investigation on Denise
19
Touhey and the IRS.
20
was within that same time frame.
I don't recall the exact date.
It
21
Q.
Yeah.
Who is "them" in your last answer?
22
A.
You'll have -- I don't --
23
Q.
Did you have any conversations with any state
24
or federal agency when you first learned about the fake
25
target letters regarding any investigation of
Page 46
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Edra D. Blixseth
1
December 17, 2009
Mr. Blixseth?
MR. HOLAHAN:
I'm going to start objecting to
every question that you ask using the phrase "fake
target letters."
about.
We don't know what you're talking
I don't know what you're talking about.

The deponent has said she doesn't know what
you're talking about, so we object to the phrase "fake
target letters" because we don't know that there are any
fake target letters and every time you ask that question
10
I'm going to be object to it.
11
If you know how to answer, if you want to read
12
back that question and you can figure out how to answer
13
it, you can.
14
15
16
17
THE WITNESS:
Okay.
BY MR. FLYNN:
Q.
With regard to the letter that you acknowledged
you were shown by Dennis Montgomery --
18
A.
Uh-huh.
19
Q.
-- that letter, referencing that letter, when
20
21
did you first speak to Sam Byrne about that letter?

A.
I don't remember the date.
I just said -- we
22
were talking about things and I said, "Just for your
23
knowledge" -- this came about the same time as the
24
Denise Touhey investigation was going on and the IRS
25
investigation and now I've got a copy of a letter.
Page 47
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1
December 17, 2009
And I don't know -- I didn't do anything with
it.
any truth to it.
I told him about the letter, but I said, "I don't
want -- if there's something of this, then I didn't say
anything.
7
8
I didn't even keep it.
Q.
I didn't know if there was
I said that when I said about -- when
I want you to know."

How did Dennis Montgomery come about to have
possession of this letter?
A.
I don't know.
10
Q.
Well, he was your employee.
11
A.
I asked him and he said it came across on a fax
12
Did you ask him?
machine.
13
Q.
From where?
14
A.
I didn't ask him that.
15
Q.
Did it come across on a fax machine from Boston
16
17
with a Kinko's cover sheet?

A.
That's what I was told when Tim got the
18
letters, but I wasn't aware of that.
19
at that.
20
Q.
I didn't even look
Did it come from Sam Byrne on a Kinko's cover
21
sheet in February of 2008 just before Mr. Byrne
22
terminated the sale of the Yellowstone Club?
23
A.
How can I answer question about did it come
24
from Mr. Byrne when I just said I don't know where the
25
letter came from?
Page 48
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Edra D. Blixseth
1
2
3
4
5
Q.
December 17, 2009
Did you talk to Steve Crisman about this
letter?
A.
May have.
Steve and Nick and everybody was
around then at the time of this.

Q.
In the first week of March 2008 did you fly to
Cabo San Lucas with Mr. Crisman and Mr. Rhodes and did
you have possession of the letter and discuss it with
them?
A.
I don't recall if I had possession, because I
10
ended up not keeping the letter.
11
been discussion about it.
So there could have
12
Q.
How do you know you didn't keep the letter?
13
A.
Because I don't have it.
14
Q.
Did you throw it away?
15
A.
I think I gave it back to Dennis.
I said,
16
"There's nothing I would do with any of this.
17
all kinds of all those things going on.
18
anything to do with it.
19
things done the way we're getting done," and didn't do
20
any more with it.
21
22
23
Q.
There's
I don't want
I just want to try to get
Did you discuss the letter with Deborah Klar
and give her a copy of it?

A.
I did not.
Whether it was discussed with her,
24
it could have been discussed within the Liner firm,
25
because when I found out Tim was being investigated by

Page 49
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Edra D. Blixseth
December 17, 2009
the IRS, I wanted to find out if that included me, and
Ellyn Garofalo -- I can't remember her last name, starts
with a G -- she investigated.
find out if I was also being investigated along with Tim
and the IRS.
6
7
Q.
She made some calls to
Did you give a copy this letter to the Lemond
parties or the Lemond lawyers?
A.
Absolutely not.
Q.
Did you discuss it with them?
10
A.
Absolutely not.
11
Q.
Did you discuss it with Conrad Burns or give
12
him a copy, the former senator from Montana?
13
A.
No, I did not.
14
Q.
Did you discuss it or give a copy to Mary Bono?
15
A.
No, I did not.
16
Q.
Did you discuss or give a copy to Robert
17
Bennett of the Skadden Arps firm?
18
A.
No, I did not.
19
Q.
Does the Skadden Arps firm currently represent
A.
They're not representing me for anything going
20
21
you?
22
on, no.
23
representing anything.
24
25
I haven't terminated them, but they're not
They were representing Dennis Montgomery and

Blxware in connection with things that you had been
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Edra D. Blixseth
1
2
3
4
December 17, 2009
representing him for and they stepped into your shoes.

Q.
How much did you pay Robert Bennett of the
Skadden Arps firm to represent you and Montgomery?

A.
I don't recall.
They're on my list of
schedules for bills still outstanding, but I don't
recall what the total was paid to them, what the
retainer was and what the total was paid.
Q.
Did you pay them over $300,000, Ms. Blixseth?
A.
I don't recall.
10
Q.
Was that paid on your behalf or on behalf of
11
12
13
14
15
16
17
18
19
Mr. Montgomery?
A.
I think it was paid on behalf of the company
and Mr. Montgomery.

Q.
At that time was the Skadden Arps firm
representing Credit Suisse?

A.
I wasn't aware of them representing Credit
Suisse.
Q.
Did Robert Bennett disclose to you that they
were representing Credit Suisse at that period of time?
20
A.
No, he did not.
21
Q.
At any time during this case has the Skadden
22
Arps firm asked you to sign a waiver of a conflict of
23
interest --
24
A.
No, they have --
25
Q.
-- between the representation of Credit Suisse

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1
December 17, 2009
and the representation of you?
A.
No.
Q.
Okay.
MR. HOLAHAN:
MR. FLYNN:
Q.
Can we take a quick break?

One more question.
Do you recall executing three declarations in
the summer of '07 in an effort to stop the Yellowstone
Club sale to CrossHarbor Capital?
A.
In an effort to stop the sale?
10
Q.
Stop the sale.
11
A.
No, I do not.
12
Q.
Do you recall executing three declarations
13
relative to your motion to seek an injunction or
14
restraining order to stop the sale?
15
A.
I didn't file a motion for that.
16
Q.
What did you file a motion for?
17
A.
You'll have to ask me -- there was so much
18
going on in family court and other things, you're going
19
to have to ask me specifically.
20
Q.
Did you file three declarations in the summer
21
of '07 in connection with the Yellowstone Club sale to
22
CrossHarbor in which you claimed that the Yellowstone
23
Club was valued at $1.3 million?
24
25
A.
Was that in family court?

MR. HOLAHAN:
What?
Page 52
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Edra D. Blixseth
1
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
10
December 17, 2009
Based on?
You mean 1.3 billion.
1.3 billion.
You said million, did you mean
billion?
Q.
Thank you.
Thank you, Dennis.
Glad to help.
Always appreciate it.
-- $1.3 billion based on the total net value
appraisal methodology of Credit Suisse?
11
A.
In what court are you referring to?
12
Q.
Family court.
13
A.
Family court.
14
filed.
15
was under the impression at that time that the Credit
16
Suisse things were valid, so it could be.
17
Q.
There's been so many things
I don't recall my exact declaration then, but I
How long did you maintain the view that the
18
Credit Suisse things were valid on your personal
19
financial statements, Ms. Blixseth?
20
A.
As long as that's what I was being told.
21
Q.
Who told you that?
22
A.
The reports from the audits from Credit Suisse
23
and the Yellowstone Club, things that Tim had given me
24
from the companies.
25
Q.
When you were borrowing approximately

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Edra D. Blixseth
December 17, 2009
$40 million from various lenders, were you holding
yourself out to having a net worth of approximately 800-
to $900 million based on the Credit Suisse total net
value appraisal system?
MR. HOLAHAN:
Objection.
Vague in general.
Vague as to time
frame.
If you want to be a little
bit more specific, maybe that would help.
BY MR. FLYNN:
Q.
Can you answer the question?
10
A.
No, I cannot.
11
12
MR. HOLAHAN:
We need to take a quick break,
sorry.
13
MR. FLYNN:
Go ahead.
14
(Recess taken.)
15
MR. FLYNN:
Let me show you what has been
16
marked as Exhibits 8 and 9, Ms. Blixseth, and these
17
purport to be documents from the US Department of
18
Justice Criminal Division and the US Department of
19
Justice Environment and Natural Resources Division.
20
(Exhibits 8 and 9 were marked for identification.)
21
MR. FLYNN:
Exhibit 8 is purportedly signed by
22
Ronald Sharpe, Assistant United States Attorney,
23
addressed to Mr. Timothy Blixseth, dated December 12,
24
2007.
25
Let's start with that one.

MR. HOLAHAN:
Are Exhibits 1 through 7 here
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Edra D. Blixseth
December 17, 2009
today but you haven't used them yet or they're from the
previous deposition?
MR. FLYNN:
Have not been used.
that pile.
so you'll have to find them on your own.
They're in
Unfortunately, Kinko's didn't collate them
Q.
Do you recognize Exhibit 8, Ms. Blixseth?
A.
I'm not sure.
It seems familiar, but you guys
keep referring to two and I think I only saw one, so I
don't know if it's this one or the other one.
10
11
12
13
MR. HOLAHAN:
front of me, Mr. Flynn?
MR. FLYNN:
MR. HOLAHAN:
15
MR. FLYNN:
17
18
It's a -- it's the exhibits we're
addressing now.
14
16
What is this a pile of you put in
Yeah, but it's not in any order.

It's in order; it's not collated,
as I just said.
MR. HOARD:
When you say collated, you mean the
individual documents are not stapled together?
19
MR. FLYNN:
Correct.
20
MR. HOARD:
You just have to thumb through it
21
until you get to -- you want to see what it looks like?
22
It's a letter.
23
MR. HOLAHAN:
24
MR. FLYNN:
25
Okay.
You have to thumb through it until
you find it.
Page 55
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Edra D. Blixseth
1
2
3
December 17, 2009
BY MR. FLYNN:
Q.
That document, Ms. Blixseth, purportedly signed
by Ronald Sharpe --
MR. HOLAHAN:
You'll have to wait a minute,
Mr. Flynn.
her any questions about it.
many pages in, is it after -- where is it in the pile?
I want to see the document before you ask
MR. FLYNN:
I'll find it for you?
10
MR. HOLAHAN:
11
MR. FLYNN:
12
MR. HOLAHAN:
14
MR. FLYNN:
15
MR. HOLAHAN:
16
MR. FLYNN:
20
Yeah.
That's good.
This is the first part of your
Okay.
These are the two documents -Thank you.
-- 8 and 9.
That's the second part
of your file.
18
19
You want to hand me the pile and
file.
13
17
So if you can tell me how
MR. HOLAHAN:
Okay.
BY MR. FLYNN:
Q.
Now Ms. Blixseth, how many conversations did
21
you have with Mr. Montgomery about either one of these
22
documents?
23
MR. GLASSER:
24
MR. FLYNN:
25
THE WITNESS:
Is the second one 9, Mr. -The second one is Exhibit 9.

Can I see both so I can tell you
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Edra D. Blixseth
December 17, 2009
which one I know I saw for sure?
I'll be able to tell you for sure, but is this the same
one?
4
5
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
11
MR. FLYNN:
12
MR. HOLAHAN:
here.
14
MR. FLYNN:
you I didn't do them.
16
MR. HOLAHAN:
20
21
22
We're going to find out whether it
You did not?

Oh, I absolutely have not.
I'm talking about the redactions
Don't cross-examine me, I just told
You put an exhibit in front of my
client, I'm entitled to ask you questions about it.
18
19
Who redacted it?
You did not do these redactions?
15
17
No, I cannot.
was Blixseth or Montgomery.
10
13
Can you, please, explain what is
redacted and why on Exhibit 9, Mr. Flynn?
I mean I don't know if
MR. FLYNN:
Do whatever you want, we're moving
on.
Q.
Ms. Blixseth, when did you first see either one
of these documents?
A.
I think this is the one I saw, because I don't
23
remember seeing -- the one I saw had everything on
24
there.
25
Q.
So you pointed to Exhibit 8?
Page 57
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Edra D. Blixseth
December 17, 2009
A.
Correct.
Q.
And you said that's the one you saw, which is a
document -- purportedly dated December 12, 2007, from a
Ronald Sharpe, Assistant United States Attorney; is that
correct?
A.
That's correct.
Q.
And the other one, as your counsel points out,
has some redactions on it.
Did you do those redactions?
10
A.
No, I did not.
11
Q.
Have you ever seen Exhibit 9, the one with the
12
redactions?
13
A.
I don't think so.
14
Q.
How many occasions have you had to discuss
15
16
either one of these documents with Dennis Montgomery?

A.
On several occasions, because when you first
17
showed it to me I was surprised and then it kind of fell
18
into the other things that I had gotten calls about.
19
Q.
Ms. Blixseth, I'm not interested in the other
20
things you got calls about.
21
document.
22
document, ma'am.
I'm interested in this
Please restrict your answers to this
23
A.
I don't know how many times I talked to Robert.
24
Q.
At this point in December of '07, your divorce
25
had not become final; is that correct, Ms. Blixseth?
Page 58
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1
2
3
4
December 17, 2009
A.
No.
It didn't become final until October of
Q.
And you were in a vigorously contested divorce
'08.
proceeding with Mr. Blixseth; is that fair to say?
A.
It was on and off okay and not okay, yes.
Q.
And sometime in late '07, according to your
testimony, you were given possession of a document that
indicated your ex-husband or then husband was the
subject of a grand jury investigation into possible
10
violations of federal criminal laws involving, but not
11
necessarily limited to 18 USC 1959, 1344 bank fraud and
12
201 bribery of public officials and witnesses?
13
A.
Yeah.
14
Q.
Is that your testimony?
15
A.
Well, I'm not sure what you just asked me, but
16
I don't think I saw this in December.
17
in early '08, but I don't actually recall when I first
18
saw it.
19
Q.
I think I saw it
In fact, Ms. Blixseth, you began emailing about
20
this in late January, early February '08; isn't that
21
correct, ma'am?
22
A.
I don't remember email -- I don't remember when
23
I started emailing about it, but I don't think I saw it
24
until early '08.
25
Q.
Who did you email about this document in early
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Edra D. Blixseth
December 17, 2009
'08 after Mr. Blixseth and Mr. Byrne signed the
agreement to purchase the Yellowstone Club?
A.
I believe the purchase -- I believe the
document to purchase the Yellowstone Club was signed in
the springtime of '07, is what I was told in family
court, so I don't know how long after that.
But when I became aware of this, then I was
asking some questions about it just like I was some
other things that you don't want me to state.
10
Q.
Ms. Blixseth, isn't it a fact that the letter
11
of intent to sell the Yellowstone Club for $510 million
12
was signed on June 28th, '07, and the purchase and sale
13
was actually signed on January 15, '08; isn't that true?
14
A.
I don't know the dates.
I was frozen out at
15
that time and only given information through family
16
court.
17
Q.
As of January 15, '08, were you frozen out?
18
A.
Yeah.
Some of the things that -- some of the
19
things that we were asking through family court started
20
to be answered in '08 and, in fact, Tim and I had some
21
conversations directly.
22
I don't remember when they were in '08 from
23
some information whether it was true or not that I was
24
given, so -- I don't recall the exact dates, though, but
25
it was in early '08, mid to early '08.
Page 60
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1
Q.
December 17, 2009
The written contract was mid '08 in which
Mr. Byrne agreed to purchase a bulk sale of the
Yellowstone Club assets; isn't that true?
A.
I can't answer that question.
Q.
Shortly thereafter Exhibit 8 surfaced with you
6
7
8
9
and Mr. Montgomery; isn't that correct, ma'am?

A.
There was no correlation to me on that, so I
can't recall.
Q.
How long after you saw Exhibit 8, according to
10
your previous testimony, did you call Sam Byrne and read
11
Exhibit 8 to him?
12
A.
Actually, I don't think I read it to him.
13
think that I paraphrased what it was about and it was
14
during the same time frame.
15
And you keep telling me only reference this,
16
but there was a time frame of certain things coming to
17
light that this -- I felt like if I had this information
18
and it was accurate and I didn't say when these other
19
things had come to light during the same time frame,
20
that I didn't want to feel responsible for having this
21
information and not talking about it.
22
And it was the same time frame as the
23
investigation on Tim on the death of Denise Touhey and
24
the IRS.
25
Q.
Ms. Blixseth, when you first saw Exhibit 8, how
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December 17, 2009
much time elapsed between the time you saw it and the
time you called Robert Franks and read it to him, from
the Wall Street Journal?
4
5
A.
I don't recall if I called Robert Frank and
read it to him.
Q.
You may have, but you don't recall?
A.
You ask me questions in such a way that -- that
8
9
10
11
12
I can't really answer them.

Q.
When did you first give or read Exhibit 8 to
the media, Ms. Blixseth?

A.
I've testified that I didn't give this letter
to the media.
13
Q.
When did you first read it to someone in the
14
media?
15
A.
I'm not aware that I did.
16
Q.
You don't remember doing it?
17
A.
I don't.
18
Q.
When did you first email Mr. Franks about
19
Exhibit 8?
20
A.
I don't -- I don't recall if I did or not.
21
That's something that -- I'm not sure if I did that
22
since he had put -- put Dennis Montgomery in touch with
23
John Wilke on -- on things.
24
25
I'm not sure if this was ever -- this was never

used by me for anything in reference to Tim Blixseth,
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2
December 17, 2009
other than it was given -- it was given to me.

Q.
Now your testimony earlier was that you have
not been notified by any state or federal agency as to
whether you're a subject of a grand jury investigation;
is that correct?
A.
That's correct.
Q.
Do you know who -- have you spoken to any FBI
agents at any time relative to Mr. Blixseth.
A.
Only when they've called me.
10
Q.
When did they call you, Ms. Blixseth?
11
A.
I've been emailed and called earlier this year.
12
Q.
By who?
13
A.
FBI agents.
14
Q.
Who?
15
A.
I don't recall the names.
16
names.
17
Q.
Greg Rice?
18
A.
I'm sorry?
19
Q.
Greg Rice.
20
A.
Greg Rice emailed me and he called me.
21
Q.
About what?
22
A.
Investigations that were ongoing about Tim.
23
Q.
So your testimony -- what were those
24
25
I don't recall the
investigations about about Tim when Mr. Rice called you?

MR. HOLAHAN:
If she knows.
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1
2
December 17, 2009
BY MR. FLYNN:
Q.
Well, whatever he said to you.
MR. HOLAHAN:
If you know.
THE WITNESS:
He first emailed me and said he
had some questions and could I call him.
back saying, "What is this in reference to?
scary thing to see and open up and says FBI."
8
9
I emailed him
This is a
When I did call him he said it was in reference

to some investigations going on about Tim and that --
10
that the FBI -- they weren't in his region and that the
11
FBI thought I could be some help.
12
Do you want me to keep going?
13
Q.
Yes.
14
A.
Well, you told me to limit it, so I'm trying
15
limit it to your question.
16
Q.
No, don't limit it.
17
A.
I said that I didn't think that I had any
18
information.
19
information or that I thought Tim had ever done anything
20
criminally, so I didn't think I could be of help to
21
them.
22
I wasn't aware of anything that I had
He said he felt that I could be and stuff that
23
I may not have known about.
And I said I was aware both
24
you and Tim had been calling them and he acknowledged
25
that you guys had been calling him on -- trying to say
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there was information that they should be investigating
on me and that there was no investigation going on on
me.
Q.
He told you that?
A.
Yes, he did.
Q.
At that time did he have possession -- what is
your best memory of when earlier this year that took
place?
A.
There was something going on within the --
10
either the Yellowstone Club or Yellowstone Club World
11
bankruptcy proceedings, because I was driving to Butte
12
and so I don't really recall but it would be sometime in
13
spring, I think, of this year.
14
15
Q.
Now you mentioned that he said there were other
regions that were interested?
16
A.
Correct.
17
Q.
What other regions?
18
A.
He didn't give me all the specifics.
He told
19
me that there was one specifically out of Florida
20
regarding Turks and Caicos and that's the ones that they
21
wanted me to -- they were willing to fly in and meet
22
with me.
23
Q.
Now prior to Mr. Rice calling you, when you
24
were still married to Mr. Blixseth and had community
25
obligations, did you make any effort in any way to
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initiate state or federal investigations against
Mr. Blixseth?
A.
Absolutely not.
I haven't subsequently.
Q.
During the summer of 2007 did you or your
lawyer contact Mr. Lemond and assist the Lemond parties
in initiating state or federal investigations --
A.
Absolutely not.
Q.
-- against Mr. Blixseth?
A.
Absolutely not.
10
Q.
Now in connection with Exhibit 8 that your
11
employee you were paying a hundred thousand dollars a
12
month to, did you question him at the time he gave this
13
to you as to where he got it?
14
A.
Yes, I did.
15
Q.
What did he say?
16
A.
He said it was on a fax machine, came in on a
17
fax machine.
18
Q.
And a fax machine from where?
19
A.
I didn't actually ask him from where.
If
20
you'll notice -- that's why when you asked me on the
21
Kinko's -- there was nothing on top.
22
idea where this came from.
23
24
25
Q.
I mean I had no
Oh, you noticed at the time there was no fax
header on Exhibit 8?
A.
He said, "It came on a fax machine," and when

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he said it came on a fax machine, I noticed there was
nothing on top where normally there would be numbers on
top of a fax machine.
Q.
So then what did you say to him?
A.
He said, "How did you get it on a fax machine?"
6
7
He just said, It came on a fax machine."

Q.
Now at the time you knew that Mr. Montgomery --
the Trepp parties were claiming that he had fabricated
the Gibbons bribery emails.
10
A.
I don't remember --
11
Q.
Having that in mind --
12
A.
Wait, you can't -- you made a statement.
13
14
15
MR. HOLAHAN:
Let him.
BY MR. FLYNN:
Q.
-- that your employee was being challenged as
16
having fabricated emails that were the subject of a
17
Washington, DC, grand jury, did you question
18
Mr. Montgomery whether he fabricated Exhibit 8?
19
MR. HOLAHAN:
So the objection to that question
20
is that it assumes facts not in evidence and I'll let
21
her answer it if she can separate what is true and what
22
isn't in your question.
23
24
25
MR. FLYNN:
Q.
We'll get into it in spades.
Ms. Blixseth, you knew Mr. Montgomery
throughout 2007 and 2008 was being challenged in the
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eTreppid litigation on the basis that he had fabricated
two emails; isn't that correct?
A.
I can't say 2007 to 2008.
I don't remember
when that allegation was brought up.
allegation was brought up in the eTreppid I asked Dennis
if he fabricated them and he said no.
When that
I don't recall asking him, I don't think I did,
because I don't think it even entered my mind that he
fabricated this.
10
Q.
Now when the issue of his fabrication came up
11
between April and June 2007 when you hired Mr. Bennett,
12
when you hired Mr. Bennett and paid Mr. Bennett from
13
Skadden Arps, did you have a conversation with
14
Mr. Bennett about what evidence existed that
15
Mr. Montgomery had fabricated the two bribery emails?
16
A.
17
18
MR. HOLAHAN:
21
22
Wait a minute.
Can you read that
question back, please.
19
20
I don't remember.
MR. FLYNN:
Q.
I'll withdraw it.
I want to know whether you talked to Bennett
about whether or not Montgomery fabricated the emails.

MR. HOLAHAN:
If this question relates to
23
Mr. Bennett being retained by Ms. Blixseth on this
24
matter, I'm going to object to any questions about
25
communications between Ms. Blixseth and Mr. Bennett on
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1
attorney-client privilege.
BY MR. FLYNN:
December 17, 2009
Q.
Was Bennett your lawyer?
A.
Yes, he was.
Q.
Did you, in fact, pay Bennett over a million
dollars in connection with the charges against
Mr. Montgomery?
8
9
A.
You asked me earlier if I paid 300,000,
500,000; now you're asking me a million.
I don't know
10
how much.
I don't remember how much was paid.
I don't
11
know how much the retainer was or how much was paid.
12
Q.
Was paid for you or was it paid for Montgomery?
13
A.
It was paid for the company to represent me as
14
the majority shareholder of the company and Dennis
15
Montgomery as the chief scientist.
16
Q.
Now Ms. Blixseth, your testimony is that you
17
saw Exhibit 8 but you did not see Exhibit 9; is that
18
correct?
19
A.
I don't recall ever seeing Exhibit 9.
20
Q.
When you saw Exhibit 8 -- and I believe the
21
state of the record is the only person you recall
22
speaking to about it is Montgomery and Byrne; is that
23
your testimony under oath, Ms.?
24
A.
Conrad Burn?
25
Q.
No, Mr. Byrne, Sam Byrne.
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1
A.
Sam.
December 17, 2009
No, I don't think -- I don't think I
testified that they were the only people.
obviously, this got my attention and -- when I first saw
it and I was concerned.
I mean,
So I may have talked to -- I mean I know that
Dennis was there when Crisman and Rhodes were there for
some Blxware meetings, but I don't really recall who
else I talked to about it.
in light of the other information.
It concerned me, especially
10
Q.
Did you call Mr. Blixseth?
11
A.
I doubt I would have done that.
12
13
14
We weren't
speaking at the time.

Q.
Did you have your lawyer call Mr. Blixseth's
lawyer?
15
A.
I don't -- I don't recall having that happen.
16
Q.
As of a month ago did you tell Mr. Blixseth or
17
text him that you believed and you still believe that
18
the letters were accurate?
19
A.
I had no reason not to believe they weren't.
20
Q.
So when you spoke to Mr. Rice in May, June, of
21
this year from the FBI, did you tell him about these
22
letters, Ms. Blixseth?
23
A.
I don't think so.
I told -- when he first
24
started asking me questions I said, "If this has to do
25
with the Denise Touhey investigation or the IRS, I think
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December 17, 2009
I've already answered those questions, that I don't
think he had anything to do with it and I don't have any
information that he did, so I don't think there's any
information."
In fact, I don't think I talked about the
letters, but I did specifically say to him that I'm not
aware of -- I'm aware of a lot of things that I don't
like how he's done or how he's treated me, but I'm not
aware of any criminal wrongdoings on his behalf.
10
11
Q.
The question, aside from all the verbiage,
Ms. Blixseth, is real simple.
12
A.
Well, sometimes you want me to expand --
13
Q.
Did you tell Rice that you had possession of a
14
grand jury target letter relating to your then
15
ex-husband?
16
A.
I don't believe I said I had possession,
17
because I don't have it any longer and I don't think
18
that the target letter was brought up.
19
Q.
When you were discussing the matter with Rice
20
as to whether Mr. Blixseth was under some type of a
21
federal criminal investigation, did you bring up or
22
discuss with him that, "Oh, is this related to a prior
23
investigation of Mr. Blixseth?"
24
25
A.
No.
I brought -- I asked if it was related to
things that I had heard about in the past and the only
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two specifics that I had heard -- that I expressed to
him that I heard about in the past were Denise Touhey
and the IRS.
Q.
I did not bring up any other specifics.
Just so we have this clear on the record,
Denise Touhey and the IRS, who went to the FBI and
complained Mr. Blixseth had murdered Ms. Touhey?
A.
I have no idea.
The only person that told me
who he thought had gone to it is Tim Blixseth and that
was just recently.
10
And he told me that Greg Lemond
and -- I can't remember who else he said.
11
Oh, John Reveal had gone to them and that's the
12
first I heard of who had gone to them.
13
to hear that.
14
Q.
I was surprised
And that was just this year I heard that.
So during the fall of '07, based on your prior
15
testimony, did you know that Reveal and Lemond had gone
16
to the FBI and accused Mr. Blixseth of committing
17
murder?
18
A.
Absolutely not.
I told you the first time I
19
heard about it was from Tim and I was surprised when he
20
told me that and expressed my surprise and said I had
21
been contacted about that and I had always said that I
22
didn't believe he had anything to do with it.
23
Q.
So when Mr. Rice contacted you earlier this
24
year in May, June, did you talk to him about the alleged
25
murder -- strike that, Mr. Blixseth's alleged
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1
December 17, 2009
involvement in the murder of Denise Touhey?
2
3
MR. HOLAHAN:
She's already answered that.
She
can answer it again.
THE WITNESS:
I said if this has to do with the
two investigations that I was aware of, that I didn't
believe -- I never believed he had anything to do with
it and I didn't have any information that would help
them if that's what they were investigating.
And he said that was not the investigations
10
that they wanted to talk to me about.
11
BY MR. FLYNN:
12
Q.
I believe it's on the record already, but we'll
13
try to pin it down here.
As I understand your testimony
14
you became aware of the IRS and Touhey investigations in
15
the fall of 2007; is that correct, ma'am?
16
A.
I don't remember when it was.
17
Q.
Was it in 2007, ma'am?
18
A.
I believe so.
I can't -- I kind of really
19
associate things with things that were going on in
20
family court and when --
21
22
Q.
I don't care what you associate with.
Was it
in the fall of 2007 as you --
23
A.
Well, I'm trying to think out loud --
24
Q.
-- as you previous testified?
25
A.
-- so I can answer your question.
If you want
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Edra D. Blixseth
December 17, 2009
me to say I don't recall, I don't recall.
to recall.
MR. HOLAHAN:
Mr. Flynn.
I was trying
Mr. Flynn, don't
interrupt my client until she's through answering your
questions.
MR. FLYNN:
another question now?
MR. HOLAHAN:
9
10
Thank you, Mr. Holahan.
I'll ask
Okay.
BY MR. FLYNN:
Q.
Ms. Blixseth, did you previously testify you
11
became aware of the Touhey and IRS investigations in the
12
fall of 2007?
13
14
15
16
17
18
19
A.
Just yes or no, ma'am.
If you're asking me the exact date, I don't
recall the exact date.

Q.
No, I'm asking about the fall of 2007 based on
your prior testimony.

A.
Did you so testify?
I don't remember if I said a date.
I just
remember that I was notified of them.

Q.
Now with regard to the Denice Touhey
20
investigation, when did you first discuss with anyone
21
the fact that your ex-husband was being accused by
22
anyone -- Lemond, Reveal, anyone -- of having murdered
23
Denise Touhey?
24
25
A.
The first time I ever heard even about an
investigation I didn't hear about it.
I saw it in the
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1
paper.
"What's this about?"
December 17, 2009
And I picked up the phone and called and said,
I thought it was horrible, thought it was
horrible for the memory of Denise, didn't believe it,
and didn't know if it was true.
I don't, thank God, believe everything is
written by the press and I didn't know if it was true
there was an investigation.
9
10
Q.
Did you discuss that with Lemond or any of the
B shareholders?
11
A.
I absolutely did not.
12
Q.
That was during the due diligence period of
13
Mr. Byrne, the fall of 2007; is that correct?
14
A.
When it came out in the paper?
15
Q.
When what came out in the paper?
16
A.
What you just asked me about, the investigation
17
18
19
20
of the death of Denise Touhey.

Q.
When did it come out in the paper,
Ms. Blixseth?
A.
Sometime in that period, I don't really recall,
21
but that was the first I'd heard of it.
I hadn't been
22
approached by anyone until I saw it in the paper.
23
Q.
When did you see it in the paper?
24
A.
I don't recall the date.
25
Q.
Roughly?
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Edra D. Blixseth
December 17, 2009
A.
Sometime in '07.
Q.
That Mr. Blixseth was being associated with the
alleged murder of Denise Touhey -- I'm sorry --
A.
No, that there was an investigation.
Q.
Did you spawn that investigation?
A.
I've answered that now about five times.
absolutely had nothing to do with it.
did until Tim Blixseth told me just a few weeks ago and
he told me and it was Greg Lemond and John Reveal.
10
11
Q.
We're going to get into what you do with the
media, Ms. Blixseth, believe me.
12
13
I didn't know who
Did you report an alleged investigation of your

then husband to the media?
14
A.
I absolutely did not.
15
Q.
IRS investigation, in the fall of '07 what did
16
17
you know about the IRS investigation, Ms. Blixseth?

A.
I just knew that there was one and it concerned
18
me because if there was an investigation by the IRS we
19
were still married and I wanted to find out if I was
20
also being investigated.
21
Q.
How did you find out about it?
22
A.
I don't recall.
23
Q.
Who told you?
24
A.
I don't recall.
25
Q.
Was it Lemond?
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Edra D. Blixseth
December 17, 2009
A.
I'm sure it wasn't.
Q.
Was it Lemond's lawyers?
A.
I didn't speak to Lemond's lawyers.
Q.
Was it Montgomery hacking into computers?
A.
I'm not aware of Montgomery hacking into
computers.
Q.
11
So as you sit here today you have no idea --
strike that.
9
10
I didn't speak to Lemond.
Was there a grand jury investigation in

connection with the IRS investigation?
A.
I believe -- when I heard that there was --
12
there was an investigation with the IRS, that's when I
13
talked to Ellyn at Liner and said I'd like to find out
14
if I'm under investigation as well.
15
16
Q.
After those two investigations flopped, did you
and Montgomery manufacture Exhibits 8 and 9?
17
A.
I had nothing to do with these two letters.
18
Q.
When did you find out that the Touhey
19
20
investigation was basically shelved by the FBI?

A.
I thought it was -- I didn't -- I didn't know
21
and I can't remember why I thought this, but I thought
22
that was something that was over with and when I talked
23
to Greg Rice earlier this year he said it was still an
24
open investigation, but that's not what they wanted to
25
talk to me about.
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Edra D. Blixseth
December 17, 2009
Q.
What did they want to talk to you about?
A.
He said there was several other investigations
going on and the primary one that they wanted to talk
about first was people out of Florida.
Q.
6
7
Were you and your ex-husband Matthew Crocker

drug dealers?
8
9
People out of Florida.
MR. HOLAHAN:
argumentative.
10
THE WITNESS:
11
MR. FLYNN:
12
MR. HOLAHAN:
13
My ex-husband?
Yes.
Object to the question as
argumentative and beyond the scope of this --
14
15
Object to the question as
MR. FLYNN:
Q.
16
I'll withdraw.
When you ran Choo-Choo Willy's -MR. HOLAHAN:
Are we assuming during this line
17
of questioning that Mr. Blixseth did not, in fact,
18
murderer Ms. Touhey?
19
these questions?
20
BY MR. FLYNN:
21
22
Q.
Is that the assumption behind all
Ms. Blixseth, when you and your husband were
running Choo-Choo Willy's, did you deal drugs?
23
A.
Absolutely not.
24
Q.
Now what did you understand the IRS
25
investigation to be about?
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1
A.
December 17, 2009
I actually didn't know.
I just knew that there
was something to do with -- I don't know.
that there was an investigation.
I just knew
Q.
Did --
A.
She found out there was an investigation.
Q.
Did it have to do with whether the Credit
Suisse loan was a dividend or a loan as alleged by the
Lemond parties?
9
10
11
12
A.
My recall, it didn't have anything at all to do
with Credit Suisse.

Q.
In connection with whether or not the monies
received from Credit Suisse were a loan or dividend?
13
A.
14
just said.
15
Q.
16
It had to do with our tax returns.
I didn't have any more information than what I

I don't know.
Do you know how the IRS concluded, as to
whether it was a loan or dividend?
17
A.
I have no idea.
18
Q.
As you sit here today, do you know when the IRS
19
concluded their investigation that it was, in fact, a
20
loan?
21
A.
I do not.
22
Q.
Are you in the habit of lying on financial
23
statements and loan documents to get money?
24
A.
No, I'm not.
25
Q.
Would you look at Exhibit 10, please.
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December 17, 2009
(Exhibit 10 was marked for identification.)
MR. FLYNN:
MR. HOLAHAN:
4
5
8
9
Yeah.
BY MR. FLYNN:
Q.
6
7
That's it right there (indicating).
Now if you turn to -MR. HOLAHAN:
Hold it, Mr. Flynn.
BY MR. FLYNN:
Q.
Turn to the 8th page down at the bottom,
Ms. Blixseth.
Is that your signature, ma'am?
10
A.
Hang on a second.
11
Q.
Pages of Exhibit 10 are numbered.
12
A.
Yeah, it looks like my signature.
13
Q.
Okay.
14
15
And did you sign that guarantee in order
to get $13 million from Western Capital Partners?

A.
I didn't get any money from Western Capital
16
Partners.
17
borrowing the money for the project.
18
19
Q.
It was a project my son was doing and he was
Yes.
How much money, after the $13 million was
paid, did your son give to you from the loan proceeds?
20
A.
None.
21
Q.
You recognize you're under oath, Ms. Blixseth?
22
A.
Yes, I do, Mr. Flynn.
23
Q.
Is it your testimony that your son never issued
24
any checks to you from any accounts he had control of
25
after June 15th of 2007; is that your testimony?
Page 80
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December 17, 2009
A.
In association with this loan?
Q.
After the money went into the Story Mill's bank
accounts, was any money paid to you after June 15, 2007,
Ms. Blixseth?
A.
From the proceeds of this loan?
Q.
No, from bank accounts under control of your
A.
We had -- we had spec homes and we had other
7
8
9
son.
things going on there, so there could have been monies
10
paid back to me from those kind of things, but I
11
received no money from this loan.
12
Q.
I'm not talking about proceeds from the loan.
13
I'm talking about once the money from Western Capital
14
went into bank accounts controlled by your son, how much
15
over the ensuing three months did he pay you?
16
17
MR. HOLAHAN:
that question.
18
19
20
21
She's already asked and answered
MR. FLYNN:
Q.
No, she hasn't.
How much money did you get three months after
this loan from your son, Matthew?

A.
I'm not aware of getting any, but if I did it
22
would have been something not associated with this loan.
23
It would have been associated with spec houses that we
24
did at Yellowstone Club or other things.
25
to do with this loan.
It had nothing
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1
2
3
4
Q.
December 17, 2009
More than a million or less than a million,
Ms. Blixseth?
A.
I'm not aware of getting any, but if I got some
it would have nothing to do with this loan.
Q.
More than 2 million or less than 2 million?
A.
I just said I'm not aware of getting anything
from this loan.
8
9
10
MR. HOLAHAN:
BY MR. FLYNN:
Q.
11
More than 3 million or less than 3 million?

MR. HOLAHAN:
12
getting any money.
13
BY MR. FLYNN:
14
That's fine.
Q.
Mr. Flynn, she's not aware of
Let's go to the first page of Exhibit 10.
15
No. 2 says, "None of the Borrowers nor Guarantors,"
16
that's you, Ms. Blixseth, "have ever filed for relief
17
under the US Bankruptcy Code"; is that a true statement?
18
19
20
21
A.
No, Tim and I filed for bankruptcy in the early
'80s -Q.
First, I want an answer, yes or no.
Is it a
true statement, Ms. Blixseth?
22
A.
That would not be a true statement.
23
Q.
So it was a falsehood in connection with a
24
document signed by you to induce payment of $13 million;
25
is that correct?
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1
A.
the whole thing.
read this whole thing.
December 17, 2009
That line -- this whole thing -- I didn't read
I didn't have a lawyer on my behalf
Western Capital had asked Matthew if I would

consider guaranteeing the loan.
Matthew called me.
Q.
Ms. Blixseth, is that a false statement?
A.
I already answered that question.
Q.
What's the answer?
A.
The answer is that is a false statement.
10
11
That wasn't your question by the way.

Q.
You were the chief financial officer and,
12
according to your declarations, basically running
13
Yellowstone Club for how many years?
14
A.
I wasn't running Yellowstone Club.
There were
15
certain parts as chief operating officer of the
16
operations that I ran for several years.
17
Q.
So as chief operating officer -- as of June 15,
18
2007, did you consider yourself to be a knowledgeable
19
and experienced businesswoman?
20
A.
Yes.
21
Q.
You had owned your own restaurants in the past;
22
is that correct?
23
A.
Yes.
24
Q.
And you had been the chief operating officer
25
for Yellowstone Club at that point in time for how many
Page 83
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Edra D. Blixseth
1
years?
A.
December 17, 2009
I can't remember exactly when we switched to
the title of that, but I had been operating the
operations of Yellowstone Club for quite a while.
Q.
You knew the significance of signing loan
documents with a bank relating to the procurement of
$13 million, did you not?
A.
I would say yes.
Q.
And is it your testimony today that you didn't
10
read the documents, Ms. Blixseth?
11
A.
I have to say that at the time it was my
12
consideration that it was Matthew's loan for the Story
13
Mill project; that they had had a long time to do
14
diligence.
15
They had done an appraisal on it.
There was plenty of collateral to support the
16
$13 million loan.
17
for it and I agreed to do that.
18
would normally do if it were my loan and I should have.
19
20
Q.
They wanted additional just guarantee

I didn't do what I
We're going to get into your loans,
Ms. Blixseth.
21
A.
I'm sure we will.
22
Q.
Yes, we will.
23
But with regard to what you're calling
24
Matthew's loan, were you desperate for money June of
25
'07?
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Edra D. Blixseth
1
2
3
4
5
A.
December 17, 2009
I wasn't going to get any money out of this
loan.
Q.
The question is:
Were you desperate for money,
Ms. Blixseth?
A.
During all of '07 because I received no
temporary or long-term spousal support and Tim Blixseth
continually testified in court that there was no
community cash flow, I was having to borrow to live and
support my companies.
10
Q.
So you were desperate for money --
11
A.
I'm not going to say I was desperate at this
12
time, but I was always looking to how I was going to
13
support myself during the time that I was frozen out of
14
everything.
15
Q.
By borrowing money?
16
A.
I borrowed money based on the fact that I was
17
getting assets I could pay the money back.
18
Q.
In '07 who else did you borrow money from?
19
A.
In '07?
20
Q.
Strike that.
21
22
23
Prior to July '07 who else did you borrow money

from?
A.
I had an ongoing line of credit with Palm
24
Desert National Bank.
I had, I believe, before that
25
time a line of credit at American Bank.
Page 85
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Edra D. Blixseth
1
2
Q.
December 17, 2009
How much were you in arrears?
As of June 15,
'07, how much were you arrears in paying your creditors?
A.
I don't know.
Q.
How long had you been in arrears in paying your
creditors when you got this $13 million for your son?
A.
I don't know.
Q.
Was it over a million dollars?
A.
I don't know.
Q.
Was it over $2 million?
10
MR. HOLAHAN:
11
MR. FLYNN:
12
13
She doesn't know, Counsel.

Okay.
We'll see, based on her
declarations, Mr. Holahan.

Q.
Let's go to the next one.
3, "As of the date
14
hereof, none of the Borrowers nor Guarantors, one, are
15
currently insolvent on a balance sheet basis."
16
Was that true?
17
A.
I believe that to be true.
18
Q.
Two, "Currently able to pay their debts as they
19
come due"; is that true?
20
MR. HOLAHAN:
Where are you reading from?
21
MR. FLYNN:
22
No. 3 on Exhibit 10.
No. 2 -- strike that.
23
Q.
Is that true?
24
A.
I don't know the date this was signed and,
25
again, I told you I didn't read this, so I don't know.
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1
2
3
4
5
6
7
8
Q.
December 17, 2009
Were you able to pay your debts as they came
due on June 15th of 2007?

A.
I think I was intermittently able to based on
how I was making loans and how cash flow came in.
Q.
Who referred you to Western Capital Partners to
get this loan?

A.
I was never referred to it.
It wasn't my loan.
It was Matthew's.
Q.
How did you find out about the loan?
10
A.
When Matthew called me and asked if I would be
11
willing to guarantee it.
12
Q.
13
this loan?
14
A.
I don't recall.
15
Q.
He may have?
16
A.
Jon Stack would call about a lot of different
17
18
19
20
Did Jon Stack call you and speak to you about
people and loans.

Q.
Did you discuss with Jon Stack that you needed
the money and you were desperate for money?

A.
No, I did not.
The Western Capital loan -- I
21
had loaned Matthew money.
22
originally when they were going to do it was going to
23
pay me back, but the way it all turned out and the way
24
it was done there was no monies to pay back to me.
25
Q.
The Western Capital loan
So the plan was for you to be paid back money
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Edra D. Blixseth
1
2
3
4
December 17, 2009
from this loan; is that correct, Ms. Blixseth?

A.
Originally, but not by the time it went to
final paperwork.
Q.
At the time the loan was entered into, did you
have discussions with anyone at Western Capital about
your divorce proceedings?
A.
I think they asked me how it was going along.
They asked me about Yellowstone Club World.
concerned about that if I was guaranteeing this.
10
They were
I met with them one time -- it was in Bozeman,
11
downtown Bozeman -- when they were there meeting with
12
Matthew.
13
Q.
That was before the $13 million check was paid?
14
A.
Oh, yes.
15
Q.
What did you say in that meeting in Bozeman?
16
A.
I don't remember.
17
there.
18
Q.
19
There was a lot of people
It was at a restaurant.
I don't recall.
Did anyone ask you whether you were getting any
part of the loan proceeds?
20
A.
I don't recall.
21
Q.
Did anyone inquire from Western Capital what
22
accounts the monies were going into and what controls
23
were over those accounts?
24
25
A.
I had nothing to do with the sources and uses
of the loan or any of those kind of discussions with
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Edra D. Blixseth
December 17, 2009
that, so I was not there and privy to those kind of
meetings that I assume they had with this loan.
Q.
Then why did your divorce proceedings come up?
A.
I think that they asked me -- I think that they
asked me since I was going to agree to guarantee it if
it would have any impact on it and they were concerned
about the Yellowstone Club World, the new launching of
Yellowstone Club World.
Q.
The next statement is four, "Borrowers and
10
Guarantors are not contemplating filing for relief under
11
the US Bankruptcy Code"; is that true?
12
A.
That is true.
13
Q.
So as of June '07 you weren't contemplating
14
filing for relief under the US Bankruptcy Code; is that
15
correct?
16
A.
That's absolutely correct.
17
Q.
Let's go down to No. 7, "Borrowers and
18
Guarantors have no judgments pending against them
19
jointly or severally"; was that true?
20
A.
I believe so.
21
Q.
No. 8, "Borrowers and Guarantors have no
22
delinquent tax obligations including, without
23
limitation, federal income tax, state income tax,
24
withholding tax, sales tax or personal property tax
25
obligations"; was that true?
Page 89
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Edra D. Blixseth
December 17, 2009
A.
I believe that would be true.
Q.
At the time did you and community owe state or
federal taxes, Ms. Blixseth?
A.
I don't recall that we did.
Q.
Nine, "Borrowers and Guarantors are not to
subject to restraining order of any type"; was that
true?
A.
I believe that to be true.
Q.
Ten, "Borrowers and Guarantors are not subject
10
11
12
13
14
to alimony or child support orders"; was that true?

A.
To the best of my knowledge I didn't have any
child support or alimony obligations.

Q.
Now Ms. Blixseth, is there any other document
that you have signed for anybody guaranteeing any loan?
15
MR. HOLAHAN:
16
MR. FLYNN:
17
Ever?
What time frame?
Ever?
Let's take it since the Credit
Suisse loan, September of 2005.
18
THE WITNESS:
I don't recall except that maybe
19
it may be with American Bank in relationship to the
20
construction loan, I can't remember who that was with,
21
for the building of Lot 176, but I can't really recall.
22
BY MR. FLYNN:
23
Q.
Before June of 2006 did you tell Nick Rhodes or
24
Steve Crisman that you were expecting over a million
25
dollars from a transaction you had in place in
Page 90
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Edra D. Blixseth
1
2
December 17, 2009
connection with financing Blxware or Opspring?

A.
I never tried to finance Blxware or Opspring.

MR. GLASSER:
Mr. Flynn, just because I'm late
to the case, who are those two guys, Western Capital
guys?
MR. FLYNN:
THE WITNESS:
8
9
Q.
Let me try it this way.

THE WITNESS:
Wait a minute.
That's not
correct.
12
13
Who's a Denver lender?
BY MR. FLYNN:
10
11
They're a Denver lender.
Nick Rhodes and Steve Crisman, I think that's

who you're asking about?
14
MR. FLYNN:
15
THE WITNESS:
No, he didn't, he said Nick
MR. GLASSER:
No.
16
Rhodes --
17
18
MR. FLYNN:
20
Blxware and Opspring.
21
MR. GLASSER:
23
I wanted to know who those
two people were.
19
22
No, we said Western Capital.
Oh.
They're two codirectors of
Thank you.
BY MR. FLYNN:
Q.
Now did you have conversations with Crisman
24
prior to June of '07 about where you were getting money
25
to fund Opspring or Blxware?

Page 91
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Edra D. Blixseth
1
A.
December 17, 2009
In general we may have had conversations based
on the fact that I wasn't getting supposal support and
things were dragging on in the courts of how I was going
to go about continuing to support the burn rate of
Blxware, but I don't have any specific recollection.
6
7
8
9
10
Q.
Did you tell him you were borrowing money,
Crisman?
A.
I think in general everyone knew in our little
group that's how I was surviving.

Q.
During that time frame, June of '07, who else
11
were you borrowing money from to support your little
12
group?
13
A.
June of '07.
I think anybody else that I
14
mentioned was after June '07, but I could be mistaken
15
exactly on the dates.
16
Q.
Prior to June '07, what were you telling
17
Crisman as to where you were getting funds to fund
18
Blxware and Opspring?
19
A.
I don't recall.
20
Q.
Did you tell him you were borrowing money?
21
A.
I think I've answered that.
In general
22
everyone knew that's how I was surviving at the time,
23
because Tim wasn't giving any cash flow to me from our
24
community cash flow, stating there was none and the way
25
I was surviving was to borrow money.
Page 92
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Edra D. Blixseth
1
Q.
December 17, 2009
Did Mr. Blixseth object to giving
Mr. Montgomery, who is about to go to prison, a hundred
thousand dollars a month community funds?
A.
He had nothing to do with that.
Q.
No.
A.
I haven't had any conversation with him about
that.
8
9
10
Did he object?
Q.
Back in the summer of '07 did Mr. Blixseth
object to putting any money in Opspring or Blxware

because it was a total con?
11
A.
No.
In fact, I have a note saying, "Give me
12
three days' notice when you need the next 5 million and
13
I'll make sure it gets done."
14
Q.
What is the date of that note?
15
A.
I'd have to go back and look.
16
Q.
Was it in '06?
17
A.
You might be right.
Q.
When you misrepresented what the technology was
18
19
20
That might have been in
'06.
to Mr. Blixseth?
21
A.
Is that a question?
22
Q.
Yeah.
23
was worth?
24
A.
No, I did not.
25
Q.
We'll see.
Did you misrepresent what the technology
You did.
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Edra D. Blixseth
December 17, 2009
Let's go to the third page of Exhibit 10.
MR. HOLAHAN:
Who did he represent?
THE WITNESS:
Dennis Montgomery.
He's the one
who told me there were no objections or anything.
BY MR. FLYNN:
6
7
Q.
Ms. Blixseth, do you know what representations
and warrantees are in loan agreements?
A.
I think I have a general knowledge.
Q.
How many loan agreements have you signed?
10
A.
I don't know.
11
Q.
Over the years?
12
A.
I don't know.
13
Q.
Have you been borrowing money back since your
14
15
restaurant days 25 years ago?

A.
We've been in business for a lot of years and
16
had -- Tim had a lot of different things that we've done
17
over the years that had loan agreements, yes.
18
19
20
21
22
Q.
You know what reps and warrantees are in loans
agreements, don't you?

A.
I just answered that, that I have a general
knowledge, yes.
Q.
Let's go to No. 51, "All representations and
23
disclosures made by Borrowers and Guarantors including,
24
without limitation, Borrowers' and Guarantors' financial
25
condition and information concerning the property and
Page 94
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Edra D. Blixseth
December 17, 2009
improvements located thereon or any other collateral
pledged to secure the repayment of the loan collateral
are to the best of the Borrowers' and Guarantors'
knowledge accurate in all respects.
"Borrowers and Guarantors have not concealed or
withheld any material information concerning borrowers'
and guarantors' financial condition or the collateral."
8
9
Did you provide a financial statement to

Western Capital Partners?
10
A.
I don't recall if I did at this time.
11
Q.
Did you provide a cash-flow analysis to Western
12
13
Capital Partners?
A.
I don't think I would have done that with
14
Western Capital, because, again, I didn't consider this
15
my loan.
16
Q.
Then No. 55 reads, "This loan is for strictly
17
business purposes.
18
for consumer, family or household purposes.
19
will not use any portion for personal, family or
20
household purposes.
21
exclusively for Borrowers'" -- purposes -- "for
22
Borrowers' business."
23
24
25
No portion of the loan will be used

Borrowers
Instead the proceeds will be used
Did you read that?

A.
I'm telling you I don't recall if I read any of
this, but I would say that that was adhered to.
Page 95
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Edra D. Blixseth
1
2
3
4
5
Q.
December 17, 2009
Did the Story Mill project make any money in
2007 and 2008?

A.
I wasn't involved in the operation or the how
the Story Mill project was going.

Q.
So if any funds were paid in 2007 or 2008 by
your son Matthew from Story Mill bank accounts, where
else would that money have come from other than this
loan, Ms. Blixseth?
9
10
A.
I can't answer questions about Story Mill and
their cash flow.
11
Q.
Did they have any cash flow?
12
A.
I can't answer questions about that.
13
I don't
know.
14
Q.
What was Story Mill?
15
A.
Story Mill was a project that Matthew had put
16
together to develop and it may have had some other
17
things in it besides just the land at Story Mill, but
18
I'm not aware of it.
19
Q.
Let's go to 58, "Borrowers and Guarantors have
20
had an opportunity to consult with their own legal
21
counsel concerning the loan and each of the anticipated
22
loan documents."
23
Did you consult with legal counsel?
24
A.
I did not.
25
Q.
61, "Borrowers and Guarantors understand that

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Edra D. Blixseth
December 17, 2009
the lender is relying on these representations and that
it would not advance the contemplated loan," in italics,
"if any one of the representations were inaccurate or
misleading in any way."
A.
I'm sorry, which one are you reading?
Q.
61.
You knew, Ms. Blixseth, when banks or lenders
loan money they rely on your statements in loan
applications.
10
11
12
13
14
15
You knew that at the time, did you not, Ms.?

A.
They rely on the information you give them, of
course.
Q.
At the time did you disclose to Western Capital
Partners that you were involved in any litigation?

A.
Not that I recall.
16
MR. FLYNN:
17
the loan agreement.
18
19
20
Okay.
Put that aside.
Let's go to

BY MR. FLYNN:
Q.
In the interests of saving time, I believe
21
you've already testified when you were deposed by the
22
Western Capital folks that that signature on page 13 is
23
yours.
24
A.
Yes.
25
Q.
Let's go over to page 5.
This is the
Page 97
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Edra D. Blixseth
December 17, 2009
representations and warrantees in the loan agreement and
it reads:
and perform the obligations of Lender hereunder" --
A.
"To induce Lender to execute this agreement
Can I stop you just a second?
I didn't bring
my reading glasses in and this font is kind of blurry.
Do you have any?
MR. HOLAHAN:
Reading glasses?
THE WITNESS:
No?
9
10
11
BY MR. FLYNN:
Q.
as follows."
12
13
14
15
16
17
-- "hereby represents and warrants the Lender
Your counsel can follow along and you can

listen to the question, Ms. Blixseth.
A.
Can you tell me where you're reading from,
because I can kind of see it.

Q.
Page 5, No. 6, and I'm going to B, "No
litigation."
18
A.
Okay.
19
Q.
"Except as disclosed in writing to Lender prior
20
to the date hereof, there is no pending litigation or
21
unsatisfied judgment entered of record against Borrower
22
or the property.
23
"No litigation or proceedings are pending or,
24
to Borrowers' knowledge, are threatened against Borrower
25
or any Guarantor which might affect the validity or
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379
Edra D. Blixseth - December 17, 2009
1
priority of the lien of the deed of trust which might
affect the Borrower or any Guarantor to perform their
respective obligations."
MR. HOLAHAN:
You're missing words.
BY MR. FLYNN:
Q.
You're not reading correctly.
-- "to perform their respective obligations
pursuant to and as contemplated by the terms and
provisions of the agreement and the other loan
10
documents --
11
12
(Mr. Blixseth hands reading glasses to the

witness.)
13
14
15
16
THE WITNESS:
BY MR. FLYNN:
Q.
19
THE WITNESS:
Better.
BY MR. FLYNN:
Q.
20
21
-- "or which could materially affect the
operations or financial condition of the property.
17
18
Thank you.
-- "borrower or any guarantor."

Well, at the time, Ms. Blixseth, that wasn't
true, was it?
22
A.
I wouldn't know at the time.
23
Q.
June of '07 you were paying -- you were paying
24
millions of dollars for Montgomery in connection with
25
your claim that you owned the software -Page 99

800.669.1866
379
1
A.
That wasn't my claim.
Q.
-- that Montgomery allegedly possessed?
A.
That wasn't my claim.
That was eTreppid versus
Montgomery and Montgomery versus eTreppid.
Q.
Montgomery was suing eTreppid.
A.
I was aware Montgomery was suing eTreppid.
Q.
And you were paying for that?
A.
Part of our agreement, you know that --
Q.
Just yes or no, Ms. Blixseth.
10
13
14
I don't need an
explanation.
11
12
You knew that?
Were you paying for it?

A.
Can we get something clear?
Sometimes you want
me to give an explanation and sometimes you don't.

Q.
When I do, I'll ask for it.
15
Were you paying millions of dollars for the
16
defense of the technology in the Montgomery eTreppid
17
litigation?
18
A.
You're aware of that.
19
Q.
And on June 15 were you aware of it?
20
A.
It was still ongoing, but that wasn't my
21
22
I was paying it to you.
litigation.
Q.
23
It wasn't.
Were you subsequently sued?
24
A.
I think after this I was brought into it.
25
Q.
We'll go there next, when you modified this
Page 100
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379
1
agreement.
So you knew there was litigation pending that
did materially affect your financial situation, did you
not?
A.
I will answer the same -- I will answer the
question that's worded in a different way, that at that
time that was not my litigation and that that was part
of the agreement within the contract with Dennis
Montgomery that I was paying your legal fees.
10
11
12
Q.
Now you were paying the Liner legal fees as of
June '07, were you not?

A.
I think that when you were -- when -- I can't
13
remember if Skadden came on before Liner or Liner came
14
on before Skadden to take some of the things off what
15
you were doing.
16
Q.
Let's put some context to this.
After
17
April 13th, 2007, at the Porcupine Creek meeting when
18
the judge had just released the FBI reports and you and
19
Mr. Kemp and myself and Mr. Montgomery met, I withdrew
20
from the litigation, did I not?
21
A.
That's not when you withdrew, no.
You withdrew
22
after.
23
Q.
Shortly thereafter?
24
A.
Because you tried to take over the company.
25
Q.
Shortly thereafter I withdrew; correct, Ms.?
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800.669.1866
379
1
A.
You were so convinced the technology wasn't
good that you wanted the technology instead of having
your legal fees paid.
Q.
Ms. Blixseth, when you signed this document did
you have any understanding as to whether or not the
pending Trepp litigation materially adversely affected
your financial situation?
A.
Not when I signed this.
Q.
When did you confess a $26.5 million judgment
10
11
12
13
14
to Trepp?
A.
The -- the agreement -- it's hard to answer
your question the way you worded it.

Q.
When did you confess a $26.5 million judgment
to Trepp?
15
A.
I don't recall.
16
Q.
Let's go --
17
MR. HOLAHAN:
18
Reporter, paperclips?
Do you have some, Madam Court
19
Discussion off the record.
20
MR. FLYNN:
21
22
23
Let's go to this document.
BY MR. FLYNN:
Q.
Did you have your lawyer, Mr. Ryden, send the
24
letter dated May 24, 2007, to Hatch Jacobs in connection
25
with this loan?
Page 102
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379
1
MR. GLASSER:
sorry.
BY MR. FLYNN:
What exhibit are you on?
I'm
Q.
What exhibit number is that, Ms. Blixseth?
A.
It's 14.
MR. HOLAHAN:
14.
MR. GLASSER:
Thank you.
THE WITNESS:
This looks like something that I
would have called -- that Western was requesting and I
10
would have called and asked Bill to do.
11
BY MR. FLYNN:
12
Q.
Now is it your testimony, Ms., that you had
13
your divorce lawyers write Exhibit 14 when you were
14
desperately in need of money, you were binding yourself
15
to a $13 million loan, but you weren't getting anything
16
out of it; is that your testimony?
17
18
19
A.
That's such a compound question.
I can't
answer that yes or no.

Q.
When you had your divorce lawyers write this
20
letter with regard to your assets in excess of
21
$500 million, did you know that at that point in time on
22
your financial statement you'd be now liable potentially
23
for a $13 million obligation?
24
25
MR. HOLAHAN:
I'm sorry, I don't understand
that question.
Page 103
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1
If you understand it --
THE WITNESS:
3
4
I don't.
BY MR. FLYNN:
Q.
As a guarantor of the $13 million loan, what
was your understanding as to whether or not some day you
might be obligated to pay the $13 million?
A.
My understanding was based on the collateral
that Matthew was putting up for the $13 million, the
Story Mill project and the appraisal at the time and the
10
forecast of the final platting of this, that all the
11
worst-case scenarios would have to happen before I would
12
be obligated for this loan.
13
Q.
Are you currently obligated for the loan?
14
A.
I am.
15
Q.
How much money, if any, did the Story Mill
16
17
18
19
20
project ever make?

A.
I've answered that I was not involved with the
Story Mill project.

Q.
So you guaranteed $13 million and yet you had
no knowledge at the time that you guaranteed it --
21
A.
That's not what I said.
22
Q.
-- of whether the Story Mill project was even
23
viable; is that correct?
24
A.
That's not what I just said.
25
just said.
That's what you
That's not what I said.
Page 104
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1
2
3
Q.
What knowledge did you have at the time of what
the Story Mill project was about?

A.
I had knowledge that the collateral for this
loan was two spec houses at Yellowstone Club, including
their lots; that they were in second position behind
American Bank -- which was, I think, 10 or 12 million, I
don't remember -- on a project that they had appraisals
that supported this loan, and the forecast looked bright
for getting the final platting for it, which definitely
10
supported this loan.
11
So my opinion, not of the Story Mill project
12
per se, of the ongoing operations and cash flow and
13
income and expense was -- was not part of it.
14
which is the actual collateral basis for a $13 million
15
loan based on the collateral that Western Pacific was
16
taking.
17
18
Q.
It was --
Then if that was the case and that was your
view at the time --
19
A.
That was my view at the time.
20
Q.
-- why did you ask your divorce lawyer to
21
22
certify what your assets were potentially worth?

A.
I don't actually recall except that they --
23
they may have wanted to know.
Like you said, they asked
24
about Yellowstone Club World and the divorce and how
25
that was going.
There had been a lot in the paper.
Page 105
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1
They may have asked to have somebody verify
that that's what they thought I was going to end up
with.
Q.
Where is there anything in this document,
Exhibit 14, relative to Yellowstone Club World,
Ms. Blixseth?
7
8
9
10
A.
I didn't say there was.
I said that was a
question they asked me.

Q.
So what exactly did they ask you?
This was in
the Bozeman meeting?
11
A.
Correct.
12
Q.
What exactly did they ask you about Yellowstone
13
14
Club World?
A.
If that was something that was going to
15
jeopardize the value of the Yellowstone Club, because --
16
I can't remember the gentleman's name at the time that
17
was there, questioned if that was going to take off or
18
not and it was a new concept and he questioned that, if
19
we were jeopardizing Yellowstone Club in any way for
20
that.
21
Q.
Who is "he"?
22
A.
I just said I can't remember his name.
23
They
were all new people to me.
24
Q.
How did they know about Yellowstone Club World?
25
A.
There had been tons of press on it.
Page 106
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1
Q.
So when you had your lawyer send this document,
did you understand that they were checking into your
assets to determine whether or not the things you said
about your financial background was true?
A.
I understood them to know that a lot of things
can happen in divorces and that they wanted to verify
that what -- and California being a community property
state and what they had seen and saw in Forbes and that
kind of stuff that I was going to get 50 percent of what
10
11
12
our supposed assets were.

Q.
How long after the $13 million was paid did it
fall into default?
13
A.
I have no idea.
14
Q.
When did Western Capital Partners start
15
contacting you with regard to the default on the loan
16
looking to you for money?
17
A.
Well, I actually don't recall.
I know that I
18
loaned money to make the interest payments sometime
19
after the loan was made, but I don't really recall the
20
dates.
21
Q.
Let me see if I understand that testimony.
22
Sometime after the loan was made you began loaning
23
money.
24
A.
Story Mill.
25
Q.
To your son, Matthew --
Who did you loan the money to?
Page 107
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1
A.
To the Story Mill project.
Q.
-- to pay the interest payments.
Was that within the first month, Ms. Blixseth?
A.
I don't remember.
Q.
The second?
A.
No, I don't recall when it started.
Q.
The third month?
8
9
10
11
12
MR. HOLAHAN:
I don't believe so.
Counselor, she said she doesn't
recall.
BY MR. FLYNN:
Q.
How much -- were you paying all of the interest
payments?
13
A.
I don't recall.
14
Q.
Was it an interest-only loan?
15
A.
I believe so.
16
Q.
How long after you started paying the interest
17
18
19
payments did you cease paying the interest payments?

A.
I don't recall, but when I couldn't -- I
couldn't afford to pay them with my cash flow.
20
Q.
Was it within six months?
21
A.
I don't recall.
22
Q.
So you took -- your son took $13 million.
So
23
we understand what happened here, you then began paying
24
the interest payments on it, then you no longer could
25
afford to pay them and the loan defaulted; is that your
Page 108
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1
testimony?
A.
I think that was your testimony, but --
Q.
Is that yours?
A.
No, but you -- if you ask me questions, I'll
5
6
7
8
9
try to give you testimony.

Q.
Is that what happened?
Can you answer that
question?
A.
I don't believe that's the order in which
things happened.
10
Q.
What is the order in which things happened?
11
A.
Well, first of all, the 13 million wasn't just
12
13 million to work the Story Mill project or do other
13
things with.
14
off for the purchase of the contiguous hundred acres.
15
There was other things that had to be paid
So most of that was -- and to finish the
16
project for getting the platting together and some of
17
those things and some of those expenses ran higher and
18
longer than they had anticipated.
19
Q.
Did you start borrowing money from other
20
lenders when you, as guarantor, were in default on the
21
Western Capital loan?
22
23
24
25
A.
I don't recall if that -- if there was other
lending done after that.

Q.
Isn't it true that the Western Capital loan,
according to their lawsuit, was in default at least as
Page 109
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1
2
of December '07?
A.
Do you know that?
I know that we were on the phone and I was
doing conference calls with them trying to work out how
we were going to be able to handle things, but I don't
remember the date.
6
7
Q.
As of December '07 had you borrowed money from
First Bank & Trust?
A.
Of December '07?
Q.
Yes.
10
A.
I believe that I did.
11
Q.
Had you borrowed money from American Bank?
12
A.
I believe that I had, yes.
13
Q.
Did you tell First Bank & Trust or American
14
Bank that you were in default as a guarantor on the
15
Western Capital loan?
16
17
18
(Speakerphone emits loud static.)

BY MR. FLYNN:
Q.
Did you tell American Bank or First Bank &
19
Trust when you borrowed those monies in late '07 that
20
you were in default as a guarantor on the Western
21
Capital loan?
22
A.
I don't recall.
23
Q.
Did you give them any, those banks, any
24
financial statements disclosing the Western Capital
25
loan?
Page 110
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1
A.
I don't recall if they were on them or not.
Q.
Isn't it true, Ms. Blixseth, that you did not
notify either American Bank or First Bank & Trust that
you were in default of the Western Capital loan as a
guarantor when you began taking millions of dollars from
them?
7
8
9
A.
Isn't that true?

I just have to say I don't recall.
I don't
recall the dates.

Q.
Okay.
Let's get into the loan.
Do you
10
remember what the loan modification agreement was
11
with -- you may have it over there.
12
No, here it is.
13
We're a little bit out of order here.
14
take that first.
15
16
17
18

BY MR. FLYNN:
Q.
21
Do you remember entering into this loan
modification agreement a year later in June of --
19
20
Let's
MR. GLASSER:
Is this Exhibit 16?
BY MR. FLYNN:
Q.
-- '-08?
22
This is Exhibit 16, yes.
Thank you.
23
THE WITNESS:
Are yours marked?
24
MR. HOLAHAN:
No, mine are not marked.
25
THE WITNESS:
I think it's this one
Page 111
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1
(indicating).
2
3
4
5
6
7
MR. HOLAHAN:
Yeah, it is.
BY MR. FLYNN:
Q.
In June of '08 do you remember entering into
this loan agreement?

A.
Hang on just a second.
My lawyer is still
trying to --
Okay.
Now I'm ready.
Q.
Do you remember entering into this document?
10
A.
Barely.
June of '08 was when there was a whole
11
lot of things going on, trying to settle with Tim and
12
Yellowstone Club things and stuff that were, I felt, my
13
things.
This was, again, I still felt as Matthew's.
14
Q.
Did you sign this document?
15
A.
Sure I did, but why don't you tell me what
16
17
18
19
page.
Q.
in your prior deposition -A.
20
21
If you're sure you did, I believe you testified
Yeah, I'm sure I did.

I did.
Q.
It's on page 8.
Let's go down to Release of Collateral under
22
this agreement in June '08.
23
document had you just borrowed $13 million from First
24
Bank & Trust and Wachovia?
25
A.
At the time you signed this
No.
Page 112
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1
2
Q.
At the time you signed this document had you
borrowed $8 million from Wachovia?
A.
At the time?
Q.
Yeah.
Roughly at this time frame had you
borrowed $8 million from Wachovia?
A.
No.
Q.
The answer is no?
A.
No.
Q.
Between March and June '08 did you borrow
10
$8 million from Wachovia bank?
11
A.
Not $8 million, no.
12
Q.
Okay.
And did you execute a loan agreement in
13
both March and June '08 with Wachovia Bank first for
14
$5 million, then for $3 million?
15
A.
There were two separate loans and the time
16
frame for the first one was not the time frame you just
17
said and I believe the 3 million was.
18
19
Q.
have all those documents.
20
21
Let's go down to the Release of Collateral.
MR. HOLAHAN:
We'll get into them.
Hold on one second here.
I'm not
finding your signature here.
22
THE WITNESS:
23
eight or something.
24
BY MR. FLYNN:
25
We
Q.
Yeah, I found it.
It was on like
Let's go down to the document -- first page,
Page 113
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1
Ms. Blixseth.
MR. HOLAHAN:
Hold on, Mr. Flynn.
THE WITNESS:
No?
MR. HOLAHAN:
These pages are out of order.
THE WITNESS:
Yeah.
The pages are out of
order, but I did find it.
MR. FLYNN:
MR. HOLAHAN:
Let me go back.
It's on page 8, Mr. Holahan.

I don't have that.
That's not in
my copy.
10
MR. FLYNN:
11
THE WITNESS:
I believe it is.
It is, they're just out of order.
12
It shows 8 and then it jumps to no page number, no page
13
number then it goes to 10 and it's behind it.
14
BY MR. FLYNN:
15
16
Q.
Ms. Blixseth, let's go down to No. 1, Release
of Collateral.
17
A.
What page?
18
Q.
First page.
19
20
21
MR. HOLAHAN:
I don't have it.
BY MR. FLYNN:
Q.
"Lender hereby agrees to release the security
22
interest in Edra D. Blixseth's ownership interest in and
23
to Blxware, LLC."
24
25
Do you see that, Ms.?

A.
Tell me where -- I'm sorry, no.
Page 114
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1
Q.
No. 1, Release of Collateral.
A.
I gotcha.
Q.
Why did you have them release the collateral
4
5
involving Blxware?
A.
Oh, I remember this.
This is when we first --
this is when we first discovered that, I believe almost
a year before, that there had been a blanket UCC filed
on everything that we were not aware of.
So when they -- so when we were getting ready
10
to do the -- when we were getting ready to do the
11
Wachovia loan, I believe, it was discovered -- and I
12
believe Liner was involved at the time, because Liner is
13
the one that brought Wachovia to me -- and they
14
discovered it and part of the condition on redoing this
15
was to have them release that.
16
Q.
To release Blxware security?
17
A.
Yeah.
18
Q.
Let's go over to the second page.
In paragraph
19
No. 2, the next to last sentence reads, "Also that
20
certain loan affidavit, dated June 15, 2007," that's the
21
one we went over, "which is part of the loan documents,
22
is hereby amended to include the additional collateral
23
and the Borrower and Guarantor hereby reconfirm and
24
remake all the representations and warrantees made in
25
the affidavit and also make the same representations and
Page 115
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1
warrantees with respect to the additional collateral."
So did you know, Ms. Blixseth, that you were
reaffirming all of those representations and warrantees
that we had previously read?
5
6
A.
Yeah.
You know, again, this is during a time
where we were trying to get things finalized between --
Q.
The question is simple:
A.
The question is not as simple, maybe I'm
Did you know?
just --
10
Q.
Yes or no?
11
A.
It's not a yes-or-no question.
12
MR. HOLAHAN:
Mr. Flynn, you can let her answer
13
the question and if you have a follow-up question, you
14
can ask it.
15
MR. FLYNN:
16
MR. HOLAHAN:
17
MR. FLYNN:
18
Q.
20
read them?
21
A.
23
24
25
You're going to get an objection.

I'll withdraw the question.
Next
question.
19
22
I don't want dialogue, Mr. Holahan.
At the time you signed these documents did you
I don't recall if I read them or I had Liner
read them for me.

Q.
So you had your lawyer read them; is that
correct?
A.
I don't recall if I read them, because I
Page 116
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1
believe when I talked to -- when Wachovia brought to the
attention of Liner, who was handling the Wachovia loan
for me, that the UCC was filed by Western Capital I was
surprised.
I had them look into it.
It was during the same time that this was being
renegotiated or reaffirmed or whatever and I -- I
believe that it was Liner that talked to them about -- I
think it was Jeff Adams, I can't remember -- about
releasing that.
10
Q.
Ms. Blixseth, when you signed this document,
11
you had advice of counsel from Liner; is that your
12
testimony?
13
A.
No.
My testimony is that I don't remember if
14
they actually read this.
15
involved, because they were involved with Wachovia and
16
they were involved with when we found out about the UCC
17
and that we needed to have that removed on Blxware.
18
Q.
I remember that they were
At the time you signed this document was the
19
Liner law firm representing you in the existing
20
litigation in which you were a defendant?
21
MR. HOLAHAN:
What litigation?
22
THE WITNESS:
What litigation?
23
MR. FLYNN:
24
THE WITNESS:
25
ETreppid and Montgomery.

What was the date?
///
Page 117
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379
1
BY MR. FLYNN:
Q.
June '08.
A.
I think I was already brought into that at that
4
5
time.
Q.
Did you disclose to Western Capital Partners in
June '08 when they rewrote this loan that you were a
defendant in the Montgomery litigation?
8
9
A.
I had no communication with Western when this
was being done.
10
Q.
11
testimony?
12
A.
13
That was strictly done by Liner; is that your
It was strictly done by people telling me what
was going on and me saying, "Check it out," and -- yeah.
14
Q.
And Liner --
15
A.
I was in the middle of things I thought were
16
17
18
more important and that was getting the balance of -Q.
Ms. Blixseth, please listen to the question.
do not want all of this verbiage.
19
A.
Okay.
20
Q.
The question is at the time were you
21
represented by Liner in June '08 in the eTreppid
22
Montgomery litigation?
23
24
25
A.
And my answer was I believe I was already added
to the litigation at the time.

Q.
The question is were you represented by Liner?
Page 118
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379
1
2
A.
it would be Liner I was represented by.
3
4
If I was added to the litigation at this time,
Q.
Now Liner knew you were involved as a defendant
in litigation; isn't that true?
A.
If they were my lawyers, I hope so.
Q.
And Liner knew that the litigation involved
Blxware and the software technology that had been
pledged to Western Capital; isn't that true?
9
10
A.
The Western Capital pledge was a blanket UCC.
It wasn't specifically pledged to them.
11
Q.
Ms. Blixseth, please listen to the question.
12
A.
I did and I answered.
13
Q.
Did Liner know that the Blxware technology was
14
involved in the litigation in which you were a
15
defendant?
16
A.
17
Did they know that, Ms.?
I can't speak for Liner.
Liner was
representing me.
18
Q.
You were the client?
19
A.
I was the client.
20
Q.
And it's your testimony you don't know whether
21
or not they were defending you and your technology?
22
A.
My answer is I'm not going to speak for Liner.
23
MR. FLYNN:
24
25
Now get into Exhibit 15.
///
Page 119
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1
2
3
4
5
6
7
8
9
10
BY MR. FLYNN:
Q.
Declaration of Edra Blixseth.

A.
Before I go to the last page, can I read what
this is?
Q.
All I'm interested in is the next to last page,
your declaration.
A.
I'd like to know what the declaration is for.
If you give me 30 seconds, I can look at the front and

tell what it's for before I go to the page.
11
12
Go to the last page, the next to last page, the
Okay.
Q.
Now this declaration is dated July 27, '07,
13
roughly a month after you got the 13 million -- or Story
14
Mill got the $13 million from Western Capital Partners
15
and you guaranteed you were able to pay your bills as
16
they matured.
17
Paragraph 3 reads, "As a result I am presently
18
in arrears to creditors in the approximate amount of
19
$2 million.
20
the sale of my real estate parcel, these debts are
21
primarily due to the ordinary expenses of Porcupine
22
Creek and they are increasing by hundreds of thousands
23
of dollars per month."
24
25
Even after using all of the proceeds from
As of July 27 when you signed this,

Ms. Blixseth, how long had you been in arrears with
Page 120
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379
1
creditors?
A.
I don't recall.
Q.
Were you in arrears with creditors as of
June 15, '07, when your son got the $13 million from
Western Capital?
A.
I don't recall.
Q.
When your son got the $13 million from Western
Capital, did you have any conversations with him about
how much of the loan proceeds you would get?
10
MR. HOLAHAN:
Asked and answered.
She's
11
already testified she didn't get any of the loan
12
proceeds.
13
MR. FLYNN:
14
MR. HOLAHAN:
15
objecting.
16
BY MR. FLYNN:
17
Q.
Are you instructing her?

No, she can answer.
I'm just
Did you have any conversations with your son,
18
Matthew, during June, July '07, about getting money from
19
Story Mill or from him?
20
A.
I knew with how the loan was going to now come
21
about from Western to Story Mill that what was
22
originally anticipated that I'd get paid back some of
23
money I'd been loaning for Story Mill was not going to
24
be able to happen and I would not get any money from it.
25
Q.
When you wrote this declaration were you
Page 121
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1
cognizant and signed it under oath, were you cognizant
of the fact you had just represented as a guarantor to
Western Capital Partners that you could pay your bills
as they matured?
5
6
A.
Q.
cover.
Let's move on.
We've got a lot of ground to
Put these over there, Tim.
10

BY MR. FLYNN:
12
13
I've said I don't recall
exactly where I was at the time this was signed.
11
I've answered that.
Q.
Do you know what a preliminary injunction is,
Ms. Blixseth?
14
A.
I do now.
15
MR. HOARD:
Which exhibit?
16
MR. FLYNN:
That's Exhibit -- what, 17?
17
THE WITNESS:
Uh-huh.
18
MR. HOLAHAN:
How many pages?
19
THE WITNESS:
Five, I think.
20
BY MR. FLYNN:
21
Q.
Were you advised there was a preliminary
22
injunction in effect as of February 8, 2006, in
23
connection with the technology that you were paying a
24
hundred thousand dollars a month to Dennis Montgomery
25
for?
Page 122
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1
MR. GLASSER:
MR. FLYNN:
Are you on an exhibit, Mr. Flynn?

It's 17.
It starts Order in the
Second Judicial District.
MR. GLASSER:
Okay.
THE WITNESS:
Are you asking me what date was I
aware of this?
BY MR. FLYNN:
8
9
10
Q.
Let's start there.
What date were you aware of
this preliminary injunction?

A.
I don't recall, but I remember when I met with
11
you and Dennis before I -- when Michael Sandoval --
12
Michael Sandoval brought you guys to me, I remember
13
asking if the eTreppid litigation was going to stop us
14
from being able to move forward on commercial viability
15
of the technology.
16
17
18
19
20
21
22
Q.
So are you saying that you were aware of the
preliminary injunction as of that date?

A.
No.
I was aware there was none.
I was told
there was none.

Q.
When were you first given notice of the
preliminary injunction, Ms. Blixseth?

A.
Probably about a year later.
I found out
23
that -- actually, maybe sooner than that, but we got
24
things moving and started getting things together.
25
I was also told at the time that there was
Page 123
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1
going to be a contract that -- coming along with Dennis.
In fact, you're the one that explained the contract and
how -Treppid screwed it up and that was going to be able
to come along with Dennis at the time of the agreement.
MR. FLYNN:
Who first --
MR. HOLAHAN:
MR. FLYNN:
10
MR. HOLAHAN:
11
MR. FLYNN:
13
14
15
16
17
18
19
Are you striking your move to
strike or are you moving to strike?
12
Move to strike.
Who first informed you -Wait a minute.

Mr. Holahan, I'm withdrawing all
those questions.
Q.
Who first informed you of this preliminary
injunction?
A.
I'm confused.
What questions are you
withdrawing?
Q.
Who first informed you of the preliminary
injunction?
A.
I don't recall who first informed me.
I recall
20
being surprised by it, since I was told there wasn't one
21
by Montgomery's counsel which was you.
22
Q.
Were you aware when you signed the June '07
23
Western Capital loan that there was a preliminary
24
injunction in place?
25
A.
'07?
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1
Q.
'07.
A.
Probably.
Q.
A year and a half later, Ms. Blixseth.
A.
I think I was by then.
Q.
You were aware there was a preliminary
injunction in place?
A.
I was aware of that.
Q.
Okay.
Let's move on.
At some point in time did you come to
10
understand that that preliminary injunction involved all
11
of Montgomery's purported technology?
12
13
A.
I discovered that all of what was under the
lawsuit with eTreppid.
14
MR. FLYNN:
15
And here's an order dated August 2, '07.
16
17
MR. GLASSER:
18
MR. FLYNN:
20
MR. GLASSER:
Exhibit 18.
And at the end of this depo are
you going to give the court reporter these?
22
23
What exhibit are we on, do you
know?
19
21
Thank you.
MR. FLYNN:
Q.
Yeah, she will take possession.
Here's an order dated August 2, '07, by Judge
24
Pro affirming the preliminary injunction when you were
25
represented by the Liner firm.
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1
Did you know as of August 2, '07, that there
was a preliminary injunction in effect on Montgomery's
technology?
A.
Clearly I did.
Q.
And so as of June '07, did the Liner firm --
between June and August 2, '07, did the Liner firm
inform Western Capital Partners that there was, in fact,
a preliminary injunction on the Blxware technology
collateralized to them?
10
A.
I can't speak for the Liner firm.
11
Q.
And a year later in June '08 when you modified
12
the loan, did anyone notify Western Capital Partners
13
that there was a preliminary injunction in effect.
14
A.
I'm not aware of it.
15
Q.
Did you borrow any more money from any other
16
lending institutions?
17
That's all for now.
18
Did you borrow any more money from any other
19
lending institutions in which the Blxware collateral was
20
collateralize while subject to the injunction?
21
22
23
24
25
A.
Well, the way you worded that, I didn't put
Blxware up for Western Capital.

Q.
No, any other lenders.
They filed a UCC.

Please listen to the
question.
A.
I'm trying very hard.
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1
2
3
Q.
Did you borrow any money from any other lender
to which you pledged Blxware as collateral?

A.
But you're saying any other as if I'd already
pledged to others.
time answering your question.
6
7
8
9
10
Q.
That's the reason I'm having a hard
Did you pledge Blxware to any lender, period,
during the period of the preliminary injunction?

A.
I pledged to the second Wachovia, which is what
we were referring to on the 3 million and the 5-.

Q.
So you got 8 million more on the Blxware
11
technology while there was a preliminary injunction; is
12
that correct?
13
A.
I got $3 million.
14
MR. FLYNN:
15
Let's deal with Exhibit 19, one of the FBI
16
reports indicating the technology was fraudulent.
17
18
We'll get into that.

BY MR. FLYNN:
19
Q.
Have you seen that FBI report, Ms. Blixseth?
20
A.
I'm confused with this, because when this --
21
when you're talking about this is after the --
22
Q.
The question is simple:
Have you seen --
23
A.
The question is not simple.
24
Q.
-- Exhibit 18?
25
A.
The question is not simple, because this report
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was part of --
MR. HOLAHAN:
19 or 18?
THE WITNESS:
19.
MR. FLYNN:
THE WITNESS:
19, I'm sorry.

That this report was part of
something after an illegal raid by the FBI on Montgomery
on which you represented him and this was part of the
report to try to say that the technology was worthless
anyway.
10
BY MR. FLYNN:
11
Q.
Does that mean you've seen it?
12
A.
I don't know if I've seen this exact one.
13
14
just know this was part of what was in court.

Q.
When did you first learn that the FBI was
15
saying in written reports that the technology was
16
fraudulent?
17
A.
I believe I learned it from you stating that
18
that's what you guys were going to use in defense of
19
Dennis's rights as illegal FBI raid.
20
MR. FLYNN:
Thank you, Ms. Blixseth.
21
Here's another FBI report, Exhibit 20, also
22
indicating that the technology was fraudulent, and these
23
date back to early '06.
24
2006, by Judge Pro.
25
They were released on April 9,
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BY MR. FLYNN:
2
3
Q.
Ms. Blixseth?
4
5
6
7
8
9
When did you get this part of the FBI report,
A.
I really don't know.
I don't know if I ever
Q.
Was it on April 12th or 13th, 2009 -- strike
did.
that, 2007, at Porcupine Creek?

A.
I don't recall.
I recall you going over the
case and things that they had filed in court that were
10
going to substantiate the information that was given to
11
them to get the FBI search warrant wasn't credible and I
12
recall that, but I don't recall seeing documents.
13
14
Q.
Were the FBI reports given to you and Mr. Kemp
in April of 2007, Ms. Blixseth?
15
A.
I don't recall.
16
Q.
Did the Liner firm give you the FBI reports
17
that have been marked Exhibit 19 and 20?
18
A.
Not to the best of my knowledge.
19
Q.
Okay.
20
Mike West.
21
A.
Let's go to the declaration of FBI agent
21.
22
23
MR. FLYNN:
24
25
Q.
This will be Exhibit 21.
Ask you just simply yes or no, have you seen
this document?
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1
A.
I think I have seen this one.
Q.
And when did you see it?
A.
I think was given to me when during discussions
of how you were going to handle the alleged legal raid
and make it an illegal raid of Dennis Montgomery's --
Q.
7
8
11
MR. HOLAHAN:
Were you through with that
THE WITNESS:
Just a run-on.
answer?
9
10
And now in July --
BY MR. FLYNN:
Q.
In July of '06 did you visit Vice President
12
Cheney's office trying to sell the technology to
13
Mr. Cheney knowing there was a preliminary injunction in
14
place?
15
A.
16
With your whole question in place just the way
it was, no.
17
Q.
Did you visit Vice President Cheney's office?
18
A.
Yes.
19
Q.
Did you try to sell the technology to him?
20
A.
No.
21
Q.
What did you do?
22
A.
We talked about the obstacles we were running
23
into of what we thought was technology that the DOD was
24
going to want to be using.
25
Q.
And what were the obstacles?
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2
MR. HOLAHAN:
testify about this?
3
4
THE WITNESS:
That part I can.
That part's
common knowledge.
5
6
Are you -- are you free to
MR. HOLAHAN:
Uh-huh.
BY MR. FLYNN:
Q.
Ms. Blixseth, what were the obstacles?
A.
Of some within the people that had worked with
Warren Trepp were saying that the technology was not
10
valid and the people that had been using the technology
11
for tests and other things were saying it was valid.
12
Q.
Now in this -- on page 2 it reads, "Special
13
Agent Gunderson further related that Dennis L.
14
Montgomery was the Azimyth employee --
15
MR. HOLAHAN:
16
MR. FLYNN:
17
Q.
What line, Counsel?

Page 2, lines 19 to 21.
-- "who located the information.
Special Agent
18
Gunderson advised me in a subsequent conversation that
19
Mr. Montgomery had reported that he located increased
20
noise in recent Al-Jazeera video transmissions."
21
Did you represent or Sandoval represent to
22
anyone in Cheney's office that Montgomery had decoded
23
al-Qaida communications on Al-Jazeera transmissions?
24
25
A.
We showed them -- we showed them what we had
been -- the data that we had been processing.
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1
Q.
Did that purport to show that Montgomery was
intercepting al-Qaida communications on Al-Jazeera
transmissions?
A.
That I can't answer.
Q.
Ms. Blixseth, isn't it a fact that you have
told numerous people that there was a $100 million black
budget allocated from Montgomery's noise filtering
technology to filter out al-Qaida communications on
Al-Jazeera transmissions?
10
11
12
You've told that to numerous people, have you

not?
A.
No.
The first time I ever heard there was a
13
hundred million dollar contract came out of your mouth
14
that that's what Dennis Montgomery was bringing to the
15
new company that Warren Trepp screwed up.
16
Q.
When was that?
17
A.
That was when you were at my house with
18
Sandoval and Dennis the very first time I met you.
19
MR. HOLAHAN:
Now we're going to have to take
20
your deposition, you realize.
21
BY MR. FLYNN:
22
Q.
That would be in March of '06, Ms. Blixseth?
23
A.
You have a better memory of months and dates,
24
25
but I know it was in '06.

Q.
So when you went to see Cheney was it an effort
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1
to try to get the hundred million dollar contract?
A.
It was an effort to try to see what the
blockage was in order to see how we could go about
talking to them about the technology we had.
Q.
To sell it to them?
A.
No, to talk to them about it.
Q.
Did you want to get the hundred million
dollars, Ms. Blixseth?
A.
If the technology was something that they
10
wanted to use and it was something we could do.
11
wasn't trying to invest the money or have the burn rate
12
it was to not try to get money back out of it.
13
Q.
Were you paying a hundred thousand dollars a
14
month to Montgomery in order to try to get the hundred-
15
million-dollar contract, Ms. Blixseth?
16
A.
I was paying a hundred thousand dollars a month
17
for him to be the chief scientist for Blxware and
18
Opspring.
19
Q.
Were you paying him a hundred thousand dollars
20
a month, yes or no, to get the hundred-million-dollar
21
contract?
22
MR. HOLAHAN:
Asked and answered.
23
THE WITNESS:
It's not a yes-or-no question.
24
MR. HOLAHAN:
She answered that question.
25
///
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1
BY MR. FLYNN:
Q.
Now Cheney rejected you; is that correct?
A.
Q.
What did Cheney's office say?
A.
They were going to investigate and check into
what the roadblocks were.
Q.
And what then happened?
A.
They did some investigations and found that
they were getting discrep- -- different discrepancies in
10
the reports and we ultimately did not put a contract
11
together through the Cheney office.
12
13
Q.
And then you went to Robert Franks at the Wall
Street Journal?
14
A.
No, that's not correct.
15
Q.
We'll look at your emails.
16
A.
Okay.
17
Q.
Now Ms. Montgomery --
18
A.
I'm Ms. Blixseth.
19
Q.
Ms. Blixseth, I get confused.
20
Did you testify a minute ago that you only got
21
$3 million from Wachovia for pledging the Blxware
22
security?
23
A.
I testified that the additional amount that I
24
got -- I already had a $5 million loan and the
25
additional amount I got was 3-.
Page 134
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1
2
Q.
Did you pledge the Blxware security to first
get $5 million before you got the $3 million?
A.
I didn't -- I don't believe so but --
Q.
What exhibit do you have there in front of you,
Ms. Blixseth?
A.
22.
Q.
22.
8
9
10

BY MR. FLYNN:
Q.
Let me ask you a couple of questions:
As of
11
March 6, 2006, when you got this $5 million demand loan,
12
were you in default with Western Capital Partners?
13
A.
Tell me the date again.
14
Q.
The date on the document, March 6, 2008, were
15
16
you in default with Western Capital Partners?

A.
We may have been in technical default, but we
17
were working with them on trying to get things -- at
18
that time they were wanting to be cooperative and trying
19
to get things, so we got things together and Matthew was
20
work closely with Western.
21
22
So I can't answer if we were -- if they had

filed a default or if we were in technical default.
23
Q.
Were you paying them?
24
A.
Intermittently the interest was being paid.
25
Q.
As of March 6, 2008, when was the last time you
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1
had paid Western Capital Partners?
A.
I can't recall.
Q.
As of March 6, 2008, were you in default with
American Bank?
A.
I believe so.
Q.
As of March 6, 2008, were you in default with
First Bank & Trust?
A.
I don't recall.
Q.
When you got the $5 million on or about
10
March 6, did you disclose to Wachovia Bank that you were
11
in default or technical default with either First Bank &
12
Trust, American Bank or Western Capital Partners?
13
14
15
A.
I don't recall, but the use of the funds from
Wachovia, they knew were to get some things -Q.
Please, the answer is I don't recall?
Is that
16
your testimony?
17
default when you took $5 million from Wachovia Bank?
18
You don't know whether you were in
MR. HOLAHAN:
Counsel, if you don't let her
19
finish answering your questions, we're going to stop the
20
deposition, very simply.
21
MR. FLYNN:
Counselor, I'm not interested in
22
all the add-ons.
23
whether you were in default as of August 2006?
24
or no.
25
The simple question:
Do you know
It's yes
You either know or you don't know.

MR. HOLAHAN:
If you don't let her answer the
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1
questions you ask, we're going to stop.
2
3
MR. FLYNN:
You do whatever you're going
to do and I'll do what I'm going to do.
4
5
Yeah.
MR. HOLAHAN:
Q.
Okay.
Ms. Blixseth, as of March 6, 2008, were you in
constant email communication with Leon Royer from
American Bank with regard to trying to cure the default
that had been going on for months with American Bank?
9
10
11
A.
I can't tell you the exact dates.
There were
things that -- I can't tell you the exact dates.

Q.
Now as of this time, early March '08, is that
12
roughly the same period of time that you first found the
13
fake target letters?
14
15
A.
not fake.
16
17
18
I'm not aware of target letters being fake or

I told you when I think I first got them.
MR. HOLAHAN:
That's all right.
BY MR. FLYNN:
Q.
Now as of early March '08, were you
19
communicating with Sam Byrne about trying to make a
20
separate deal on the Yellowstone Club?
21
A.
Absolutely not.
22
Q.
As of March 21, '08, did you send Gary Peters
23
to Sam Byrne's office to make a separate deal on the
24
Yellowstone Club?
25
A.
That was not why Gary Peters went to Sam
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1
Byrne's office.
2
3
Q.
respect to why Gary Peters went to Sam Byrne's office?
4
5
A.
There were a lot of emails going back and forth
between Gary Peters and me.
6
7
Do you have numerous email communications with
Q.
Was one them relating to your effort to get the
club in place of Mr. Blixseth?
A.
Absolutely not.
Q.
As of March 21, '08, were you subject to an
10
injunction by the family court about interfering with
11
the sale of the Yellowstone Club?
12
A.
13
not.
14
again.
15
Q.
I don't recall if there was an injunction or

I recall that the judge said -- tell me the date
Early March '08.
Were you subject to an
16
injunction from the family court prohibiting you from
17
interfering with the sale of the Yellowstone Club?
18
A.
I don't remember if it was an injunction.
19
remember that the judge said to -- there can only be one
20
of us negotiating with that and that would be Tim since
21
he had been doing that.
22
Q.
With respect to this $5 million loan, did you
23
know at the time that you were pledging Blxware security
24
that was subject to a preliminary injunction?
25
THE WITNESS:
I don't know how to answer that,
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1
because it wasn't -- we were doing things besides at the
same time.
MR. HOLAHAN:
You can say you don't understand.
THE WITNESS:
Yeah, I'm not sure how to answer
that question.
BY MR. FLYNN:
Q.
Let's go through the loan document.
In the
first paragraph it references a correct copy of a
certain license agreement between borrower and
10
guarantor.
11
MR. HOLAHAN:
Which document are you looking at
13
THE WITNESS:
22.
14
MR. FLYNN:
12
15
now?
Q.
Exhibit 22.
Did you issue -- who owned the technology as of
16
March 6, 2008, that was pledged as collateral to
17
Wachovia Bank for this $5 million?
18
Ms. Blixseth?
19
20
21
22
A.
Who owned it,
I don't recall if it was me, personally, or it
was Blxware.
Q.
Did you enter into a license agreement giving
it to Blxware, licensing it to Blxware?
23
A.
License it for use?
24
Q.
Yes.
25
A.
I believe so.
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1
Q.
Let's go over to page 3 of Exhibit 22,
Representations and Warrantees.
don't you, Ms. Blixseth?
A.
You know what they are,
My answer is the same as you've asked me now
five times.
representations and warrantees are.
Q.
I think I'm generally aware of what
This reads, "To induce the bank to enter into
this letter and make the loan hereunder, the Borrower
represents and warrants to the bank that, A, Litigation,
10
there are no legal or arbitration proceedings or any
11
proceedings by or before any governmental or regulatory
12
authority or agency now pending or to the knowledge of
13
the Borrower threatened against the Borrower, the
14
Guarantor or any of Guarantor's subsidiaries, which,
15
with respect to this agreement, the note, the guarantee,
16
the security agreement or any of the transactions
17
contemplated hereby or thereby or which could have a
18
material adverse effect on the financial condition or
19
operations or the prospects or business of, one, the
20
Borrowers or, two, the Guarantor and its subsidiaries."
21
22
Now that was false, wasn't it, Ms. Blixseth?

A.
If it -- if it says that they weren't aware of
23
the litigation when there was other ways to use the
24
technology, then what's part of -- that we were working
25
on at Bellevue, which is part of -- or excuse me,
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1
different than eTreppid.
2
3
Do you want me to wait so you can hear my

answer?
Wachovia was brought to me by Liner, so Liner
was the law firm representing me in the eTreppid
litigation.
7
8
Q.
technology; is that correct, Ms. Blixseth?
9
10
A.
Q.
So this statement is false.
There was
litigation pending, wasn't there, Ms. Blixseth?
13
14
To some of the technology, but not to all of
the technology that Blxware was developing.
11
12
So there was litigation pending relating to the
A.
I would say that there was litigation still
pending.
15
Q.
And your law firm, Liner, was representing you
16
and Montgomery in the litigation that was pending; isn't
17
that true, Ms. Blixseth?
18
A.
That is true.
19
Q.
Did you read this document before you signed
21
A.
I don't recall.
22
Q.
Now did you know that the litigation in Nevada
20
it?
23
involving Montgomery and eTreppid when you signed it
24
involved the preliminary injunction in connection with
25
the technology you were pledging as collateral?
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1
2
A.
With the technology that eTreppid and
Montgomery were suing over, I did know that by then.
Q.
What did you do with the $5 million?
A.
That's what I was trying to answer a few
minutes ago.
I paid -- I got things current.
interest current.
I got
I paid -- I paid things off.
Q.
Did you pay Western Capital Partners?
A.
They may have been -- they may have gotten some
interest then.
I'm not sure.
10
Q.
Did you pay American Bank and Leon Royer.
11
A.
I believe they got some interest current in
12
there, not paid the loans off.
13
Q.
Did you pay First Bank & Trust?
14
A.
You know, I should just say I don't recall.
15
The money was used to get things current and, hopefully,
16
have some stability until we got the other stuff
17
resolved with the marital.
18
19
Q.
Isn't it true that you didn't pay anybody but
gave $1.5 million to Tony Robbins of the $5 million?
20
A.
That's not true.
21
Q.
Did you give $1.5 million to Tony Robbins?
22
A.
No, I did not.
23
Q.
Did you give $1.5 million to any entity other
24
25
than Blxware?
A.
No I not.
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1
Q.
Where did the $1.5 million go?
A.
I don't know what 1.5 you're talking about.
Q.
Where did the $5 million go?
memory in general.
5
6
Give me your best
MR. HOLAHAN:
She already answered that
question, counsel.
THE WITNESS:
I can't.
MR. HOLAHAN:
She already answered that
9
10
11
question to the best of her recollection.

BY MR. FLYNN:
Q.
Can you give me any idea whether you paid any
12
kind of an approximate amount to Western Capital, a
13
dollar?
14
A.
10,000?
A hundred thousand?
I already answered that.
I believe some of
15
their interest was paid when I got this, but I'm not
16
positive.
17
Q.
Same with American Bank?
18
MR. HOLAHAN:
19
MR. FLYNN:
20
21
22
23
24
25
Q.
Asked and answered, Counsel.

Let's move on.
Is this your signature at the end,
Ms. Blixseth?
A.
Looks like it.

MR. GLASSER:
What exhibit are you on,
Mr. Flynn?
MR. FLYNN:
Same exhibit.
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1
MR. HOLAHAN:
22.
MR. GLASSER:
22.
3
4
5
BY MR. FLYNN:
Q.
So it's your testimony that Liner represented
you in this transaction?
MR. HOLAHAN:
No, she did not say that.
THE WITNESS:
Yes, I did.
They represented me.
They brought Wachovia to me and that's how I met
Wachovia.
10
11
BY MR. FLYNN:
Q.
12
Thank you.
Thank you.
In fact, you had a meeting in Steve
13
Yankelevitz's office within two weeks before this loan
14
in which you and Yankelevitz and an individual named
15
Vijay Chandran were present; isn't that correct,
16
Ms. Blixseth?
17
18
19
20
21
22
23
24
25
A.
I had a meeting with those three at the Liner
firm.
Q.
Thank you.
What is your best memory of what was said at
that meeting?
MR. HOLAHAN:
Objection.
Attorney-client
privilege.
MR. FLYNN:
No.
Mr. Chandran is a
representative of -- he's a representative of Wachovia
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1
Bank, Mr. Holahan.
MR. HOLAHAN:
That true?
THE WITNESS:
Yeah.
BY MR. FLYNN:
Q.
What was said at that meeting, Ms. Blixseth?
A.
It was an introduction.
7
8
9
I don't really recall.
It was an introduction.
Q.
Did you advise Mr. Chandran at that time about
the litigation in Nevada.
10
A.
Not to my best recollection.
11
Q.
Did Mr. Yankelevitz advise Mr. Chandran about
12
the litigation in Nevada?
13
A.
I don't recall.
14
Q.
Was any kind of kickback paid to Mr. Chandran?
15
A.
I have no idea.
16
Q.
By you or Mr. Scalia?
17
A.
I can tell you I did not pay any kickback to
18
anybody and I can't speak for Jack, but I assume that's
19
negative as well.
20
Q.
Did you represent to Mr. Chandran that you had
21
in your possession, Blxware, a contract with the federal
22
government, a black budget contract at that time -- at
23
the time of the meeting?
24
A.
And what was the date of the meeting?
25
Q.
Within the two weeks before March 6th, 2008?
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A.
No, I did not.
Q.
Did Mr. Yankelevitz represent to Mr. Chandran
that there was a black budget contract owned by Blxware
involving Montgomery's technology?
A.
Not in front of me.
Q.
Did anyone represent to Wachovia Bank that
Blxware had a contract in place with the federal
government in connection with the Blxware technology?
A.
10
Q.
What did you tell Mr. Chandran during this
11
12
meeting?
A.
I've already -- I've already said that I don't
13
recall everything that was said in the introduction,
14
kind of explained the technology, what we were trying to
15
do and that was it.
16
Q.
What did you explain?
17
A.
Explained that, that Dennis had come on board,
18
explained kind of the history of when he came on board,
19
what we thought we were going to be able to do, may have
20
talked about the injunction because part of what I had
21
to explain was why the burn rate went on so long before
22
we could try to take it to commercial and have cash
23
flow.
24
25
Q.
So your memory now is you believe that someone
disclosed to Mr. Chandran the injunction?
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A.
I'm just saying may have.
In going through why
by this date we still hadn't taken anything to the
marketplace, that may have been talked about.
Q.
As of March '08 did you even have a product?
A.
Not that we could take to the marketplace.
Q.
Were any representations made to you -- made by
you to Mr. Chandran in the meeting with regard to having
a product that you could take to the marketplace?
A.
Not by me.
10
Q.
Did anyone represent to Wachovia Bank in
11
exchange for this $5 million -- did anyone represent to
12
Wachovia Bank in exchange for this $5 million that the
13
technology was about to be sold to either Raytheon or
14
the federal government and, basically, the $5 million
15
can get repaid as soon as those contracts are paid?
16
17
Did you make any kind of representations like

that?
18
A.
No, I did not.
19
Q.
Did you make any kinds of representations like
20
21
that in any document to anybody?

A.
We had meetings with
22
Raytheon.
23
could have been disclosed that there were meetings or
24
ongoing talks.
25
Q.
We sent people to go meet with them, so that
Did you prepare an executive resume in which
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those representations in general were made to loads of
people?
A.
4
5
Not that I'm ware of.

MR. FLYNN:
Let me just finish Wachovia and
then we'll go for lunch.
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
Sure.
10
MR. HOARD:
Do I get a vote?
11
MR. BLIXSETH:
12
MR. HOLAHAN:
What is the document?
13
THE WITNESS:
Demand promissory note.
14
MR. FLYNN:
15
Yeah, would you mark this, please, 23A, please,
16
Do you?
We can get you takeout.
Yeah, let's put that one aside.
(Exhibit 23A was marked for identification.)

BY MR. FLYNN:
19
Q.
20
Agreement.
21
22
You want to go straight through?
Stephanie.
17
18
We're not going to stay through?
We'll put it aside, Collateral License
Let me just ask you, is this your signature on

Exhibit 23A, Ms. Blixseth, next to last page.
23
A.
Give me a second.
24
Q.
Last two pages, actually.
25
A.
Looks like my signature.
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Q.
Maybe the last page is the notary?
A.
No, it's mine.
Q.
No, it's your signature too.
A.
Yeah.
5
6
MR. FLYNN:
agreement.
7
8
9
That's confirming the license
Let's go to the license agreement.

BY MR. FLYNN:
Q.
Do you recognize Exhibit 24, Ms. Blixseth, as
10
being the license agreement securing the Wachovia loan,
11
saying you were licensing your technology to Blxware?
12
I don't believe your signature is on it, but if
13
you look on page 6 and 7, the software schedule -- 6, 7
14
and 8, the software schedule, the question for you,
15
Ms. Blixseth:
16
basically reflect your understanding that you owned all
17
the software technology that Montgomery had?
Is this licensing agreement, does it
18
A.
Yes.
19
Q.
Thank you.
20
MR. BLIXSETH:
If anybody is hungry, we'll get
21
somebody to run in some sandwiches if you tell me what
22
you're hungry for.
23
MR. HOLAHAN:
24
MR. FLYNN:
25
THE WITNESS:
We can take a break.

Yeah, we'll take a break.
You're throwing these at me so
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1
fast, I want to be able to see them.
BY MR. FLYNN:
3
4
5
6
Q.
That's going to be for another day.

A.
But there's no signatures.
I'm trying to look
to see who presented this.
7
8
You can put the license agreement aside.
Who presented this?

Q.
These are Wachovia loan documents that are on
file with the court.
10
A.
Okay.
11
Q.
Matter of fact, you can see the docket entries
12
at the top of the document?
13
A.
Okay.
14
Q.
This is the 3 million on June 23, '08,
15
16
17
18
Ms. Blixseth, so you're now getting another 3 million.

A.
That's what I was recalling when you were
asking about the 8- and I said it was 5- and 3-.

Q.
19
Right.
Now at this time were you in default with
20
Western Capital in agreeing to do a loan modification
21
with them on June 23rd, '08, on or about that time?
22
23
24
25
A.
I believe so, because I think that's when
Matthew was trying to renegotiate the -Q.
Did you disclose to Western Capital -- to
Wachovia that you were in default with Western Capital

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1
Partners?
A.
I don't recall.
Q.
Did you disclose to Wachovia at this time that
you were in default with First Bank & Trust?
A.
with them.
Q.
I don't recall.
I don't recall if I was then
Did you disclose to Wachovia that you were in
default with American Bank?
A.
Yeah, I don't recall.
10
Q.
Okay.
11
12
Now on this $3 million, what did you do
with that 3 million, Ms. Blixseth?

A.
Every time I got money from borrowing, I tried
13
to catch things up, pay things, cover overhead, that
14
kind of thing, so I would just say that's my recall of
15
this amount as well.
16
17
18
19
20
21
Q.
Where are all the records relating to where all
this money went?

A.
You probably have them, because they would have
been on Jory's computer.

Q.
Ms. Blixseth, where are the records relating to
where all this money went?
22
A.
Who knows?
Probably on Jory's computer.
23
Q.
"Who knows?"
Is that your answer?
24
MR. HOLAHAN:
She said --
25
THE WITNESS:
I didn't say, "Who knows?"
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said they're probably on Jory's computer.
BY MR. FLYNN:
Q.
Thank you very much.

Now, Ms. Blixseth, did you tell Jory Russell on
or about June 24th or thereafter to delete or destroy
documents off his computers?
A.
I told Jory Russell to not only not destroy
anything, but anything that he had in his possession to
turn over and anything that -- any question he was
10
11
asked, to answer the truth.

Q.
And if, in fact, these financial records for
12
Blxware and these entities have been destroyed off his
13
computers, is it still your testimony that you believe
14
they were previously on the computers?
15
A.
I assume, because that's the -- and it's an
16
assumption of mine because that's the computer Jory
17
used.
18
MR. FLYNN:
Okay.
And I'll represent for the
19
record the financial documents relating to where these
20
monies went are not and if they were on the Russell
21
computers, they have been destroyed.
22
23
24
25
MR. HOLAHAN:
Are you representing that as an
expert witness?
MR. FLYNN:
I'm just putting that on in the
record at this point.
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2
MR. HOLAHAN:
documenting that?
3
4
Do you have any papers
MR. FLYNN:
Yeah, we'll get into it,
Mr. Holahan.
Q.
Let's get into page 3 of this document.
A.
Which document is this?
Q.
Same document, the $3 million you got on
June 23rd.
documentation we've been able to put together it appears
Let me ask you this:
From the little
10
that every time you got large sums of money you stopped
11
paying your bills; is that true or false?
12
A.
That would almost be reverse of what I would do
13
when I got sums of money.
14
pay everything.
15
Q.
16
We'll see.
Representations and warrantees --
17
A.
Tell me what page.
18
Q.
-- page 3.
19
I would try to catch up and
"To induce the bank to enter into this
20
agreement and make the new loan hereunder, the Borrower
21
represents the warrants to the bank that, A,
22
litigation" -- it's the same litigation clause that
23
there's no litigation pending.
24
25
Well, in fact, at that time you were involved

in evidentiary hearings on contempt orders against
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1
Montgomery that you were paying for in connection with
litigation, isn't that true, Ms. Blixseth, in June '08?
A.
That Blxware was paying for?
Q.
That you, Edra Blixseth, the money was coming
from you, was it not?
A.
The money was being paid by Blxware.
Q.
To pay --
A.
That was part of the burn rate that we --
Q.
You knew on June 23, '08, in fact, Blxware and
10
Montgomery were in contempt proceedings for not
11
producing the technology in the litigation; isn't that
12
correct, ma'am?
13
A.
I can't -- I can't answer if I was aware of
14
that at the time or that's what was going on at the
15
time.
16
Q.
17
18
We'll see.
In fact, you were subpoenaed to come in and
testify for those contempt proceedings, were you not?
19
A.
I'm not aware that I was.
20
Q.
Let's go to the last page.
21
I didn't testify.
Is that your signature for this 3 million?
22
A.
I believe so.
23
Q.
When you took this $3 million from Wachovia
24
25
Bank, did you have the means to repay it?

A.
I believe I did.
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1
Q.
And why do you believe that you did?
A.
I believed every time I took out a loan that I
was going to get things finally settled with Tim and I
would have the assets and the cash flow to be able to
consolidate the assets that I had that were free and
clear and be able to take care of all of these loans and
get on a positive cash flow.
MR. FLYNN:
Let's look at Exhibit 28, Pledge Agreement.
10
11
12
Thank you.
BY MR. FLYNN:
Q.
Now this is dated the 23rd of June.
In here
13
you're pledging the security while there are contempt
14
proceedings going on in connection with the security in
15
which you're a party.
16
Did you know that on or about June 23rd?
17
MR. HOLAHAN:
18
19
Could you please -- I'm sorry,
Counsel, she's a party to what?

MR. FLYNN:
She was a defendant at this point
20
in the litigation, Mr. Holahan.
21
aware of the facts, sir, but that's not my problem.
22
23
MR. HOLAHAN:
injunction?
I'm sorry you're not
Was she added after the
Because she's not on the injunction.
24
THE WITNESS:
25
MR. FLYNN:
Yeah, I was added.

The injunction is back in
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1
February '06 --
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
along, Mr. Holahan.
10
11
-- the order in the federal court
confirming it is August 2007.
Right.
THE WITNESS:
Right.
We're now into 2008.
Please follow
But it wasn't Blxware, it was
Dennis Montgomery and eTreppid.

BY MR. FLYNN:
Q.
What were you pledging here that was then the
12
subject of contempt hearings in federal court and the
13
injunction to get this $3 million?
14
pledging?
15
A.
What were you
The -- what we were going to be doing with the
16
technology, some of which had nothing to do with the
17
eTreppid technology.
18
19
20
Q.
What part of it didn't have anything to do with
eTreppid technology?
A.
We were working a lot of different things in
21
Bellevue and some things separate and we hoped to get
22
the eTreppid thing resolved, but, again, I'm assuming
23
that since Liner brought Wachovia to me and Liner looked
24
at the things that they were aware of what was going on.
25
Q.
Let's cut through this.
Is that why you
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1
confessed $26.5 million in judgments two months later to
the Trepp parties if the technology didn't belong to
Trepp?
A.
when the judgment was entered, but second of all --
6
7
Q.
entered.
8
9
First of all, I don't think two months later is
A.
I'm not talking about when the judgment was

I'm talking -That's what you just said.
entered into --
10
Q.
-- a settlement?
11
A.
That's not what you said.
12
Q.
A confession of judgment.
13
14
The agreement to confess the judgment was in

September '08; isn't that true, Ms. Blixseth?
15
16
A.
Q.
In which you agreed to confess judgments if you
didn't pay them $26.5 million?
19
20
That was the settlement agreement between
eTreppid and Montgomery --
17
18
You said when you
A.
I don't know if that was part of what the final
agreement was.
21
Q.
I don't know if that was in there.
Let's look at some emails -- and then we'll
22
break for lunch -- between you and Mr. Royer from
23
American Bank when you were getting all this money.
24
25
MR. HOLAHAN:
Let's see this.
///
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BY MR. FLYNN:
Q.
Do you remember these emails, Ms. Blixseth?
A.
I haven't had time to look at them yet.
MR. GLASSER:
MR. FLYNN:
THE WITNESS:
Yes.
MR. HOLAHAN:
No, 29.
THE WITNESS:
It's hard to fell it's a -4 or
Is that Exhibit 24?

No, 29, I think.
-9.
10
MR. FLYNN:
11
MR. HOLAHAN:
12
What exhibit are you on now?
28.
What was the last one?

It's 29.
The pledge agreement is
You skipped two.
13
MR. FLYNN:
14
MR. GLASSER:
15
MR. FLYNN:
16
MR. GLASSER:
Pledge agreement is 29.
17
MR. HOLAHAN:
Did you mean to skip two?
18
MR. FLYNN:
19
MR. HOLAHAN:
20
MR. FLYNN:
21
MR. HOARD:
23
THE WITNESS:
25
29, all right.

29.
Yeah, I intended to skip.

26 and 27.
But just so we're accurate, what
did the court reporter put on that exhibit?
22
24
Okay.
30 is an email.
I think it's 29.
It looks like
24, I said, but I think it's 29.

MR. GLASSER:
29 in the set you gave us is --
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MR. HOARD:
MR. GLASSER:
MR. HOLAHAN:
Oh, oh-oh.
MR. GLASSER:
MR. FLYNN:
It's 29 in the -I'll fix that at the break.
10
MR. BLIXSETH:
11
MR. FLYNN:
for lunch, Ms. Blixseth.

MR. GLASSER:
16
MR. FLYNN:
So the emails are 30.

And we'll fix it at lunch, Brian.
We'll call them Exhibit 30.
18
19
Yeah, I'm not going over them right
I want to go over these emails before we break
15
17
Are you leaving 24 and 25 out?
now.
13
14
For
the time being we'll call it Exhibit 30.
12
Pledge agreement is
28 that the court reporter marked.
Well, 29, in the set is the
pledge agreement.
4
5
It's 30.
MR. GLASSER:
Okay.
BY MR. FLYNN:
20
Q.
Okay.
21
A.
Are these in chronological order?
22
Q.
It's generally an email train, so let's start
23
24
25
from the back.

A.
Ms. Blixseth, we first --
Let's see what the last email is.
You actually have them in order first to last,
it's right.
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Q.
Okay.
A.
4/14.
Q.
4/14, okay.
We've got them in chronological
order going forward, for the record.
First one is from a Leon Royer and let me ask
you this first:
emails -- this is what we have because they were sent to
Peters and we've retrieved some -- how long had you been
emailing Royer?
10
11
And by the way, for the record we've subpoenaed

all the American Bank records.
12
13
After having quickly looked at these
How long had you been emailing Royer about the

loan being in default before April 14th, of '08?
14
A.
I would have no idea.
15
Q.
Had it been going on for months?
16
A.
I would have no idea.
17
Q.
Had you defaulted on the American Bank loan --
18
or strike that.
19
20
21
How much had you received as of April 14th,

2008, from American Bank?
A.
American Bank had a line of credit to me of
22
2 million that had a -- when Matthew was trying to close
23
out the Story Mill, they were at their limit and Leon
24
had suggested that they loan me the $5 million for the
25
trailer park.
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So the $5 million didn't go to me, it went to
pay off the trailer park.
That was a Story Mill
obligation back to me.
is 7 million of which 2 million was my personal and
5 million was Story Mill.
So the total with American Bank
Q.
As of April 14th?
A.
I believe so.
Q.
When was the 5 million given to your son?
A.
I don't believe it was given to him.
I believe
10
it was given to pay off to purchase the trailer park and
11
I don't remember when that was.
12
13
14
Q.
It must have been '07.
To purchase or to pay off the trailer park,
Ms. Blixseth?
A.
I think it was to purchase it.
I don't know.
15
I wasn't involved in that, but I think it was the
16
purchase.
17
Q.
How much was paid for the trailer park?
18
A.
I believe it was the 5 million.
19
Q.
When was the 5 million paid by American Bank?
20
A.
I just said I don't recall, but I believe it
21
22
was in '07.
Q.
23
24
25
Was it in November and December of '07?

MR. HOLAHAN:
If you don't recall, you don't
THE WITNESS:
Yeah, I don't recall.
recall.
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2
BY MR. FLYNN:
Q.
Okay.
When did you -- as of April 14, '08, how
long had you been in default with American Bank on the
7 million?
A.
I don't recall.
Q.
Now Mr. Royer writes on April 14, to you --
you're LearG2; correct?
A.
Correct.
Q.
Lear, is that a Lear jet?
10
A.
It's my dogs.
11
Q.
G2, is that dog too?
12
A.
It is.
13
Q.
And you happen to have a G2; is that correct?
14
A.
I'm sorry?
15
Q.
Did you have a G2B jet?
16
A.
What does that have to do with anything?
Lear
17
and G2 are my dogs that are deceased and that was my
18
email address.
19
20
Q.
"Good morning, Edra.
We look forward to
receipt of the payoffs on April 21 at the least."
21
What payoffs?
22
A.
You know, I don't know.
23
Q.
The whole 7 million?
24
A.
I don't know.
25
Q.
Next email, April 13 -- well, actually it's the
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1
day before, April 13, this is from you to Royer and you
say -- Royer writes, "Who will be sending the funds?"
You respond, "Sorry, Leon.
clear, but I must not have.
out of my account, Edra."
I thought I made it
I will be sending the funds
What funds?
A.
I think that this was one of the phoney Gary
Peters' loans, wires that never came to fruition when I
thought that they were going to.
10
Q.
11
Wachovia.
12
yet.
13
14
15
As of April 14th you had 5 million from

We haven't got to the First Bank & Trust loan
How much did you get in March of '08 from First

Bank & Trust?
A.
I don't recall.
Without the things in front of
16
me, I don't recall the dates to answer questions like
17
that.
18
Q.
That was an $8-million letter of credit?
19
A.
The ultimate amount was 8-, but that's not what
20
it started out being so I don't recall what the dates
21
were for those.
22
Q.
As of March -- as of April 14th, you had gotten
23
5 million from Wachovia, you had gotten 8 million, as I
24
understand it, from First Bank.
25
documents.
We'll go through the
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1
Did you pay Royer anything?
A.
I don't recall.
Q.
Did you tell Royer the funds would be coming
out of your account, but they're coming from a third
person you were also borrowing money from?
6
7
A.
He knew how I was getting money to pay him was
through a different loan, the loan person, yes.
Q.
What did you tell him?
A.
I don't recall this one, but I would have told
10
him the truth.
11
Q.
Let me see if I --
12
A.
He knew I didn't have money coming in from
13
income.
14
Q.
Did you tell him that you were borrowing money
15
from someone else who didn't know about his loan to pay
16
him?
17
A.
Of course not.
18
Q.
Where was the money coming from that's
19
referenced in these emails?
20
A.
I just answered your question.
21
Q.
From Gary Peters?
22
A.
Based on reading the one you're asking me to
23
24
25
read, I cannot answer that question.

Q.
Let's go to the next one.

And the next one appears to be the duplicate of
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1
the first one, maybe part of a chain.
2
3
Third page, from LearG2 to

CEO@1800investmentgroup.com.
Is that Gary Peters?
A.
Yes, it is.
Q.
"Gary, this is why I was hoping to get that
bridge put through ASAP, even if it is only particle."
A.
That means "partial," I think.
Q.
"This is the bank that Tim is getting lots of
10
information from.
11
get the sig loan of mine that is past due and the one I
12
get from Matthew paid off as I had told them I would do
13
it on the 15th before everything changed."
14
15
16
17
18
19
What did you mean by "before everything

changed"?
A.
22
I have no idea.
There was so many changes.
would have no idea which one this was in reference to.

Q.
"Now they're wanting to help Tim with putting
pressure on me."
20
21
Think I told you about them, want to
Let me break in there.
Who told you that
American Bank wanted to put pressure on you?

A.
I just knew by the way that they were doing
23
things.
Tim had worked with Leon Royer and Bruce
24
Erickson a lot of times in a lot of different settings
25
to get information that put pressure on other people, so
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I just assumed it was the same MO there.
Q.
correctly.
attributing it to put -- to Tim, because he's having the
bank put pressure on you even though you're in default
on 7 million.
7
8
9
All right.
Let me see if I understand this
You're in default on $7 million.
You're
Is that what you're saying?

A.
No, that's what you said.
You want me to say
what I want to say?
10
Q.
Yeah.
What are you saying?
11
A.
What I was saying is banks can be either
12
helpful or not helpful when you're in situations where
13
you're trying to renegotiate loans or pay things or have
14
things done differently.
15
not helpful.
16
They can either be helpful or
With Tim behind the scenes -- and this Leon
17
Royer is not the only one.
18
deal with, so I knew what he was doing to put pressure
19
on me.
20
Q.
How did you know this again?
21
A.
They would tell me that he called.
22
Q.
Let me get that straight.
23
24
25
He called banks he doesn't
American Bank, Leon
Royer told you -A.
No, I didn't say that.
You said how were these
others.
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Q.
How did you know that Tim was doing something
with American Bank to put pressure on you?
that to me.
A.
Just explain
Well, I had been with him for 25, 26 years and
the MO of what I had seen him do before with other
people would have me believe that he was doing the same
thing now to me.
8
9
10
11
Q.
So did Leon Royer say anything to you about Tim
using the bank to pressure you?

A.
No, but their attitude and their behavior and
what they were willing to do changed.
12
Q.
What changed?
13
A.
They were always willing to be kind of
14
understanding, rewrite some things.
They had been
15
helpful to me, actually, on the 2 million, thinking that
16
I was coming to the end and going to get things settled.
17
That's kind of what we all assumed.
18
And now that that these things were coming due,
19
rather than giving me time or buying me time or figuring
20
out another way to do things, they were putting a lot of
21
pressure on me.
22
23
Q.
So their attitude is what you detected;
correct?
24
A.
That's somewhat of what I detected, yes.
25
Q.
Did Leon Royer know you had just borrowed $5
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1
million from Wachovia Bank?
2
3
A.
may have.
4
5
Q.
Were you signing documents giving them access
to your credit reports?
6
7
He knew I was borrowing money to survive, so he
A.
I don't recall doing that, but I may have if
they asked for it.
Q.
Were you giving them cash-flow analyses?
A.
I don't know if I gave any to American Bank or
Q.
Were you giving them financial statements,
10
11
12
13
14
15
16
not.
Ms. Blixseth?
A.
I believe that they would ask for updated
financial statements.
Q.
Now were you reporting on your financial
statements your Western Capital $13 million loan?
17
A.
I believe I was not.
18
Q.
Were you fudging the financial statements from
19
loan to loan and from time period to time period to try
20
to get more money?
21
A.
No.
In fact, you used the word "fudging."
22
When things would change, when the asset -- as an
23
example, something you gave me a few documents ago,
24
showed that we valued Porcupine Creek at 200 million,
25
that's because that's the amount that Tim and I were
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putting on it and he was putting 200 million on Desert
Ranch as well.
3
4
5
6
7
8
9
Those things changed as the market changed and

as time went on so -Q.
In reference to some of the testimony you just
gave, I'd like to know -A.
You weren't listen to my answer.
You were
reading what Tim wrote.

Q.
10
I heard you.
I heard you.
Ms. Blixseth, please.
I want to know exactly
11
who told you when and under what circumstances from
12
these other banks that Tim Blixseth was doing something
13
to put pressure on you.
14
15
Please identify any individual who told you

anything.
16
A.
Are you talking about this email?
17
Q.
No.
18
19
I'm talking about your testimony of a few
moments ago.
A.
Alan Rye told me that Tim would call him.
He
20
had no business with Alan Rye.
21
with Alan Rye anymore; that he was asking questions
22
about my dealings.
23
He wasn't doing business
Kevin McGuire from Palm Desert National Bank
24
would tell me that Tim was calling and giving them
25
information or trying to get information.
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2
Q.
What did Mr. Rye say to you that Tim Blixseth
had said to him and when?
A.
Well, one of the things was that he called and
asked me if Jim Dolan was going to be making the payment
on the BFI note and I said I assumed so, because I
talked to Jim and asked if he was going to be needing an
extension and he said no.
8
9
And he said, "Well, Tim is telling me that

Jim's not going to make the payment."
And I said,
10
"Well, that's contrary."
I called Jim afterwards, told
11
him what Alan Rye had told me and he said, "No, I'm not
12
asking for an extension.
13
payment."
I'm planning on making a
14
Q.
When was that, Ms. Blixseth?
15
A.
That would be sometime in '08, so the latter
16
part of '08 because the payment was due in January of
17
'09.
18
Q.
Was the payment made?
19
A.
No, of course not.
20
Q.
So let me see if I understand this.
Sometime
21
in '08, Mr. Blixseth, who has two children in BFI that
22
was securing the loan to First Bank & Trust --
23
A.
24
trust.
25
Q.
Those were adult children.
It wasn't in a
-- wanted to know whether -- how much was the
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payment for?
A.
$5 million.
Q.
-- whether a $5 million payment was going to
come in to BFI, understanding that his two children are
beneficiaries under that instrument.
Is it your testimony that in that some way
shows that Mr. Blixseth was putting financial pressure
on you through First Bank & Trust?
A.
Alan told me that -- that, first of all, he
10
shouldn't have talked to Tim about it.
11
are adults.
12
Morgan had a question they could have called him.
13
Beau and Morgan
Tim had no reason to call him.
If Beau and
Second of all, he said that it was clear Tim
14
had said, "I don't think that that note is going to be
15
worth anything.
16
I don't think that the security for Spanish Peaks is
17
going to be worth anything," and, basically, trying to
18
put the fear that it was going to end up being a bad
19
loan because BFI was not going to be paid.
20
21
Q.
Okay.
Jim Dolan is having financial pressure.
Well, we will talk to Mr. Dolan and
Mr. Rye.
22
In fact, the payment was not made for
23
5 million?
24
A.
Correct.
25
Q.
Kevin McGuire, what did he say and when?
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A.
Kevin just told me that he got calls from Tim
intermittently asking what I was doing and saying that I
was going to end up with nothing and be careful of
loaning money to me and those kind of things.
Q.
Now please explain to me how as of the date you
took $35 million from Byrne, August 14th, 2008, and you
were showing $900 million in your net worth, please
explain to me as fully as you can how you went from
$900 million when you got the 35- million, owned
10
Porcupine Creek, owned the Yellowstone Club, and ended
11
up in bankruptcy some six, seven months later with a
12
negative net worth.
13
Please explain that to me, Ms. Blixseth.
14
MR. HOLAHAN:
15
answer.
16
17
If you're willing to let her answer -MR. FLYNN:
Q.
You're asking for a very long
I'm willing to let her answer.
Please explain how you went from an 8- to
18
$900 million net worth on your financial statements on
19
August 15th, which we're going to get into, and how you
20
ended up broke and cheating all these people out of all
21
this money.
22
How did that happen, Ms. Blixseth?
23
MR. HOLAHAN:
24
MR. FLYNN:
25
Q.
Object to your -I'll withdraw "cheating."
Not paying all these people all this money and
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Byrne ends up with your major assets.
how that happened.
A.
Go ahead.
I don't even know how to begin to start.

MR. HOLAHAN:
I think you should parse that
question a little bit better.
BY MR. FLYNN:
Q.
Can't answer it?
A.
It's --
9
10
MR. HOLAHAN:
13
Do you want to know how she went
from $900 million to having no money a few months later.
11
12
Please explain
MR. FLYNN:
of everything.
Q.
Yeah, and Byrne ends up in control
I want to know that.
How did that happen with Tim Blixseth telling
14
Kevin McGuire she's going to end up with nothing.
15
Please explain to me how that happened, Ms. Blixseth.
16
A.
17
to answer.
18
It's so broad it's hard to answer, but I'll try
Tim Blixseth not only called banks, he
19
called -- he -- Warren Trepp.
He got involved in
20
anything, an asset, that came my direction and tried to
21
sabotage it and did a successful job of sabotaging.
22
So a lot of things that I counted on -- we had
23
a contract to settle the eTreppid so that Blxware could
24
go forward.
25
money to make the first payment, so that fell apart.
We ended up not being able to have the
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That money coming in had a lot to do with what
I was counting on coming in.
to be certain things ended up not being what I was told
them to believe.
A lot of what I was told
Based on my financial statements that you say I
cheated people out of, I used what Tim Blixseth turned
over on the books and records of values.
was talked about in the family court.
MR. HOLAHAN:
I used what
Are you going to continue to
10
whisper to your client in front of my client as she's
11
answering?
12
THE WITNESS:
13
MR. FLYNN:
14
MR. HOLAHAN:
15
Do you have anything else to add?

No.
She's not through, but are
you going to continue?
16
17
And smile and laugh.
MR. FLYNN:
Q.
Mr. Holahan, please.
Do you have anything else to add?
18
MR. HOLAHAN:
19
MR. FLYNN:
20
MR. HOLAHAN:
21
MR. FLYNN:
22
MR. HOLAHAN:
23
MR. FLYNN:
24
MR. HOLAHAN:
25
MR. FLYNN:
Mr. Flynn -I'm not responding, Mr. Holahan.

Mr. Flynn -I'm not responding.
Mr. Flynn -Mr. Holahan -Mr. Flynn -Mr. Holahan --
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MR. HOLAHAN:
MR. BLIXSETH:
MR. FLYNN:
Stephanie?
documents --
MR. FLYNN:
13
MR. FLYNN:
19
20
Q.
You interrupted the witness in the
Ms. Blixseth, do you have anything further to
add to your answer?

MR. HOLAHAN:
it now.
Yes, she does, but she won't do
We're going to break for lunch.

MR. FLYNN:
And Mr. Holahan, you ever do that
to me again, sir, I will see you outside --
21
MR. HOLAHAN:
22
MR. FLYNN:
23
No, you stop talking.
middle of an answer.
17
18
Mr. Holahan, please cease and
desist.
MR. HOLAHAN:
16
I'm trying to get your attention.
I'm making an objection and you won't stop talking.
12
15
The record will reflect
So the noise of that slap in my face on my
MR. HOLAHAN:
10
14
Hold on.
This is tape recorded; is that correct,
11
Sit down, Jack.
that Mr. Holahan just leaned across the table and --
Are you going to continue --
Okay.
-- at the end the deposition.
Do
you understand?
24
MR. HOLAHAN:
25
MR. FLYNN:
Yes.
You don't professionally misbehave
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like that, Mr. Holahan.
MR. HOLAHAN:
Well --
THE WITNESS:
Thank you for the glasses.
MR. BLIXSETH:
MR. FLYNN:
You might need them.
We're just at the beginning.
We're
at the tip of the iceberg, Mr. Holahan.
THE REPORTER:
MR. HOLAHAN:
MR. FLYNN:
10
tip of the iceberg.
11
THE WITNESS:
Go off?
We're halfway through the day.
We're at the tip of the iceberg,
Why does Mike Flynn stare me
12
down, throw something towards my direction and say, "Tip
13
of the iceberg?"
14
15
MR. FLYNN:
THE WITNESS:
you said it?
Were you not staring me down as
Can't have it both ways, Mike.
18
MR. FLYNN:
19
(Luncheon recess.)
20
21
It was thrown on my
papers.
16
17
It wasn't.
Let's take a break.
BY MR. FLYNN:
Q.
Ms. Blixseth, at the end of the -- before the
22
lunch break, end of the morning session, we were
23
discussing how you went from 900 million roughly to zero
24
and I believe your testimony was sabotage of
25
Mr. Blixseth and Mr. Blixseth giving you false numbers;
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is that correct?
A.
That was part of it.
Q.
What else?
A.
Certain things not falling into place, certain
things that were told to be values that ended up not
being the values or having -- having difficulties in
being able to get those values out.
8
9
10
Q.
Who told you about certain values that didn't
end up being values?

A.
Part of it was what was turned over from the
11
things that I got from the MSA on trial balances and
12
that kind of thing that didn't balance.
13
14
Q.
What trial balances did you get from the MSA
that didn't balance?
15
A.
The BGI records.
16
Q.
Okay.
17
A.
Specifically, I can't say, just some of the BGI
What in the BGI records didn't balance?
18
records of the things that were turned over.
There was
19
also things in the MSA of -- just give you a small
20
example, because I can't think of everything without it
21
in front -- there was commissions for Big Springs Realty
22
that were 30 to 60 days in arrears when they were in
23
arrears much more than that.
24
Q.
And you didn't know that?
25
A.
I was aware of -- there was conflicting things
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1
going on, because in family court, as another example,
when I tried to object to the golf course lots with
CrossHarbor being sold, it was stated that there was no
commissions.
And then subsequent to that there was an Eric
Ladd commission that I had become aware of, so there
were some things, little bits and pieces, that I was
aware of and other things that I wasn't aware of.
Q.
So give me some of the top five money things
10
that you weren't aware of that ended up sabotaging your
11
plans?
12
A.
I can't think of a lot of things.
One of the
13
things that ended up being huge now for me is that
14
Credit Suisse loan was a secured loan and now it's an
15
unsecured loan.
16
That's pretty huge.
So I can't --
17
Q.
As of the date of the MSA was it secured or
18
unsecured?
19
A.
I believe it was still secured as of that date.
20
Q.
Okay.
Are you saying that because at some
21
point later on it became unsecured that led to your loss
22
of $900 million in some way?
23
24
25
A.
The totality of a whole lot of events led to
that.
Q.
Okay.
Can you identify any other events in
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that totality?
A.
Not right now off the top of my head, no.
Q.
Have you had any meetings with the liquidating
trustee?
A.
I've never met the liquidating trustee.
Q.
Any meetings with their lawyers?
A.
Until today, no.
Q.
Have you provided any documents or information
9
10
11
12
13
through yourself or a third party about the MSA or any

of the transactions involving the MSA?
A.
I don't think the MSA is a party to that, so
I'm not aware.

Q.
14
No.
Have you, through a third party such as a
15
lawyer or Mr. Russell or Ms. Yarborough or any third
16
party, provided any information to anyone on the side of
17
the liquidating trust?
18
A.
I don't believe they've asked me for anything.
19
Q.
We're going to get further into the sabotage
20
issues.
21
couple of questions.
22
Let's finish with Exhibit 30 and I have a
You say in here between you and Peters, on the
23
third page, "You just want to keep things transparent
24
between you and me."
25
Did I read that correctly?
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A.
I'm sorry, I'm just getting to where --
Q.
At the end of that paragraph, about wanting to
keep things transparent between you and Peters?
A.
Yes, I see that.
Q.
As of April 15 in your prior relationship with
Peters had you kept everything transparent between the
two of you?
8
9
A.
To the best of my knowledge.
You know, whether
he was really real at this time or not, he was trying to
10
get bridge loans and loans to take out some of these
11
things and take the pressure off.
12
When you asked me on the very first page with
13
Leon, that's what I was referring to.
14
which that loan was.
15
16
Q.
I didn't know
Was part of that transparency to leak stuff to
the press and blame Tim for the leaks?
17
A.
Absolutely not.
18
Q.
Is that in an email that you exchanged with
19
Peters and Fultz?
20
A.
Not that I had anything to do with it.
21
Q.
So if it was sent to you and then you replied,
22
are you saying that wasn't part of a plan that you
23
engineered and then subsequently invited a member of the
24
Associated Press up to one of your properties in Montana
25
who thereafter released an article?
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2
You had nothing to do with that?

A.
Not only did I not have anything to do with
that, that is not a true statement.
Tim in court before.
that that's chasing shadows, because that didn't happen.
I think you're referring to Matt Brown and that
absolutely didn't happen.
Q.
Okay.
I told him when we were talking
We'll see.
Did you call Gary Peters phoney?
10
A.
Did I call him a phoney?
11
Q.
At any time.
12
13
That's been said by
Give me a time frame.
Do you consider Gary Peters to be
a phoney?
A.
I do now consider him to be a phoney, yes.
14
didn't at the time that I thought he was going to
15
perform.
16
Q.
So when you filed your motion to intervene in
17
the Lemond case -- which, parenthetically, Steve Byrnes
18
had, basically, destroyed the value of the Yellowstone
19
Club -- when you filed that motion?
20
MR. BLIXSETH:
21
MR. FLYNN:
22
Q.
Sam Byrne.
I mean Sam Byrne.
When you filed that motion on April 4th, 2008,
23
within days after the Yellowstone Club deal cratered,
24
when you filed that motion did you believe Gary Peters
25
was a phoney at that point in time?
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2
3
A.
No, I did not.
I didn't believe he was a
phoney at the mediation just before that either.

Q.
When you filed that motion to intervene, were
you counting on getting $50 million from Gary Peters in
order to take over the Yellowstone Club?
A.
To interject -- to interject the needed cash
flow and cash for what was needed to be done at
Yellowstone Club, yes.
Q.
Do you have any comprehension -- forgetting
10
Mr. Byrne's testimony for the moment under oath -- of
11
what happened to the value of the Yellowstone Club on or
12
after April 4th when you filed that 200-page Motion to
13
Intervene in Lemond?
14
A.
I'm not clear on your question.
15
Q.
Yeah.
16
Do you know the adverse impact on the
17
Yellowstone Club in the media when you filed that
18
motion?
19
A.
There had already been such bad press between
20
the Lemond litigation and the divorce that that probably
21
added to it, but there had been nonstop for -- since --
22
since just shortly after January of '07 negative press
23
about Yellowstone Club.
24
25
Q.
Did you believe on or about April 4th when you
filed that motion, which we'll get into -- which,
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1
parenthetically, Byrne says destroyed the Yellowstone
Club in essence -- when you filed that motion, you did
so on the basis that Peters was going to come up with
50 million in cash immediately and 500 million to buy
the club; is that correct?
A.
There were -- it was a two-prong step.
don't know about the 500 million.
possibility that he had brought up.
We
That was a
The first prong was that what needed to be put
10
into Yellowstone Club to stabilize the cash flow and pay
11
the creditors, address the B shareholders, that kind of
12
thing, was the original 50.
13
14
Q.
Now do you recall, and we've got the document
here, that Byrne terminated the loan on March 26?
15
A.
Terminated the loan?
16
Q.
Terminated the purchase of the Yellowstone Club
17
18
on March 26, '08.

A.
Do you recall that?
I don't recall the date.
I recall a
19
conversation that I had with Tim, that he was talking to
20
Byrne and telling him that if he didn't show that they
21
had the funds there to close that he was going to
22
force --
23
24
25
Q.
All I need right now is whether you recall the
date.
A.
But I don't recall the date.
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1
Q.
March 26.
Do you know two days later on March 28 you and
your lawyers had a 200-page document prepared with your
declarations and Peter's declarations to intervene on
the Lemond case?
A.
I don't remember it being that close.

There was a time frame from the question you
just asked me, though, which is the reason I wanted to
state what I was stating.
There was a time differential
10
from when everything came down to actually culminating
11
and CrossHarbor saying that they were not going to go
12
forward and the date Tim gave them as drop-dead-show-us-
13
that-you-have-the-money and then they responded that
14
they were not doing it.
15
Q.
Now let me see if we can focus in on the dates
16
and we've got the documents, so we'll get into it, but I
17
need to focus in on the dates for a minute here.
18
Do you recall Gary Peters being in Sam Byrne's
19
office as your representative on March 21, 2008, when
20
you were in court testifying that you were doing nothing
21
to interfere with the Yellowstone Club sale?
22
Do you recall that date?
23
24
25
A.
I don't recall that happening at the same time,
Q.
Okay.
no.
Do you recall Peters going to Sam
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1
2
3
Byrne's office at your behest as your representative?

A.
I -- Gary Peters did go and meet with Sam.
had said -- I had introduced Gary to Sam at Yellowstone.
Q.
I don't need any more --
A.
-- but I do.
Q.
Fine then you can't answer that.
A.
Then take my answer away, because I can't
8
9
I can't answer it that way then.
answer the question.

Q.
Then five days later the deal cratered.
10
remember that?
11
the deal craters.
12
A.
Well, Gary -- I don't remember if it was five
days.
14
Sumptner after meeting with Sam Byrne.
16
Gary had conversations with Tim Blixseth and Bob
Q.
You don't remember, fine.
That's all I need
for now.
17
Do you remember between March 21, roughly, this
18
time frame, and when the deal is cratering you
19
negotiating with Gary Peters to come up with
20
$500 million to buy the club?
21
Do you
Five days after Peters is in the office,
13
15
Sam
A.
Gary came to me and said he might have somebody
22
that is interested and I said, "If there's somebody
23
interested and it's a real deal, put it in writing and
24
we'll see."
25
Q.
Two days after the deal craters -- and we'll
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get into the exhibits -- two days later you've got a
200-page motion based on Peters putting 500 million in.
Do you remember that?
A.
No.
Q.
The 50 million was the bridge and the
500 million was the purchase.
7
8
9
10
I remember the 50 million.
You don't remember that?

A.
The purchase was never something that was an
actual offer that was put in.

Q.
Now at the time were you telling people,
11
members of the club, and sending emails when you were in
12
default on all these loans that we went through that you
13
had the money to purchase the club?
14
A.
I think that I said that I was able to come up
15
with the money to purchase the club.
16
the money to purchase the club.
17
Q.
I didn't say I had
And how many banks were you in default with
18
when you were telling people at the club that you had
19
the money to purchase the club?
20
A.
That's apples to oranges.
21
Q.
Okay.
22
23
Let's go to the next page.
move quickly here.
We have to
Let's go to the next page in emails.
And you write on this page dated May 5th,
24
"That's their MO.
He wrote back after my answer to him
25
to contact him this afternoon.
I will do what I can to
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stall."
2
3
4
Stall what?
A.
Stall paying him?
I don't know based on what I'm reading.
I have
no idea.
Q.
You don't know what you meant?
A.
Based on what you have in front of me, I don't
7
8
9
10
11
12
know what that meant.

Q.
Were you trying to stall from paying American
Bank?
A.
Based on what you have in front of me, I can't
tell what this means.

Q.
Regardless of what's in front of you, based on
13
this time frame, early May '08, were you trying to stall
14
from paying American Bank?
15
A.
What I wrote was that I should be able to
16
transfer money based on what Gary was saying and then I
17
wasn't going to have the money.
18
buy some time hoping the money was coming in for that,
19
but that's a guess on my part.
20
Q.
I might be trying to
Then you say, "I'd rather it come out next week
21
after Monday," and you put, in caps, "AFTER."
22
that all about, Ms. Blixseth?
What's
23
A.
I have no idea.
24
Q.
What did you want to come out in the media
25
after Monday?
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1
2
3
A.
I have no idea.
I don't even know if that
means media.
Q.
Let's read down further on a prior email.
That's at 12:32 this one is 12:30, two minutes before,
to you.
almost threatening you which is illegal with the press
issue.
on the bridge to find comfort."
9
10
"Edra, I understand clearly the banker is
Keep me posted on the wire.
I'm still working
What's that all about, Ms. Blixseth, that

American Bank was threatening you with press?
11
A.
I don't know.
12
Q.
Were you trying to keep the fact that American
13
Bank had forestalled for three or four months from
14
filing a lawsuit against you for default on the loan and
15
you didn't want it to come out if they filed the
16
lawsuit?
17
A.
I'd have to -- if we can read these where I can
18
read all of them and then you can ask me questions it
19
might be easier, because until I read what was written
20
before or after I don't know how to answer.
21
Q.
So you don't remember, is the answer to my
22
question, whether it was because they were threatening
23
to sue you.
24
which is illegal with the press issue."
25
remember what that was about?
Because Peters is saying, "That's a threat,

You don't
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1
A.
Not exactly.
Q.
Okay.
Let's go on.
Then you just -- you write an email to Peters
the same day and you say, "Gary, this is what I am
dealing with.
in court next week.
50 million, but is in default of 7 million with American
Bank.'"
He knows this kind of press will hurt me

'Edra's offering to put in
You put that in quotes.

"I made a deal with them last week before I
10
knew that the bridge loan was in trouble to 2 million in
11
interest current and the 5 million in 30 days.
12
that would give me time to put my LOC together on PC."
13
Now this part in quotes, "Edra is offering to
I knew
14
put in 50 million but is in default of 7 million with
15
the American Bank loan," what's that all about,
16
Ms. Blixseth?
17
A.
I don't know, but while you were reading I read
18
ahead to what Leon had written on the next page so I can
19
only then surmise that what I am saying to Gary is that
20
Leon is threatening for that to come out that I'm
21
defaulting on loans with American Bank at the same time
22
that I'm saying I can put 50 into Yellowstone Club.
23
Q.
Yeah.
24
In other words, you had been in court and filed
25
affidavits, which we've got here, saying you had all the
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money to buy the Yellowstone Club and you yet were in
default on this loan.
A.
That was --
Q.
You don't see, Ms. Blixseth, some contradiction
or hypocrisy in doing that?
Do you see any -- any lack
of responsibility on your part in representing in court
that you got $500 million to buy the Yellowstone Club
and you're in default of over $2 million and the bank
saying we're going to sue you for it?
10
A.
11
statement.
12
Q.
I'm done.
13
A.
Okay.
14
Q.
Do you see any contradiction or hypocrisy?
15
A.
You're making a statement.
16
question?
Tell me when you're done speaking your
What's your
Do I see any hypocrisy?
17
Q.
Yeah.
18
A.
Okay.
Now I'd like time to answer.
It's
19
apples to oranges.
If I didn't have the Yellowstone
20
Club to have for someone to either look at a purchase or
21
look at putting money into it -- that wasn't putting
22
money into Edra Blixseth or taking care of Edra
23
Blixseth's personal issues, it was taking care of the
24
Yellowstone Club's person issues that had assets that
25
they could deal with.
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1
That wasn't money that was going to me to solve
my personal issues.
issues, then long-term that would help solve my issues
as Yellowstone Club would be stabilized then and have
value.
If I could solve Yellowstone Club's
So no, I don't see hypocrisy in it.
I see that
I'm working my damnedest to try to make an asset have a
value rather than not have a value because it
desperately needed money.
10
11
12
13
14
15
Nobody would give me that
amount of money, directly to me.

Q.
You didn't own Yellowstone Club at the time you
were making the -A.
It was a community property asset.
I owned
half of the asset.

Q.
Were you telling Royer, "Don't worry.
I'll get
16
control of the club and then I'll get the money and I
17
can pay you"?
18
A.
Absolutely not.
19
Q.
Were you telling Royer that -- at that time did
20
you make those representations to other people at other
21
times?
22
A.
23
24
25
Absolutely not.
That's not what I filed and I
didn't make those representations to anyone.

Q.
No.
We'll see.
Did you write up an executive summary in which
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1
before you even got the club you said, "Once I'm in
control of the club, I can do this, that and the other
thing"?
A.
I don't remember that, but there was a
hypothesis going on of not knowing how the assets were
going to end up being divided.
Q.
Let's go to the next -- then Royer runs through
the amounts you owe him that you've been promising to
pay him for some period of time.
10
We'll find out from
his records when we get them.
11
And then Royer writes, "During the period that
12
we were working on Blue Sky, we stopped the legal action
13
concerning the collection of your personal debt."
14
15
16
Did he stop legal action against you,

Ms. Blixseth?
A.
I'm just reading this.
17
ever a legal action started.
18
Ah, sorry.
I don't think there was
Am I on the wrong page?
It was on the wrong page.
19
Q.
Did he tell you that --
20
A.
Can I get time to get caught up here?
21
I was on the wrong page.
22
Q.
I'll read it into the record.
23
A.
I just --
24
Q.
You can keep reading.
25
Because
"During that time," this
is Royer talking, "I read a news article which said
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1
'Edra's attorney, Deborah Klar, insists that Edra and
BFI were the best answer to the settlement case,
because,'" in bold and underlined, "'she has immediate
access to money to pay the settlement.
Klar said Edra has access to enough capital to deal with
a looming $375 million from the investment bank Credit
Suisse.'"
8
9
Not only that,
"Imagine my surprise to learn that such a

statement had been made in court, yet we cannot obtain
10
our past-due payments.
11
process."
12
Today we are restarting that
Now having read that and put that in the
13
record, I take it from your prior testimony that doesn't
14
indicate to you deceit or deception --
15
A.
No, it does not.
16
Q.
-- on the one part to the bank, when you
17
didn't --
18
A.
Can you read into the record my response?
19
Q.
-- when you were trying to obtain control of
20
Yellowstone Club and represented that you had all this
21
money?
22
And, in fact, Ms. Blixseth, you didn't have the
23
money, did you?
24
isn't that true?
25
A.
You had promises from Gary Peters;
I thought I had money based on --
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1
Q.
Thank you.
A.
Are you going to read into the record my
response which clearly nullifies what you just said my
intent was?
5
6
Q.
I'll let your lawyer do it.
I believe it adds
to the deception.
You write, "Leon, as I am sure you are aware,
there is a difference in having access to funds for an
asset that I own or have control over than funds when I
10
do not."
11
You're admitting there you didn't have control
12
over the Yellowstone Club, is that what you're doing, or
13
control over this 500 million from Peters?
14
15
16
17
Is that what you're doing?

A.
No.
I didn't have control over it in order to
solve my personal issues with American Bank.

Q.
"If I am successful in the new case" -- that's
18
the intervention in Lemond -- "I have these funds
19
available for Yellowstone Club."
20
Was that true?
21
A.
I believed it to be true when I wrote this.
22
Q.
Did you actually have the funds?
23
A.
I believed I had letters supporting and I had
24
25
documents supporting that I had the funds.

Q.
But did you have the funds?
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1
2
3
A.
went through.
Q.
4
5
I believed I had the funds available if that
No.
Ms. Blixseth, it's a simple question.
Did you, Edra Blixseth, have the funds?

A.
It's the same answer as did -- CrossHarbor says
that they can close and have the funds available, but
didn't have them in the account to be able to show Tim
that they had the account.
9
10
It's the same thing.
I believed I had the funds if that were to go

through to have the funds to put into Yellowstone Club.
11
Q.
Then you write at the end --
12
A.
Read the next line.
"They're not for Edra
13
Blixseth, personally."
14
deceiving by saying I had all this money but that I
15
wasn't taking care of my personal obligations.
16
17
18
19
You keep saying that I was
I responded to what you read into the record by

telling him that was not for me to use personally.
Q.
Did you deceive Wachovia Bank when you didn't
inform them there was litigation pending, Ms. Blixseth?
20
A.
No.
21
Q.
Did you deceive Western Capital Partners in
22
June of '08 when you didn't inform them there was
23
litigation pending?
24
25
A.
I think I've answered this how many times now?

MR. HOLAHAN:
Many.
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1
2
MR. FLYNN:
Show Cause.
3
4
5
Let's mark this next one, Order to

BY MR. FLYNN:
Q.
And we can go very quickly on this.
have to read the whole document.
going to read into the record a short part.
8
9
10
11
You don't
I would -- simply
This is the federal court in Nevada relating to

the Trepp litigation and the technology that you were
paying Montgomery a hundred thousand dollars a month on.
A.
I was paying Montgomery a hundred thousand a
12
month and before that, if you remember, I was paying you
13
hundreds.
14
Q.
Ms. Blixseth, I didn't --
15
Move to strike.
16
Ms. Blixseth, did you know as of late June that
17
the court was issuing an order to show cause for the
18
failure of you and Montgomery to turn over the source
19
code for the technology Montgomery claimed he owned?
20
A.
Does it say me?
21
Q.
You were a party.
22
23
It only says Montgomery and
Deborah Klar, but you were a party, were you not?

A.
I was brought into this.
24
never says Edra.
25
over.
I saw this and this
I didn't have the source code to turn
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1
2
3
4
5
Q.
So to this day has the source code ever been
turned over?
A.
You've asked me that three times and my answer
is the same.
Q.
I'll withdraw it.

Does the source code even exist, Ms. Blixseth?
A.
I have every reason to believe it exists.
Q.
What reason do you have to believe that it
9
10
11
12
exists?
A.
Because Dennis Montgomery is able to make
things work when asked to make work by different people.

Q.
Do you know that on four occasions the
13
United States Government has asked Montgomery to
14
demonstrate the source codes to show that the technology
15
worked and that every single time, twice at eTreppid and
16
twice with you, he's walked out of the meetings and
17
left.
18
19
You know, Ms. Blixseth, do you not, there's no

technology.
20
A.
No, I do not believe that.
21
Q.
So --
22
A.
Just a second.
You make statements, Mike, and
23
then you don't let me respond to them.
24
you're asking me questions or --
25
Q.
I can't tell if
We're going to move on, because they're all
Page 197
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1
going to come together.
A.
Okay.
Q.
With regard to this Order to Show Cause, did
Montgomery come to you or send you emails and say,
"There's going to be contempt hearings requiring me to
produce the source code and I'm not going to do it"?
7
8
9
Did he say those kinds of things to you either

in person or in the email?
A.
He said to me that he didn't want to turn over
10
the source code because he felt that then the -- either
11
the government or somebody else would have the source
12
code and be able to circumvent him or us getting paid.
13
He did make those comments.
14
MR. FLYNN:
15
16
17
Okay.
Next Exhibit 32.
BY MR. FLYNN:
Q.
Did you know after three or four days of
18
evidentiary hearing in which you were subpoenaed at one,
19
the United States Federal District Court in Nevada on
20
August 18th, after --
21
A.
What year, sorry?
22
Q.
2000- --
23
A.
I see it.
24
Q.
-- 2008.
25
A.
'-8.
Okay.
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1
Q.
Same time that -- same time that you were
taking the $35 million from Sam Byrne -- issued an order
imposing $2500 a day in penalties until the source code
was produced?
5
6
A.
Was this against Liner or Dennis?
Sorry, I
can't figure --
Q.
If you go to the last -- second page from the
back, "Therefore, it is ordered that a monetary contempt
sanction is imposed against Dennis Montgomery in the
10
amount of $2,500 a day from the date of the failure to
11
comply, July 23, 2008, through the date the production
12
actually occurs."
13
14
Did you know that penalty was being imposed,

Ms. Blixseth?
15
A.
I think I did hear about that and there was a
16
lot of stuff going back and forth about Dennis having
17
problems gathering what they were asking for with the
18
DOJ restrictions on what could be turned over but --
19
MR. HOLAHAN:
DOD?
20
THE WITNESS:
No, the DOJ at the time.
21
MR. HOLAHAN:
Okay.
22
THE WITNESS:
But I don't -- and I remember
23
this happening, but I don't remember the amount and I
24
don't remember the exact dates.
25
///
Page 199
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1
2
BY MR. FLYNN:
Q.
This was happening right around the time you
got the $35 million from Byrne.
you would pay the $2500 a day?
Did you tell Montgomery
A.
No, I did not.
Q.
Did he tell you he didn't have the money to pay
7
8
9
10
11
12
the $2500 a day and wanted you to pay it?

A.
He may have said he didn't have the money to
pay it, but the 35 million was all earmarked for

everything for Yellowstone Club.
Q.
Now did Montgomery threaten you during this
period of time to pay the 2500?
13
A.
Threaten me in what way?
14
Q.
In any way.
15
A.
I don't think Dennis has ever threatened me.
16
Q.
Did he threaten you in connection with exposing
17
any computer hacking you had done?
18
A.
Absolutely not.
19
Q.
He had done for you?
20
A.
Absolutely not.
21
Q.
Did he hack into Mr. Blixseth's computers with
22
regard to alleged Cayman Islands accounts during the
23
proceedings and inform you that Tim Blixseth had
24
accounts in the Cayman Islands; that he had picked
25
off -- hacked into the bank accounts in the Cayman
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1
Islands in addition to Mr. Blixseth's computers and had
not reported on his marital disclosure statements?
Did Montgomery tell you that?
A.
No, he did not.
Q.
Did you tell your lawyers who then wrote a
letter that Mr. Blixseth was concealing Cayman Island
accounts?
8
9
A.
No.
I asked about the Cayman Islands from a
Bank of America account and I said I think it probably
10
has something to do with the boats.
11
Dan Jaffe wrote Kolodny a letter asking about that.
12
And I think that
Tim and I talked about this just a few weeks
13
ago when we were speaking that he totally over-reacted
14
to that.
15
16
Q.
I never accused him of having accounts there.

Did you tell Steve Crisman that Tim Blixseth
had concealed $7 million in Cayman Islands accounts --
17
A.
Absolutely not.
18
Q.
-- within weeks prior to your lawyers writing
19
the letter on June 15, '07?
20
A.
Absolutely not.
21
Q.
Absolutely not?
22
A.
Absolutely not.
23
Q.
So then Crisman would be lying and you would be
24
25
telling the truth, Ms. Blixseth?

A.
If he said that, he would be lying.
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1
Q.
Did you send any emails to anybody relative to
Tim Blixseth concealing monies in Cayman Islands
accounts and being trapped in court concealing those
accounts?
A.
I did not write an email like that.
MR. FLYNN:
one, Confession of Judgment.
8
9
Okay.
Let's give her this next

Q.
Now --
10
MR. BLIXSETH:
Which exhibit?
11
MR. HOARD:
33.
12
MR. FLYNN:
33.
13
MR. HOARD:
33, if it's the $5 million one.
14
MR. FLYNN:
This is the $5 million judgment on,
15
basically, what was defamation by Dennis Montgomery
16
accusing Trepp of bribing Gibbons, the current governor
17
of Nevada.
18
Q.
19
20
Ms. Blixseth?
A.
21
22
Do you recall executing this document,
Let me look at it.

Is this the settlement agreement?
Q.
This is the judgment that was agreed to in the
23
settlement agreement, but you didn't pay the settlement
24
agreement.
25
Let me ask you this:
Why did you agree pay
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1
Trepp $5 million for Montgomery defaming Trepp about
bribing Gibbons?
5 million?
A.
Why did you agree to pay the
It wasn't me, personally.
It was the company,
but I may have signed, personally.
there was a huge issue with Warren Trepp's wife that
wanted -- and Warren, himself, told me that since there
were shareholders in eTreppid, he wanted something that
was specifically going to go to them and he didn't have
10
But there was a --
to do with the shareholders.
11
And she wanted to feel like she had some --
12
some kind of something for all the stuff that had been
13
in the press and so it was the same amount of money, it
14
was just how they wanted it divided.
15
16
17
Q.
So she wanted something for what -- what had
been in the press?

A.
There had been a whole lot of stuff in the
18
press of what Dennis's allegations were were not true,
19
what Warren and Gibbons were saying were not true.
20
was back and forth.
21
Q.
Let cut through a lot of it.
It
In fact, there
22
were three Wall Street Journal articles by your friend,
23
John Wilke, two front page, one I think on page 4 or 5.
24
There was an NBC show done by your friend Lisa Myers
25
filmed at your estate, Porcupine Creek -Page 203

800.669.1866
379
1
2
A.
With you the one present in the room and me not
present.
Q.
When I told Montgomery not to do it.
A.
That's so not true.
5
6
that.
Q.
7
8
Ms. Blixseth?
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
12
MR. FLYNN:
13
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
18
MR. FLYNN:
19
MR. HOLAHAN:
23
Did you just state that you
You don't understand the facts.
Hold on one second.

-- and his lawyers.
Hold on one second.
Did you
represent Dennis Montgomery at the time?
21
22
You don't understand the facts.
There's a 54-page sanction order on Montgomery --
17
20
Are you breaching your --
were --
15
16
You don't understand the facts,
Dennis.
11
14
Are you breaching your
attorney-client privilege?
9
10
You can't testify and do
MR. FLYNN:
You don't understand the facts and
I'm not going to let you delay the deposition.

Q.
Ms. Blixseth, the next question is:
Did Lisa
24
Myers film at Porcupine Creek an interview in which
25
Montgomery accused Trepp of bribing Gibbons, yes or no?
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1
2
3
A.
Q.
Ms. Blixseth, was it filmed at Porcupine Creek?

MR. GLASSER:
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
10
Excuse me.
Can you not interrupt
her and her not interrupt you, like to get through this.
You were in
the room when the interview was --
4
5
I saw the interview afterwards.
Move to strike.
No, sorry.
Please, Dennis, I want a simple
answer to this question.

Q.
11
Was it filmed at Porcupine Creek?

MR. HOLAHAN:
I need to make a statement.
12
You're raising your voice the way you did before lunch.
13
You're being abusive and argumentative with my client,
14
the deponent.
15
16
If you continue to do that, we're going to

adjourn.
17
MR. FLYNN:
18
I'm going to move on.
19
MR. HOLAHAN:
20
MR. FLYNN:
21
22
You do whatever you're going to do.
No, you're not until I finish.

You're delaying and wasting time,
Dennis.
MR. GLASSER:
I suggest let him talk until he's
23
fully ventilated himself and then you can talk until you
24
fully ventilate yourself and then we'll --
25
MR. FLYNN:
Mr. Glass [sic], it's a waste of
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1
time.
We're just wasting time.
MR. HOLAHAN:
If you continue to raise your
voice and be abusive to my client, we're going to get a
magistrate.
and then we'll continue that way, so please don't --
6
7
MR. FLYNN:
MR. HOLAHAN:
Please, please, don't do that
anymore.
10
11
I submit we're going to do that
anyway, but we're going to move forward.
8
9
We're going to leave and get a magistrate
MR. FLYNN:
Q.
Please don't waste time.
Ms. Blixseth, was the interview filmed at your
12
home, Porcupine Creek, in the first week in
13
November 2006 regarding Lisa Myers and Dennis
14
Montgomery, was it filmed at your house?
15
A.
You know it was, because you were there.
16
Q.
It's a simple question.
17
So the answer is yes; is that correct?
18
A.
Yes.
19
Q.
Thank you.
20
21
22
You were the one present to witness it.
Who contacted Lisa Myers and have her fly to

California to interview Dennis Montgomery?
A.
First of all, you referred to her repeatedly as
23
my friend, so I'm going to correct that if I'm answering
24
questions about her.
25
I have never met her.
Tim Blixseth called a gentleman from NBC who
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1
then called Lisa Myers and contacted us.
Q.
So it was Tim Blixseth who did it; is that your
testimony?
A.
It was Tim Blixseth who initiated the call who
would be the best person to have this come out if that
was going to come out.
Q.
That weekend did you get in a fight with Tim
Blixseth because you told him you didn't want him to
have any part of what was going on with the technology
10
11
and Montgomery?
A.
No, I got in a fight with him because I told
12
him he shouldn't be using names like Jack Kemp and other
13
people that weren't involved in what this was doing and
14
he was using their names.
15
16
MR. FLYNN:
Exhibit 24.
Let's go to the next one,
This is the $20-million judgment.
17
MR. GLASSER:
18
MR. FLYNN:
19
20
21
34?
34.
Thank you.
BY MR. FLYNN:
Q.
22
This is the $20-million judgment.

Did you agree to pay -- to confess a judgment
23
to Trepp to pay him $20 million for the software that
24
Montgomery had taken from eTreppid?
25
A.
I can't answer that in that way.
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1
Q.
Did you agree to pay him $20 million?
A.
We agreed to have him participate in the upside
if there was upside with what we were doing with the
technology.
5
6
Q.
Did you agree to confess a judgment for
$20 million in favor of Trepp?
A.
judgment."
Q.
10
I guess I'm not clear when you say "confess a
Is it your signature on this document
Confession of Judgment for $20 million, Ms. Blixseth?
11
A.
Mine doesn't have any signatures.
12
Q.
Look at the second page; is that your
13
signature?
14
A.
It appears to be my signature.
15
Q.
Thank you.
16
17
Did you pay Trepp?

A.
18
19
But it doesn't say Confession of Judgment.

Oh, yeah, it does.
I'm sorry, I didn't see
that.
20
MR. FLYNN:
Let's go to the next one, Exhibit
21
35, Amended Expedited Writ of Execution on Personal
22
Property.
23
24
25

BY MR. FLYNN:
Q.
Did the Trepp parties come and collect all the
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personal property at Blxware?
A.
Blxware where?
Q.
Well, in Bellevue, Washington.
A.
I was told that the marshals came and that it's
5
6
still being held by the marshals.

Q.
Does Dennis Montgomery, right across the street
here, have Blxware technology -- strike that, have
Blxware computer equipment?
A.
I don't know.
I don't know where right across
10
the street.
11
where Dennis had moved to, but I've never been there or
12
never driven past it or --
13
14
15
16
Q.
Tim told me he had him followed and knew
Assuming Dennis Montgomery has an office full
of computer equipment, do you know where it comes from?

A.
I hate assuming, but I would think it's
Blxware.
17
MR. HOLAHAN:
Is that a guess?
18
THE WITNESS:
If it's the equipment he took
19
from the other office, it would be Blxware.
20
BY MR. FLYNN:
21
Q.
Took from what office?
22
A.
The office that was over on 111.
23
Q.
In Rancho Mirage?
24
A.
Correct.
25
Q.
What equipment was over on 111?
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A.
I can't name the equipment.
There was all of
Blxware's, other than what was at Bellevue was at that
office.
Q.
Computers and screens and rays and --
A.
Correct.
Q.
Was that being used to ostensibly or
7
8
9
10
purportedly noise-filter Al-Jazeera communications?

A.
That was being used to process certain data and
to continue to work on making the technology better.

Q.
So what was -- so describe it to me.
Was it a
11
room full of computers and screens and that type of
12
thing?
13
A.
Yes.
14
Q.
And was he purportedly downloading Al-Jazeera
15
16
video transmissions and filtering them?

A.
17
18
You know, I don't know.

MR. HOLAHAN:
If you don't know, you don't
THE WITNESS:
I think you can get that
know.
19
20
information from other sources.
21
BY MR. FLYNN:
22
23
Q.
After paying Montgomery over $5 million, are
you telling me you don't know what he was doing?
24
A.
I never said I paid Montgomery over $5 million.
25
Q.
How much did you pay him?
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1
A.
I repeatedly told you the signing bonus that
I'm aware of was a million or million and a half and he
got a hundred thousand a month and --
Q.
So what is your best statement of how much you
gave Montgomery?
is your best estimate, Ms. Blixseth?
7
8
A.
It happens to be 5.3 million, but what
I'm not aware of him getting 5.3 million out of
the company.
Q.
What is your best estimate?
10
A.
I don't have --
11
Q.
You don't have an estimate?
12
A.
It's the same answer I told you.
13
Q.
Now that equipment that you described that was
14
over on 111 belonging to Blxware, where is it now?
15
A.
I don't know.
16
Q.
What is its value?
17
A.
I don't know, but I'm getting those numbers
18
together.
19
Q.
Why are you getting those numbers together?
20
A.
Because the trustee would like to have them.
21
Q.
When you say you don't know, did someone remove
22
it from the office on 111?
23
A.
I said I don't know the value.
24
Q.
Okay.
25
Well, right now I'm wanting to know
where it went.
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2
A.
Yeah.
I don't know.
I'm assuming it went to
the new location that Dennis leased, but I don't know.
Q.
Who took the equipment out, if you know?
A.
I believe Dennis did.
Q.
How do you know that?
A.
I just said I believed it.
I believe we were
moving out of that office and I believe Dennis moved the
equipment there.
Q.
Do you have any emails or text messages from
10
Montgomery that he was moving the equipment over right
11
across the street on Cook Street here?
12
A.
We recently got from him, because the trustee
13
asked, storage units.
14
storage units, but I still don't know the address of
15
where the equipment was moved to.
16
17
Q.
So we recently got addresses for
This is an email that you wrote to Dennis,
Rhodes and Russell.
18
19
MR. BLIXSETH:
20
MR. FLYNN:
21
THE WITNESS:
22
MR. FLYNN:
23
THE WITNESS:
What's the number?
This is exhibit -- what, 35?

36, mine says.
36.
Okay.
I think I wrote it to Dennis and
24
I copied Russell and Nick.
25
///
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2
BY MR. FLYNN:
Q.
All right.
This is dated August 27, '08?
MR. HOLAHAN:
Sorry.
THE WITNESS:
Hang on a second.
MR. HOLAHAN:
Yeah, go ahead.
THE WITNESS:
Okay.
7
8
9
10
BY MR. FLYNN:
Q.
And you say, "I met with Nick and Jory
yesterday in LA.
We're going over numbers and ways to
make this start paying for itself."
11
A.
I'm not reading the same --
12
Q.
Second paragraph.
13
A.
Oh, I thought you started from the top.
14
Q.
"You are the key to our success.
I know you
15
have all the court things going on and the penalty is
16
mounting each day, so I want to get that done."
17
18
What did you mean by getting "that done,"

Ms. Blixseth?
19
A.
I don't know.
20
Q.
Did you mean paying the penalty?
21
A.
I don't know.
22
Q.
"But we really need to get our business in
23
order to start capitalizing on things coming our way.
24
We can't afford to continue the way we have here.
25
need the source code (not about court, about our
We
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1
business), so we can have it in the proper, safe place
to be evaluated and then they can monetize our work."
Did you know at the time there was a court
order to have the technology produced in court subject
to a 2500-dollar-a-day penalty?
A.
I knew that there were some things Dennis was
being asked to turn over that he hadn't turned over
because he said it was -- it was so many files and so
many things to try to go through.
10
11
12
He was trying to find another way to do it, but

I still don't know if that means it's the source code.
Q.
So what "proper, safe place" did you want the
13
source code to go to when it was supposed to be produced
14
in court?
15
A.
That's two different questions.
I'm talking
16
about here trying to go forward with Dennis so that we
17
weren't at -- at his mercy if something fell off a
18
bridge or something happened that we had nothing with
19
all the money we'd invested so that we were going to try
20
to find a third party, much like an escrow company, that
21
would safeguard having the source code be turned over
22
and so we could go forward with it.
23
24
25
As I said, Dennis was the key and still is,

right now, to this.
Q.
Did the source code ever get turned over?
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1
A.
No, it did not.
Q.
Do you know why it never got turned over?
A.
We just couldn't -- just couldn't get to
4
5
getting Dennis to turn it over.

Q.
After three years did it not get -- three years
and, I think, $22 million you've got on your financial
statement, did you ever ask yourself whether it didn't
get turned over because it doesn't exist?
A.
No.
I asked myself if it didn't get turned
10
over because Dennis -- because of all the other things
11
that had happened that eTreppid and other things was
12
paranoid about, if it got turned over then he didn't
13
have control and would be carved out of the situation.
14
MR. FLYNN:
15
16
THE WITNESS:
17
of this one?
18
BY MR. FLYNN:
19
Q.
Let me show you Exhibit 37.
So you only wanted the first page
We don't have time.
It'll be on another day.
20
Exhibit 37 is an email from you to Michael
21
Sandoval and Dennis Montgomery dated July 11, 2006.
22
this before or after you went to see Trepp -- strike
23
that, Vice President Cheney?
24
25
A.
Was
Give me time to read it because -MR. GLASSER:
Are you on Exhibit 37?
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1
MR. FLYNN:
MR. HOLAHAN:
MR. FLYNN:
Yeah.
How many pages is it?
There are two emails and there are
Wall Street Journal articles.
MR. HOLAHAN:
MR. FLYNN:
Articles, plural?
Articles.
There are three articles
all written by John Wilke who worked with Ms. Blixseth
and Mr. Montgomery for two months.
9
10
THE WITNESS:
That was just a statement.
BY MR. FLYNN:
11
Q.
That statement made on the record.
12
A.
I talked to John Wilke a few times; Dennis was
13
working with John Wilke.
14
(Mr. Blixseth and Mr. Flynn confer.)
15
THE WITNESS:
16
"That's beautiful."
17
I can't tell from reading this if it was before
18
or after that meeting.
19
BY MR. FLYNN:
20
21
22
"That's beautiful," he says,
Q.
yet."
A.
You write, "We haven't pulled all the cards out

What cards are you referring to?
I'm not sure, but what we were trying to do is
23
get to places where we were -- the people that were
24
questioning the technology and Dennis to be able to have
25
things to show that the technology worked and we can
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1
2
move forward.
Q.
You say, "I have a plan that I've sort of
talked to with Michael."
Was that a plan to go to the
media?
A.
No.
Q.
What was the plan?
A.
The plan was to -- I don't really remember
based on this, but the plan was to try to use some
things so we had some cash flow going but then give
10
Dennis time to work on the issues he needed to work on
11
in order to get the -- keep working on the technology.
12
13
Q.
So it wasn't a plan to go to the Wall Street
Journal because Cheney had rejected you?
14
A.
No.
That was not the plan.
15
Q.
And how is it that over the ensuing two months
16
John Wilke worked on an article working with Dennis
17
Montgomery?
18
A.
How did that come to pass?
As I told you, we talked to -- Tim and I both
19
talked to Robert Frank when we were in New York on the
20
boat for something to do with Yellowstone Club.
21
Robert Frank said he didn't have time because
22
of working on his book and he thought that John Wilke,
23
would, perhaps, be a better person because he was an
24
investigative, so Robert Frank gave either me or Tim, I
25
don't remember which one.

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1
I think Tim talked to John Wilke quite a few
times before I actually ever did.
turned things over to say, "This is what Dennis is
saying.
Q.
And that's who we
Let's find out if it's the truth or not."

Did you sign a declaration under oath saying
Tim Blixseth had virtually little to do with the
technology companies and you didn't want him involved,
words to that effect?
A.
Yes, because he was trying to be involved once
10
I was going to get the technology companies and he
11
was -- that would be like me being involved in Western
12
Pacific Timber when that wasn't going to be my asset.
13
Q.
Did you say over the previous period of time
14
that Tim Blixseth had never been involved in the
15
technology company?
16
17
A.
He had never been involved in an active role in
what the technology companies were doing.
18
Q.
Okay.
Ms. Blixseth --
19
A.
Are we done with these two?
20
MR. FLYNN:
21
Let me show you a financial statement 10/30 --
22
10/13/07, Exhibit 51.
23
24
25
Yeah, for the time being.

BY MR. FLYNN:
Q.
Did you give that bank statement to --
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1
financial statement, I'm sorry, to Alan Rye to get
approximately 7 million from First Bank & Trust?
A.
4
5
I don't know if that was for 7 at the time.

MR. HOLAHAN:
between?
MR. FLYNN:
probably go back to.
yet.
9
10
Are you skipping everything in
Q.
Well, the executive summary I'll

Apparently it hasn't been marked
So Ms. Blixseth did you report the Western
Capital $13 million on that financial statement?
11
A.
No, I don't think I did on any of them.
12
Q.
And why didn't you report it?
13
A.
Again, probably my mistake.
Definitely my
14
oversight that I never considered that my loan.
15
always considered it Matthew's and so --
16
17
Q.
MR. HOLAHAN:
Mr. Flynn, she said what she
said.
20
21
So not reporting a $13 million liability was a
mistake; was that your testimony?
18
19
MR. FLYNN:
Q.
Thanks.
Did you discuss the nonreporting of the
22
13 million on your 10/13 financial statement with Jory
23
Russell?
24
25
A.
No, I don't believe I did.
Jory didn't really
have anything to do with Western other than every once

Page 219
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1
in a while when we paid the financial statements.
2
3
Q.
Is that financial statement otherwise accurate
other than the nonreporting of the 13 million?
A.
At the time I believed it to be accurate
because I was basing the -- as an example, the B shares
and the A shares of Yellowstone Club at a certain value.
There's a mistake on here that we later
corrected as soon as I was asked about it and that's a
cash surrender value of life insurance that was -- that
10
was corrected because that's not how the life insurance
11
was.
It was just a life insurance policy.
12
Q.
How big of a mistake is that?
13
A.
The whole amount, because it's not a cash --
14
Q.
What's the whole amount, Ms. Blixseth?
15
A.
$30 million.
16
Q.
And any other mistakes?
17
A.
Well, I think that the values for Yellowstone
18
Club World properties were listed at the amount we paid
19
and then put at half, but were those values ever really
20
those values I now question.
21
22
Q.
25
I'm going to skip the -- yeah.
We're going to
get into the Yellowstone Club.
23
24
I didn't at the time.
You had your half share of the Yellowstone Club

at 300 million?
A.
Tell me where that is?
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Q.
2
3
4
5
Right here (indicating), Yellowstone Club,

300 million.
A.
8
9
That's a net amount?
I don't know if that's a net amount or we were
looking at fair market value at the time.
6
7
Let me take a look at it.
MR. HOLAHAN:
Oh, I see.
BY MR. FLYNN:
Q.
Is that your half of the community property, so
300- and 300- is 600 million and then you add in the
10
Yellowstone Club for 375 million and you're roughly
11
around a billion dollars?
12
A.
Yeah, and that was based on the 1.3- from
13
the -- the audit that Credit Suisse had done with -- I
14
can't think of the name of them right now -- put their
15
value on it.
16
MR. HOLAHAN:
Cushman Wakefield.
17
THE WITNESS:
Cushman Wakefield.
18
19
BY MR. FLYNN:
Q.
So the Cushman Wakefield total net value
20
methodology of appraisal on the Yellowstone Club led you
21
to report your half interest at 300 million; is that
22
correct?
23
A.
24
given.
25
Q.
At the time that was the information I was
And who gave that you information?
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1
A.
Somebody from Tim's office.
Q.
But as chief operating officer you knew, I take
it, for a period of at least two years before that that
$375 million had been loaned based on a $1.2 billion
appraisal based on total net value; is that correct?
A.
Repeat your question.
Q.
Yeah.
8
9
When did you find out -- when was the first

date that you found out that the total net value
10
methodology for appraisal of the Yellowstone Club was
11
used?
12
A.
I don't recall when I first found that out.
13
Q.
So when you put 300 million down, your
14
testimony is it was based on the Cushman and Wakefield
15
appraisal; is that correct?
16
A.
It was based on the information I was given
17
from the books and records that I believe they based it
18
on the Cushman Wakefield.
19
Q.
They being BGI?
20
A.
Correct.
21
Q.
So what happened is the Cushman and Wakefield
22
total net value appraisal filtered down to your
23
financial statement?
24
A.
Correct.
25
Q.
Was that correct?
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1
A.
Correct.
Q.
Is that one of the things that you attribute to
3
4
5
6
7
8
9
Tim Blixseth as sabotaging you?

A.
That's just the information I was given and
that's the information I used.

Q.
So as of October of 2007, did you believe that
the Yellowstone Club was worth roughly $1.2 billion?

A.
I believed from what Tim had told me and from
what he was trying to at that time find a buyer for it,
10
that those numbers could be accurate on a long-term
11
build-out or fair market value.
12
13
14
I don't think of a sale to, let's say, a quick

sale that those numbers would have been accurate.
Q.
Well, you thought 510 million on the sale to
15
Byrne was too low, did you not?
16
declarations to the effect that 510 million was too low,
17
did you not?
18
A.
I did.
19
Q.
Thank you.
20
21
Now when you signed those declarations in July

and August that the 510 million was too low --
22
23
24
25
And you signed three
MR. HOLAHAN:
What year?
BY MR. FLYNN:
Q.
-- of 2007, I take it you believed, as you said
in your declarations, that the true value was
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1
2
3
4
1.2 billion; is that correct?

A.
I believe that was the true value that had been
stated on a long-term build-out.

Q.
And you sought an injunction to prevent
Mr. Blixseth from selling it for 510 million because you
believed it was worth $1.2 billion; is that correct?
A.
I don't believe that the injunction was cited
for just that.
It was to gather information.
been the COO and been involved in the day-to-day
10
operations and I was completely frozen out of
11
information and I wanted information.
12
MR. FLYNN:
13
two aside.
14
representations.
15
16
Q.
Put that aside.
I had
We'll put these
Perhaps we'll come back to your
Do you remember preparing an Edra Blixseth
executive summary?
17
A.
No, I don't.
18
Q.
Did he prepare it under your auspices?
19
A.
I'd have to see exactly what you're talking
20
about.
21
Q.
22
23
I think Jory prepared that.
That's it there, Ms. Blixseth.
We'll just mark
it and we'll move on.

A.
It says 41.
24
25
MR. GLASSER:
What's the number, please?
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1
MR. FLYNN:
41.
MR. GLASSER:
Thank you.
MR. HOLAHAN:
Oh, man.
THE WITNESS:
Do you have it?
MR. HOLAHAN:
Well, I was going to look at --
what does it look like.
BY MR. FLYNN:
8
9
10
Q.
Have you read this document before?
you, Ms. Blixseth, that -MR. HOLAHAN:
12
document Mr. --
13
BY MR. FLYNN:
15
16
We don't
have the time to go into it now, but I'll represent to
11
14
I'll find it.
Q.
Are you going to characterize the
Just scan the document and I'll just simply ask
you if read it or participated in its preparation.

A.
17
I would assume that I was -MR. GLASSER:
Mind if we open the door?
19
THE WITNESS:
I know, I'm hot.
20
MR. BLIXSETH:
21
MR. GLASSER:
18
22
It's
way hot.
Might help if we open the door.

Let's open the door.
There's no
one else here.
23
THE WITNESS:
Yeah, I didn't prepare this or
24
was involved, but did I see it?
25
I did.
At some point I believe
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1
MR. HOLAHAN:
I'm sorry, Mr. Flynn, did you say
what date this was prepared?
MR. FLYNN:
There's no date on it, but you can
date it through the emails and you can date it through
other documentation as you will see.
MR. HOLAHAN:
What is the exhibit number on
THE WITNESS:
41.
MR. FLYNN:
that?
I believe it was right after she
10
made the deal with Mr. Blixseth to settle the marital
11
and shortly before she got the 35 million from --
12
MR. HOLAHAN:
13
MR. FLYNN:
14
Well, the deal with Mr. Blixseth
was June 26, I think, of '08.
15
16
July of '08 you're talking about?
MR. HOLAHAN:
But everything was signed on
July 4th, was it; right?
17
MR. FLYNN:
18
THE WITNESS:
19
that because --
20
BY MR. FLYNN:
Yeah, right in that time frame.

It must have been done before
21
Q.
Yes?
22
A.
Oh, no, I read it wrong.
23
35 million.
24
25
Why?
Sorry.
MR. FLYNN:
time.
I read 3.5 million as
Let's move on, since we don't have
We'll move on through these exhibits.
Let's go
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1
to -- okay.
2
3
Let me show you a financial statement.
Yeah.
Let me see that.
7/15/08, Exhibit 55.
BY MR. FLYNN:
Q.
Did you give that to Sam Byrne?
THE WITNESS:
55.
MR. HOLAHAN:
I don't have that, let me see it.
10
THE WITNESS:
I don't remember who it was given
11
to.
12
BY MR. FLYNN:
13
Q.
Did you give that to Sam Byrne?
14
A.
I don't remember who it was given to.
15
Q.
Did you sign a letter agreement with Sam Byrne
16
to -- prior to receiving the $35 million from him?
17
A.
Did I receive what?
18
Q.
Did you sign a letter agreement with Sam Byrne
19
I'm sorry.
before you got the $35 million from him?
20
A.
A letter agreement?
21
Q.
A letter agreement.
22
A.
In reference to what?
23
Q.
The $35 million in the Yellowstone Club.
24
A.
Before getting it from him?
25
I think it was
kind of simultaneous when we signed the letter and
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1
agreement to form and all that.
the same time.
It kind of -- all at
Q.
What was the letter?
A.
The letter was explaining what we were going to
do.
easier for me to look at it and answer questions.
7
8
9
I can't remember.
Q.
If you have it, it would be
You've never produced the letter agreement,
Ms. Blixseth, in any proceeding that we can find.

A.
Then maybe we didn't have a letter before that.
10
Everything was at the same time.
11
Liner's office and CrossHarbor came down there.
12
why I asked you was there ever a letter done before and
13
what's it in reference to.
14
Q.
We did everything at
That's
I'm not aware.
Did you make any deal with Sam Byrne in any
15
form of words to get money pursuant to a letter
16
agreement after he got control of the Yellowstone Club?
17
A.
Absolutely not.
18
Q.
This letter agreement that I'm referencing is
19
referenced in documents here.
20
from the bankruptcy court?
Have you concealed it
21
A.
Absolutely not.
22
Q.
When was the last time you saw the letter
23
agreement?
24
A.
25
I don't know if there is a letter agreement.
said that when you first asked me the question.
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1
2
3
Q.
You said you believed that the letter agreement
was signed on execution of the loan?

A.
I was thinking of the agreement to form.
When
the money was loaned, simultaneously the money was
loaned we signed the documents that were the agreement
to form which had agreements for Phase 1 and was part of
the whole negotiations.
8
9
10
11
Q.
When you say "part of the whole negotiations,"
so is that the letter agreement or is that the agreement

to form?
A.
I don't know what you're talking about.
That's
12
why when you asked me the letter agreement, I asked you
13
in reference to what, because I don't know exactly what
14
you're talking about.
15
16
17
18
19
20
21
Q.
Okay.
Did you attend a meeting in which the
letter agreement was discussed?

A.
I'm not aware there is a letter agreement.

MR. FLYNN:
Okay.
We're going to deviate out
of order a little bit here, Stephanie.

We're going to the end, gentlemen, starting
with an email dated Tuesday, July 8th, from Edra to --
22
THE WITNESS:
Is this done?
23
MR. FLYNN:
24
It's way at the end.
25
Stephanie, would you please mark --
No.
Just leave that.
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1
2
Why don't we take a ten-minute break while that

gets marked?
MR. HOLAHAN:
MR. FLYNN:
THE WITNESS:
MR. FLYNN:
Sorry.
It's an email -- see how thick the
file is here?
What's the date on it?
Yeah.
These are the last documents in
the -MR. HOLAHAN:
What's the first date?
10
MR. FLYNN:
11
MR. HOLAHAN:
July 8, 2006.
12
MR. GLASSER:
Do you know which number it
13
starts with, Mike?
14
MR. FLYNN:
15
MR. GLASSER:
16
MR. FLYNN:
18
MR. GLASSER:
19
MR. FLYNN:
20
MR. GLASSER:
22
23
Well, right behind it.

This the one that starts with the
July 8, 2008, 8:24 a.m.?
17
21
July 8, 2006.
Yes.
We're going to start there.
All right.
That is Exhibit 111.
Oh, you mean File 111.

Yeah.
On the website it's
Exhibit 111.
MR. FLYNN:
Start marking that as Exhibit 111,
thank you.
24
(Recess taken.)
25
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1
BY MR. FLYNN:
Q.
Ms. Blixseth, let me show you what has been
marked as Exhibit 56, financial statement, dated
8/15/08.
5
6
Now this was the day after you got the

$35 million from Mr. Byrne; correct?
A.
I don't recall.
MR. HOLAHAN:
MR. FLYNN:
Is that in the pile somewhere?

Yeah.
Yeah.
10
MR. GLASSER:
11
MR. HOARD:
It looks like -- just about like
13
MR. FLYNN:
Here's another copy for you, Mr. --
14
THE WITNESS:
12
It's Exhibit 56.
55.
Well, I know it's after, because
15
it's got the 35 million on there.
16
BY MR. FLYNN:
17
18
Q.
Well, your marital dissolution went through on
August 13, did it not?
19
A.
I don't remember the date.
20
Q.
Did your -- and the next day you got the 35
21
22
23
million; you don't remember that?

A.
Well, this is August.
You just said -- the
dissolution of the marriage was not until October.
24
Q.
Well, the closing of the transaction --
25
A.
The MSA.
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1
2
3
Q.
-- the dissolution of the marriage, was on
August 13th, was it not?

A.
I don't remember, but I know it was close to
this because it's now listed on this.
I notice that he
did have -- on this one he does have MNI bank and
Western Capital Partners.
Q.
What's MNI Bank?
A.
That's partly -- who Western Capital Partners
sold off part of the loan to.
10
Q.
And what's the amount?
11
A.
3 million.
12
Q.
So that's not the 13 million, is it,
13
14
Ms. Blixseth?
A.
No.
I believe that was the part that got
15
changed around with the -- right before -- right before
16
all this was happening is when all that was going on, so
17
I don't remember the exact details.
18
19
Q.
Now as of the closing on August 13, you signed
a note for $181 million to BGI, did you not?
20
A.
I did.
21
Q.
Where is that on this financial statement?
22
A.
It's not.
23
Q.
Why is it not on the financial statement?
24
A.
That was the taking over the note that Tim had
25
signed for us, personally, and then to BGI and then BGI
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1
to the Yellowstone Club, which was going to be worked
off -- Yellowstone Club was always -- the Credit Suisse
loan was always going to be paid off by the lot sales
from the Yellowstone Club and the money that we took as
a loan was going to be taken care of as time went along
and we had chances to write things off and that kind of
thing because of other business dealings to be gone down
from a loan to -- whether it's forgiven or not paid
back, whatever.
10
11
Q.
Did you prepare Exhibit 56 to induce someone to
give you money?
12
A.
I don't remember why this was prepared, because
13
I had just gotten -- unless it was prepared for Archer,
14
which was at the time we thought going to take out --
15
CrossHarbor's loan was only going to be a 30- or 45-day
16
loan.
17
It was kind of an interim to get things closed
18
and then a hard-money lender called Archer was going to
19
be coming in and taking them out, so I don't know if
20
that's what this is for.
21
Q.
I don't remember.
Ms. Blixseth, you admit you signed a note
22
personally for $181 million and you did not put it in
23
your personal financial statement; is that true, yes or
24
no?
25
MR. HOLAHAN:
She already answered the
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1
question.
MR. FLYNN:
long-winded answer.
4
5
She gave me a
We've got that on the record.
MR. HOLAHAN:
She said it's not on here.
BY MR. FLYNN:
6
7
She did not.
Q.
Did you sign a note for $181 million,
personally?
A.
Yeah, I took Tim's place on the note.
Q.
I don't want to know whose place you took or
10
anything else.
11
financial statement for $181 million personally, just
12
yes or no?
13
A.
That was part of the MSA.
Q.
Did you tell someone not to put the 181 million
14
15
16
Did you sign a note two days before this
I answered that,
yes.
on the financial statement?
17
A.
No, I did not.
18
Q.
Who prepared the financial statement?
19
A.
It says at the top Jory Russell.
20
Q.
Did you tell him about the $181 million note
21
you had signed?
22
A.
I don't know.
23
Q.
When you filed your bankruptcy schedules, did
24
you report on your bankruptcy schedules the $181 million
25
personal obligation that you have to BGI?
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1
A.
I don't believe it is.
Q.
Why didn't you?
A.
Because, again, I didn't take that as something
Why did you not put it on?
that was going to have to be paid back.
I thought it
was something that was going to be worked out.
Q.
Now you got on --
A.
I need to ask my lawyer something.
a break for a second?
MR. FLYNN:
Yeah.
10
(Witness and counsel confer.)
11
MR. HOLAHAN:
12
13
Can I take
Okay.
BY MR. FLYNN:
Q.
Now Ms. Blixseth, you also signed a note,
14
personally, for $40 million involving the Tamarindo
15
transaction, why did you not put that note on your
16
financial statement?
17
A.
That was one of the things actually, that Tim
18
had said to me that -- that that could be worked out,
19
the $40 million.
20
want," that could be worked out the same way as the
21
notes to BGI.
22
Q.
He said, "Work it out however you
So because Tim said that to you, you did not
23
feel that you were personally obligated to put it on
24
your financial statement that you were giving to
25
potential lenders; is that correct?
Page 235
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1
A.
Yeah.
I didn't feel like that was something
that was going to actually have to be paid back.
thought it was something worked out through our taxes.
4
5
Q.
So you, Edra Blixseth, thought you would never
have to pay it?
A.
That's correct.
Q.
Why did you not put it on your bankruptcy
schedules?
A.
For the same reason, I guess.
For the
10
bankruptcy schedules we used these and the books, the
11
additional books and records, that we had had time to go
12
through and that's the numbers that we used.
13
Q.
Now on this statement you have a net worth of
14
849,485,412.
Did that accurately reflect your financial
15
net worth at the time?
16
A.
I thought it did at the time.
17
Q.
On what basis did you believe that?
18
A.
On the basis of what had been given to me, what
19
we talked about in the family court of values, what Tim
20
and I had gone back and forth on sheets that we had put
21
on values that he had given to me.
22
Q.
And what values had Tim given to you?
23
A.
Pretty much the values of most of the assets.
24
Q.
Let's run through them.
25
A.
Cash would have been just cash in my account.
Cash, 492,000.
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1
Q.
Story Mill, 19,500,000.
A.
No.
Did Tim give you that?
That would have been -- that would have
been based on the books, sorry, that would have been
based on the books that --
Q.
XPatterns, $8 million, did Tim give you that?
A.
That would have been based on books we had
7
8
9
10
11
control of.
Q.
2.8 million Monarch Investments, did Tim give
you that?
A.
Monarch Investments was something -- I've got
to think out loud for a second.
12
Q.
13
an answer.
14
A.
15
No.
Please don't think out loud.
Just give me
Well, give me a minute then.

Monarch Investments was something Tim started
16
and the only asset in it was the building that was in
17
Monarch, so I believe that came from records that we got
18
from Tim.
19
20
21
Q.
Who had the records for Monarch as of 8/15/08?
It says Edra Blixseth owns 100 percent.

A.
That was something that I had gotten in the MSA
22
but prior to that, so I don't know if we had gotten
23
these records or not yet.
24
but Patrick Ratte would have had them.
25
BGI office.
They came in kind of slowly,

They were at the
Page 237
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1
2
Q.
Is there anything inaccurate about the
$2.8 million that you know of today?
A.
Probably not that one.
Q.
Monarch Furniture & Design, that was you all
along, 2.879 million.
that down too?
Is Tim responsible for putting
A.
No, he's not.
Q.
Monarch Go Build, that's your son, 637,000.
Does he have anything to do with that?
10
MR. HOLAHAN:
11
MR. FLYNN:
12
THE WITNESS:
"He" meaning Tim?

Tim.
He did for a while.
There was
13
some tax write-offs that Matthew couldn't -- he couldn't
14
use and so for a while Tim had something to do with both
15
Go Build and Monarch Go Build, but I don't think at the
16
time he did.
17
BY MR. FLYNN:
18
19
20
21
22
23
Q.
So did the 637,000, have anything to do with
Tim Blixseth giving you that number?

A.
No, I think that would have come from Theta out
of the office on the spec homes.

Q.
Blxware 13,262,000 as an asset, Wachovia
8 million; did Tim have anything do with that number?
24
A.
No.
25
Q.
Blixseth Family Investments, 29,705,000, First
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1
Bank, 8 million, did Tim have anything to do with that
number?
3
4
5
6
7
A.
Only by virtue of keeping himself involved
because of Beau and Morgan's shares.

Q.
Where did you get the number?
Did Tim Blixseth
have anything to do with it?

A.
I got the number -- somewhat.
I got the number
based on what the receivable was from Spanish Peaks for
the note and then -- let me finish, please -- also
10
Blixseth Family Investment is one B share and five A
11
shares, so we based the value of the B shares and the A
12
shares based on the value that Tim said they were.
13
Q.
How long had Tim been out of BFI as of
14
August 15, 2008?
15
Ms. Blixseth?
16
A.
Which mini settlement was that,
I think that was two, so, maybe, approximately
17
a year, but Tim was not involved in the value of the A
18
and B shares within BFI.
19
Q.
So he had been out for over a year and you had
20
all the books and records of BFI when you put the
21
29 million down; is that correct?
22
A.
That's correct.
23
Q.
Let's go to the Yellowstone Club, 500 million,
24
25
Credit Suisse 300 million.

How did you arrive at the 500 million?
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1
A.
I think that that didn't change from the same
way we arrived at it before earlier on the financial
statement.
Q.
And as of June 28th, '07, was that roughly the
amount that Mr. Blixseth was trying to sell the club to
Sam Byrne for, $500 million?
A.
I don't remember the original amount.
There
was some early closings that happened and some other
things because of due diligence and stuff that changed,
10
but I think that the original amount in the beginning
11
for a sale was 500-something-thousand and this is based
12
on a long-term build-out.
13
14
15
16
17
18
19
Q.
number?
A.
Is the 500 million -- so that's a Credit Suisse

Is that based on the total net value?
It's the same answer that I gave you on the
other question.
Q.
Okay.
Porcupine Creek.
A.
As of August 15, 207 million for -- for

Is that your number, Ms. Blixseth?
That's based on an appraisal that we had done
20
in November of the prior year and we had it updated in
21
spring and then again in fall that still showed the
22
same.
23
Q.
So are you blaming Mr. Blixseth for that one?
24
A.
I don't think he had anything to do with that
25
one --
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1
Q.
these.
A.
4
5
6
7
So far he hasn't had anything to do with any of
No.
He had something to do with BFI on the A
and B shares and what the values were on that.

Q.
But that was a year before and you had had the
books and records for a year, Ms. Blixseth.

A.
I had the books and records for a year, but I
didn't have what the values were for Yellowstone Club
and based on what the A and B share were.
10
11
12
Q.
So what on the 29 million on Blixseth Family
Investments did Mr. Blixseth mislead you on?

A.
I believe if we have notes back here it might
13
say the amount that we put for contributing to the A and
14
B shares.
15
16
17
Q.
I just want to know how he misled you on the
29 million.
A.
The A and the B share values that placed on
18
what the A and B shares were worth within BFI were his
19
numbers and I don't know the amount.
20
itemized list behind this.
21
22
23
Q.
It doesn't show an
So over the prior year had you done anything to
correct his numbers?

A.
I couldn't do anything to correct his numbers.
24
I had been frozen out until the MSA was closed.
25
didn't have access to the books and records.
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1
Q.
As you sit here today do you know anything
inaccurate about the 29 million allegedly attributable
to Mr. Blixseth?
A.
Well, I know that the -- the note receivable is
the amount that it is on face value.
put into a lot of people's mind question if that note
receivable has any value at all or if Spanish Peaks has
any value at all.
I know that he has
The A and the B share that were owned in BFI
10
that were Yellowstone Club's have now no value and
11
probably didn't then.
12
13
14
15
Q.
Let's go to Farcheville, 63,900,000.
Where did
you get that number?

A.
That was based on an offer that came in for
Farcheville for 45 million euro at the time.
16
Q.
So that's got nothing to do with Mr. Blixseth.
17
A.
The euro on the dollar.
18
Q.
22,500,000 for Casa Captiva, what does that
19
20
21
have to do with Mr. Blixseth?

A.
That was the value that we had placed on it
together.
22
Q.
Who is we?
23
A.
Tim and I together.
He took three homes in
24
Tamarindo, I took Casa Captiva and we placed the values
25
at that.
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379
1
Q.
So both of you placed that value on it?
A.
I would say that's correct.
Q.
40 million for the Yellowstone Club compound.
4
5
Who put that value on there?

A.
Tim told me that he had a contract with
CrossHarbor that I had to take if I took Yellowstone
Club.
he had a contract with CrossHarbor to build that out and
that I would have to assume that contract and that was
I had to take the family compound back, but that
10
the value.
11
Q.
So you agreed to that?
12
A.
That's the value he gave me, so that's the
13
14
value I put down.

Q.
So you knew that -- you knew these loans were
15
against it, 13 million, 13.5 and 22 million?
16
those as of August 15 were pledged against that
17
collateral?
18
A.
You knew
Well, the 13 million was a note that I took
19
over.
20
I took over that was part of the 35-.
21
aware it was on as a second already when Tim had the
22
family compound and the third was a new loan that was
23
part of the collateral for the CrossHarbor.
24
25
Q.
That was a Tim Blixseth note to CrossHarbor that

The Lemond, I was
So you were fully knowledgeable of all that.

7 million Yellowstone --
Page 243
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1
A.
I was knowledgeable of those.
I wasn't aware
that the value was not $40 million on the family
compound.
Q.
Did you believe at the time of this financial
statement when you gave it to lenders that it was
$40 million?
A.
I did.
Q.
7 million to Yellowstone Development, what's
9
10
that, Ms. Blixseth?

A.
That's the -- that's Lot 48.
That's the house
11
that -- I don't know why it says BFI.
12
that I ended up getting.
13
Yellowstone Club and I ended up getting in the MSA.
14
15
16
Q.
It was traded in to
The Rancho Mirage homes, 4 million; Bellevue
condo, 3 million.
A.
That's a house
Is that a condo you bought?
It's a condo we bought together, but our
17
marriage was already over even though we hadn't filed so
18
I got that.
19
Q.
Now the 13 million, I think we covered this, of
20
Western Cap is not on here, only the 3 million; is that
21
correct?
So there's 10 million that's not on there?
22
A.
Correct.
23
Q.
And as of August 15, '08, were you in default
24
25
on all your loans?

A.
I don't know.
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1
2
3
Q.
What is your best memory as to when you were in
default on all your loans?

A.
I don't know at the time -- the first time I
was in default on all loans.
current and some things I couldn't get current, so I
can't answer that.
7
8
9
Q.
Let me show you a letter.
mark out of order.

A.
10
11
Okay.
Some things I would get
We'll have to
I'm not sure it's in the pile.
Are we done with this one (indicating)?

MR. FLYNN:
Please mark that next exhibit in
order.
12
I've got copies for you and copies for you.
13
(Discussion off the record.)
14
15
16
17
BY MR. FLYNN:
Q.
Is this a letter that you received from your
lawyers, Jaffe and Clemens, that they had you sign?
18
A.
It appears so.
19
Q.
Did you read it at the time you signed it,
20
Ms. Blixseth?
21
A.
I assume I did.
22
Q.
And notwithstanding the contents of the letter,
23
you proceeded to go forward with the marital settlement
24
agreement; is that correct?
25
A.
That's correct.
Page 245
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379
1
Q.
And having read and signed the letter from your
lawyers and deciding to forward with the marital
settlement agreement --
MR. HOLAHAN:
How did you get this letter?
This is attorney-client privilege.
document?
7
8
MR. FLYNN:
I'm not going to answer that now,
but believe me it came to my possession properly.
MR. HOLAHAN:
10
MR. FLYNN:
11
MR. HOLAHAN:
Well, you better answer it.

Don't tell me what to do.
Just tell me quickly where you
12
got or we can't answer.
13
got it --
14
MR. FLYNN:
It's attorney-client, so if you
If you want to move to strike it,
15
you can move to strike it.
16
comes from.
17
18
How did you get this
Q.
You'll find out where it
Ms. Blixseth, did you give this letter to
somebody?
19
A.
I don't recall.
20
Q.
Who did you give it to Ms. Blixseth?
21
A.
I just said I don't recall.
22
Q.
Did you give this letter to someone to make
23
sure that the $35 million transaction with CrossHarbor
24
went through?
25
A.
I don't recall
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1
if I gave this to anybody or if I didn't and your
question has assumptions in it that I have no idea.
Q.
Okay.
MR. HOLAHAN:
marked as an exhibit.
privileged document.
attorney-client privilege that's copied on it and it's
between Ms. Blixseth's divorce attorneys and her and I
don't know how Mr. Flynn got it, but it's
10
It's an attorney-client
There's nobody outside of the
attorney-client privileged.
11
12
I have to object to this being
MR. FLYNN:
For the record, it's emailed to
numerous people by Ms. Blixseth.
13
MR. HOLAHAN:
Well, I'm objecting.
Just let me
14
finish and we'll be through.
15
MR. FLYNN:
16
Let's move to these exhibits starting with 111.
17
18
MR. FLYNN:
19
20
21
22
23
24
25
I'm objecting to it.
Your objection is noted.
She emailed it to a bunch of
people.
Q.
Did you send this Exhibit 111 to Jory Russell
re financing on July 8th?

A.
I can't tell, but it appears because it came
from me up there and answering Jory's that I did.

Q.
It says, "Would you like me to send you the
most current financial statement for your review and
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1
then send to Sam?"
2
3
And you say, "Keep with the end of the month.

Yes, send it when you have it."
4
5
Was that a financial statement that you sent to

Sam Byrne in connection with the 35 million?
A.
I have no idea by reading this what that would
be.
That's the only transaction I had ongoing was Sam
so I assume so, but I really can't tell by looking at
this.
10
Q.
11
Byrne?
12
A.
I can't recall.
13
Q.
Did Sam Byrne know about the 35 million Western
14
15
Did you give a financial statement to Sam
Capital guarantee?
A.
I don't recall if he did or not.
I do recall
16
telling him about finding the UCC -- he must have,
17
because I told him we found the UCC filing on everything
18
when we were doing something with Wachovia, so I think I
19
would have brought that up then.
20
Q.
Was it in the agreement to form, Ms. Blixseth?
21
A.
Not that I recall.
22
Q.
Was it referenced in the agreement to form?
23
A.
I don't recall.
24
Q.
Okay.
25
subpoena:
Just yes or no without regard to this
Did you give Sam Byrne a complete financial
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1
statement with regard to your true financial situation
prior to getting the $35 million loan?
A.
I don't recall when he got the financial
statement.
Q.
Did you disclose to him a full picture of your
then current financial situation when you got the
$35 million loan?
8
9
A.
Q.
14
15
Do you recall withholding any information from
Sam Byrne before he gave you the $35 million?
12
13
I don't
recall the conversation.
10
11
Hard -- that's a hard thing to answer.
A.
I did not knowingly withhold information from
Q.
Did he do his due diligence before he gave you
Sam.
the $35 million?
16
A.
I can't speak for what Sam did or didn't do.
17
Q.
Did his lawyers and your lawyers exchange
18
19
20
information?
A.
information exchanged.
21
22
23
24
25
They had conversations; I don't know about

BY MR. FLYNN:
Q.
Let's look at the 6/30/08 financial statement.
To your knowledge, did that go to Sam Byrne?

A.
I have no idea.
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Q.
This shows your net worth at $1.2 billion.
this statement accurately reflect your financial
position as of 6/30/08, Ms. Blixseth?
4
5
6
7
8
A.
Did
It must have reflected what I thought at the
time.
Q.
As of June 30, '08, it accurately reflected
your financial situation?

A.
I'm looking at the notes here.

We hadn't done the CrossHarbors deals at this
10
date, so I'm not clear.
I'm not sure if this was a
11
working document or if this was a document that ever
12
actually went to somebody, so I'm sorry, I can't answer
13
your question.
14
Q.
Did you give a financial statement for BGI to
15
Sam Byrne?
16
A.
For BGI?
17
Q.
Yes.
18
A.
I don't believe so.
I don't know.
When we did
19
the Sam Byrne closing was the same time as the MSA
20
closing and at that time I didn't have all the books and
21
records for BGI.
22
23
Q.
Who owned Porcupine Creek that Sam Byrne was
putting the $35 million loan on?
24
A.
BGI.
25
Q.
And did Mr. Byrne conduct any inquiry into the
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1
financial status of BGI, to your knowledge, before he
gave the $35 million?
A.
I think he questioned if there was -- I think
they did a title search and saw there was no loans
against BGI -- excuse me, Porcupine Creek.
Q.
And Mr. Byrne and his lawyers participated in
the closing in which the $181 million check by you was
signed and the $40 million note by you was signed; is
that correct, Ms. Blixseth?
10
A.
Can you start over?
11
Q.
Yeah.
12
Because I heard --
With regard to the -- all the closing documents
13
and the financial documents that were involved were all
14
given to Mr. Byrne before closing; is that correct?
15
A.
I don't know if that's correct or not.
16
Q.
What was given to him that you don't know
17
about?
18
A.
Well, if I don't know about it I wouldn't know
19
how to answer your question, so I don't know what was
20
given to him that I don't know about.
21
Q.
Did you conceal any documents from Mr. Byrne?
22
A.
No.
23
Q.
Did Mr. Byrne, to your knowledge, know about
24
the $181 million personal note that you were writing as
25
part of the MSA?
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1
A.
I don't know.
Q.
Did he know about the $40 million note that you
3
4
were writing as part of the MSA?

A.
I think -- there was so many questions on what
we were allowed to say and not say at that time, because
it wasn't public record and we had a confidentiality --
Q.
Who is "we"?
A.
Tim Blixseth and me had a confidentiality of
what we could disclose and not disclose, except if it
10
had to do with banking or getting financing and that
11
kind of thing, so I actually don't recall.
12
13
14
Q.
lawyers that they had to approve the MSA, Ms. Blixseth?

A.
15
16
I don't recall that ever being said.

MR. FLYNN:
Okay.
Let's go to this 7/15/08
financial statement.
17
18
Did Mr. Byrne and his lawyers tell you and your

BY MR. FLYNN:
19
Q.
Was that given to Mr. Byrne?
20
A.
I don't know.
Again, I can't tell by looking
21
at these if these were working documents or documents
22
that were actually given to someone.
23
24
25
If there's an email that goes with it or letter

that goes with it, it would be easier for me to tell.
Q.
Now your net worth is up to 1.312 billion?
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1
A.
And it was 1.32 there.
Q.
So Ms. Blixseth, is this financial statement,
3
4
to your knowledge, accurate in all respects?

A.
Again, to the time and the values with the
exceptions of what I've already addressed, I think that
the insurance thing was already taken care of by this
time, by this one.
8
9
10

BY MR. FLYNN:
Q.
Let me show you a series of emails between
11
Yankelevitz Heller from the Liner firm, Goldfarb, your
12
financial advisor, dated as of July 22, July 21.
13
14
Do you recall these emails marked as

Exhibit 114, Ms. Blixseth?
15
MR. HOLAHAN:
How many?
16
THE WITNESS:
There's one, two, three.
17
18
BY MR. FLYNN:
Q.
What I'm really interested in is the two
19
sentences on the second and third page, Regenstreif, one
20
of the Liner lawyers writes to -- and Goldfarb is
21
included in this communication.
22
"I did not see that the CrossHarbor
23
subordinated mortgage is required," then you go over to
24
the next page, "Catch is CrossHarbor has not agreed to
25
allow this.
We have a call with them at 9:30 a.m. PST
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1
to discuss."
Did everything you were doing at the time to
get the MSA concluded and the 35 million loan require
the approval of CrossHarbor Capital?
A.
I don't believe so, but this was actually --
when I said this was Archer, this was when we still
thought PEM was going to be -- so I'm going to correct
my testimony from earlier when I said I thought it was
Archer.
10
PEM and Archer had both made a run at it.
PEM
11
made a run at it, but it didn't work out so we went with
12
Archer.
13
Q.
Is Goldfarb wrong that the catch is that
14
CrossHarbor has not yet agreed to this and did you have
15
a conference call to discuss?
16
17
Do you recall that CrossHarbor had to approve

it?
18
A.
When you say "approve it," approve what?
19
Q.
The entire marital agreement.
20
A.
That's not what this says.
This does not say
21
that they would have to approve the entire marital
22
settlement agreement.
23
Q.
Did they have to?
24
A.
I've already answered that question.
25
Not to
the best of my knowledge and I'm sure they didn't.
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1
don't know what "it" is they had to approve.
clear.
Q.
It's not
You realize you're under oath, Ms. Blixseth.
Let's look at the next exhibit in order.
THE WITNESS:
is about.
BY MR. FLYNN:
Q.
This doesn't make clear what this
Ms. Blixseth, this is an email from you to Jory
10
Russell dated August 5th.
11
your jewelry at the jeweler and being behind in payments
12
to him.
13
Did --
14
MR. GLASSER:
15
MR. FLYNN:
16
MR. HOLAHAN:
17
18
19
What's the date of this?

August 5th.
August 5.
BY MR. FLYNN:
Q.
Were your circumstances such that you were
hocking your jewelry at the time, Ms. Blixseth?
20
21
This has to do with hocking
MR. GLASSER:
That's Exhibit 115.
BY MR. FLYNN:
22
Q.
Were you hocking your jewelry at the jeweler?
23
A.
I'm trying to read what you've given me and
24
25
then I'm going to answer you.

I think this was for an interest payment on
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1
jewelry that I had borrowed against, yes.
MR. FLYNN:
4
5
Exhibit 116.
BY MR. FLYNN:
Q.
Did you attend discussions between
Edra/Yellowstone Club Entities and CrossHarbor Capital
Partners on August 1, 2008?
A.
Where was this held?
Q.
Did you attend a meeting with --
10
A.
I don't know.
11
to answer.
12
might have a better recall.
13
Q.
I don't know if I -- not going
I thought if you knew where it was held, I
First preliminary agreement reads, first page,
14
"CrossHarbor Capital Partners seeks to provide
15
short-term bridge financing to Edra Blixseth in order to
16
close on her divorce from Tim Blixseth and implement a
17
financial plan to stabilize the Yellowstone Club and all
18
affiliated entities."
19
Was that agreed upon between you and Byrne?
20
A.
That's the discussion points.
21
Q.
Was it agreed upon between you and Mr. Byrne?
22
A.
That was just discussion points.
23
Q.
Is it your testimony it was not agreed upon?
24
A.
Nothing was agreed upon until we signed the
25
thing.
This was a working paper, working document, for
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2
discussion points.
Q.
"In order to move forward, CrossHarbor needs
assurance of its complete understanding of the
situation; therefore, CrossHarbor requires it be
provided with the following documents:
settlement-related documents received."
All divorce
Did I read that correctly, Ms. Blixseth?
A.
I think you did a great job.
Q.
In fact, all your divorce settlement documents
10
11
go to CrossHarbor before the transaction was finalized?

A.
I believe that we had it checked out through
12
the confidentiality that since CrossHarbor would be
13
deemed a -- like a bank or creditor or anybody else that
14
I could give information to, that I was allowed to give
15
them information.
16
Q.
So they had all the divorce settlement-related
17
documents?
18
A.
I don't know if they had all of them.
This
19
says received, but I didn't put this document together
20
nor did anyone in my employ so --
21
22
23
Q.
Were your lawyers and Jory Russell sending them
all of the divorce settlement-related documents?

A.
We were sending them things as we found that we
24
could and they were requested, unless I had a question
25
and so they would be deemed sent out of the offices.
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1
2
Q.
Did you send them detailed, updated financial
statements for EB, Edra Blixseth?
A.
I don't recall.
Q.
Is there any reason to dispute that pursuant to
this requirement of CrossHarbor they got updated
financial statements?
7
8
9
A.
It's on here from a working document, so it
doesn't say "received" but it says they were requested.

Q.
Do you have any reason to believe you didn't
10
get them updated financial statements where they knew
11
about the Wachovia loan, the First Bank loan, the
12
American Bank loan, the Western Capital loan?
13
14
Do you have any reason to believe they didn't

have those documents?
15
A.
I don't know what documents were given to them.
16
Q.
"All underwriting materials provided to PEM,
17
Archer and other potential sources of capital."
18
19
Did you give those to them?

A.
I believe those were not allowed to be given to
20
them because I believe PEM and Archer objected, but I
21
just kind of have a small recollection of that.
22
Q.
Who referred you to PEM and Archer?
23
A.
I was referred to Goldfarb by Liner.
Goldfarb
24
is the one that found -- Wachovia was originally
25
supposed to be who closed on -- which Tim was aware
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1
of -- who closed on the MSA.
Wachovia had their very public, huge hiccup
right before this and said that they couldn't close on
it now.
5
6
7
Q.
I want to know
who referred.
A.
8
9
I'm not interested in all that.
Well, I'm trying to answer your question.

Liner referred Wachovia.
do the deal.
Wachovia was going to
When Wachovia didn't do the deal, then
10
Liner put me in touch with Jim Goldfarb who worked with
11
hard-money lenders and that's -- with the market and
12
everything else, that's who I was forced to try to
13
negotiate with.
14
Q.
Did you work with Matthew Kidd to try to get
15
all this documentation to CrossHarbor through Matthew
16
Kidd who was working for CrossHarbor at the time?
17
A.
I didn't directly work with Matt Kidd.
18
Q.
Did he work with Jory Russell?
19
A.
I'm sure that Matt Kidd worked with Jory
20
21
22
Russell.
Q.
Detailed, updated financial statements for the
Yellowstone Club from 3/31/08.
23
A.
Are you on the second page?
24
Q.
No, same page.
25
A.
I see, yes.
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1
Q.
Did you do that?
A.
I don't recall.
document.
what they were requesting.
Q.
Again, this is a working
I don't recall what they actually got and
"Additionally, CrossHarbor needs a full
recognition of its existing rights through the execution
of the previous agreed-upon letter agreement."
8
9
Do you see that, Ms. Blixseth?

A.
10
I do.
MR. FLYNN:
For the record, no letter agreement
11
has ever been provided by Ms. Blixseth, I believe, in
12
this litigation that we've seen.
13
Q.
What letter agreement is referenced there?
14
A.
I have no idea.
15
Q.
Did you previously agree upon a letter
16
17
agreement with CrossHarbor Capital?

A.
Not that I recall.
I'm reading this and seeing
18
that and I know it's been referenced a letter of
19
agreement before, but we didn't have -- we didn't have
20
an LOI.
21
very, very quickly when Wachovia fell out and I couldn't
22
get PEM or Archer to --
23
24
25
Q.
We didn't have anything.
This was all done
So the answer is you don't know of any letter
of agreement; is that correct?

A.
I think I've answered that five times now.
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1
Q.
So you don't know of any agreement?
A.
And the answer is still the same.
Q.
Prior to getting the $35 million, did you
4
5
execute a previously agreed-upon letter agreement?

A.
Mike, I keep telling you that I don't -- I'm
not aware of a letter of agreement.
I'm aware of
agreement to form.
documents, but we didn't have anything prior to that.
I'm aware of all the closing
Q.
Let's keep going.
10
A.
This all came together really fast.
11
Q.
Let's keep going.
12
"CrossHarbor provides Edra Blixseth with a
13
$35 million loan," various terms, first mortgage,
14
assignment, first mortgage on family compound, then down
15
below, "CrossHarbor will control distributions of
16
Yellowstone Club working capital."
17
Do you see that, Ms. Blixseth?
18
A.
I do.
19
Q.
Did you turn over control of the Yellowstone
20
Club working capital to CrossHarbor Capital Partners as
21
part of the marital settlement agreement?
22
A.
No, not as part of the marital settlement
23
agreement.
24
Q.
As part of what, getting the $35 million?
25
A.
Until it was paid back, they wanted control of
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1
the use of the funds, and so this is basically saying
the use of the funds.
And yes, until that was -- that's why we put in
an interim COO that was somebody that was doing things
with CrossHarbor until their money was paid back.
6
7
They wanted to have some supervision, just like

a bank might ask for of where the money was going.
Q.
Thank you.
Now it says "control" not "supervision."
10
Did, in fact, as a result of the $35 million
11
loan which was used to consummate the marital settlement
12
agreement, did CrossHarbor get control of Yellowstone
13
Club working capital; yes or no?
14
A.
No.
15
Q.
You realize you're under oath, Ms. Blixseth?
16
A.
So you don't have to ask me again, I realized I
17
was under oath 9 o'clock this morning.
18
19
Q.
MR. HOLAHAN:
24
25
The answer was no, they
She hadn't finished her answer.
BY MR. FLYNN:
22
23
I got the answer.
didn't control it?
20
21
They got control of --
Q.
Do you want to change your answer from no to
yes?
MR. HOLAHAN:
As you have been doing all day,
Mr. Flynn, you didn't let her finish her answer.
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2
3
4
BY MR. FLYNN:
Q.
Do you have anything else to add after the no,
Ms. Blixseth?
A.
I have to add you keep asking if I'm aware I'm
under oath.
The reason it feels like you're asking me
that is to intimidate me or to have me scared that I'm
not answering the right question.
I want to make it clear to you as I was sworn
in this morning I know I'm under oath until we're done
10
today so, when I answer the questions I'm answering them
11
knowing I'm under oath.
12
MR. FLYNN:
For the record, I interject that
13
because as part of the record where this record may be
14
read, grand jury or elsewhere, I'm interjecting that
15
Ms. Blixseth is cognizant is cognizant of her duty to
16
testify truthfully.
17
MR. HOLAHAN:
That's when he cut you off.
18
THE WITNESS:
Yeah.
He got control and he had
19
control of how the money was used for that -- of the
20
money that I borrowed and we had certain other things
21
that I'll go into later when I'm asked of things that we
22
weren't aware of when it closed that I needed his help
23
on and we did that.
24
25
But he did not get control of Yellowstone Club

at the signing of this and the 35 million.
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2
BY MR. FLYNN:
Q.
Did he take control after the 35 million was
paid of the Stockman Yellowstone Club bank accounts and
remove you as a check signer?
5
6
A.
before.
I'm not sure I was a check signer on them

And we were at American Bank.
Q.
Did he take --
A.
We were at American Bank.
We just changed the
accounts to Stockman Bank and Moses Moore retained
10
control -- who had been -- who Tim and Dieter had hired.
11
He remained on board just like he had been.
12
13
14
15
And so my answer is no, CrossHarbor did not

take over total control of Yellowstone Club.
Q.
question, Ms. Blixseth.
16
17
Did they take over -- please listen to the
Did they take control of the Stockman Bank

account, Yellowstone Club bank accounts?
18
A.
I would not say they took control.
19
Q.
What did they do?
20
A.
They had a right until this loan was paid back
21
to see where monies were going and how the monies were
22
being used based on them funding this loan.
23
Q.
Did the loan ever get paid back?
24
A.
No, it did not.
25
Q.
What was the term of the loan?
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1
A.
It was either 30 or 45 days.
It was short
term, because, again, I thought PEM or Archer was going
to come in and take them out.
Q.
Did you disclose to PEM or Archer when you were
seeking monies from them, apparently about $55 million
or so, that you had defaulted on all of your lender
obligations at that time?
8
9
A.
I'm not aware that I defaulted on all my lender
obligations at that time.
They knew that I was in a
10
very tight cash situation and I had been under
11
tremendous pressure for a while, personally.
12
Q.
Did you give them that August 15 financial
13
statement, '08 financial statement, that we went over in
14
order to get money from PEM and Archer Capital?
15
A.
I don't know if that's what that was used for.
16
I'm not sure that was given to anybody.
17
could have been a working document.
As I said, that
18
Q.
Did PEM or Archer ever lend you money?
19
A.
No, they did not.
20
Q.
Going back to just prior to making the
21
agreement with Mr. Blixseth for you to own Porcupine
22
Creek and Yellowstone Club in June/July of '08, was
23
there a series of discussions between your
24
representatives in which the court got involved at one
25
point and Mr. Blixseth's representatives where,
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1
basically, what it came down to is either Mr. Blixseth
would buy Yellowstone Club or you would buy it and you
made the choice to buy it; is that what happened?
4
5
A.
No.
The very first part of your commentary
before the question was not accurate as well.
The Porcupine Creek, the year prior to that,
was Mini Settlement, I believe, No. 1.
Tim and the accountants couldn't figure out how to get
it from BGI into my personal name without having some
10
It's just that
huge tax ramifications.
11
So part of the negotiations for the final MSA
12
didn't involve Porcupine Creek, because it had already
13
been established and the MSA was clear and the things
14
that were done ahead of time on the two mini settlements
15
were not part of this.
They were rolled into it.
16
Q.
Just with regard to the Yellowstone Club --
17
A.
Okay.
18
Q.
-- did it come down to you buy it or he buys
A.
I can't answer that as a yes or no.
19
20
it?
George
21
Mack had called and said -- Tim and I had gone back and
22
forth.
23
settlements.
24
get it done, so George Mack came up with a very simple
25
formula -- it was a one-pager; you guys have it -- that
We had done this successfully on two mini

We'd gotten to a standstill on trying to
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said this is a deal that could be for if Edra wants this
and this and this, if Edra doesn't want this, this and
this and you had to pick.
I had pick based on part of that being --
incorporating BFI, which I didn't have a right to do
that according to BFI, so I really had no choice but to
take the one that took Yellowstone Club.
Q.
So you choose to buy the club?
A.
Right, I chose to take the club as the
10
11
settlement.
Q.
And this was roughly three months after you had
12
filed the motion to intervene saying that the club was
13
in a liquidity crises; is that correct?
14
Is that correct, Ms. Blixseth?
15
A.
Would you repeat your question.
16
Q.
When you made the deal to take the Yellowstone
17
Club, this was roughly three months after you had filed
18
200 page of documents saying the club was in a liquidity
19
crisis?
20
A.
The club was still in a liquidity crisis.
21
Q.
And you choose to take it, Ms. Blixseth?
22
A.
I chose to try to make it work out based on a
23
lot of parts, that the members had formed an ad hoc
24
committee that --
25
Q.
I'm just wondering if you made the choice.
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Next question:
You just testified that BFI
somehow factored into your decision, but, in fact, you
had gotten BFI a year before that in a mini settlement;
isn't that correct?
A.
I had gotten Tim's 30 percent of BFI.
Q.
So you effectively controlled BFI as of the
date you made the decision to take the Yellowstone Club;
isn't that correct, Ms. Blixseth?
A.
I was the manager for BFI, but part of the --
10
part of the agreement that was put toward me was that
11
there were conditions to make decisions on BFI that had
12
to be their B shares, their A shares rolled into all
13
part of the deal and I said I couldn't do that for BFI.
14
There was other --
15
MR. FLYNN:
Now for the record, attached to
16
this discussion which, apparently, was on Jory Russell's
17
computer, is the 7/15/08 financial statement --
18
THE WITNESS:
19
MR. FLYNN:
20
21
22
23
Are we on the same document?

-- which is attached to this
document.
THE WITNESS:
I'm sorry, were you talking to
yourself or me?
MR. FLYNN:
24
the record.
25
document aside.
Yeah, I was making something for
It's on the document.
You can put that
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2
MR. GLASSER:
No, no.
On Exhibit 116 there's
nothing but the power point.
MR. HOLAHAN:
MR. FLYNN:
11 pages.
It must have been stapled.
believe it was part of -- it got stapled incorrectly
then because the next -- the 7/15 --
7
8
MR. HOARD:
What's the official exhibit look
like?
MR. HOLAHAN:
Yeah.
10
MR. FLYNN:
11
MR. GLASSER:
Well, I mean can I see that?
12
THE WITNESS:
Yeah.
13
MR. GLASSER:
I guess what I'm saying is,
14
Mr. Flynn, that my 116 stops here at page 11 and this --
15
16
MR. FLYNN:
19
20
The official exhibit does, too,
then.
17
18
Okay. fine.
MR. GLASSER:
All right.
Fair enough.
MR. HOLAHAN:
No, no, no, hold it.
this off.
Where did
this come from?
21
THE WITNESS:
22
MR. FLYNN:
You mistakenly put that --
23
MR. HOARD:
He had paperclipped.
24
MR. HOLAHAN:
25
Take
He had that attached to what --
This is yours.
Wait a minute.
That's -- yeah, that's underneath your --
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2
3
4

BY MR. FLYNN:
Q.
Ms. Blixseth, did you and Sam Byrne exchange
that email?
MR. GLASSER:
MR. FLYNN:
MR. GLASSER:
Let me find it.
MR. HOLAHAN:
Is there an exhibit number on
THE WITNESS:
Yeah, but is this contiguous or
August 20, '08.
that?
10
11
is it --
12
BY MR. FLYNN:
13
What's the date of that one?
Q.
I'm simply saying, did you exchange that email
14
that is in front of you, page 1 of 1, with Sam Byrne and
15
Jory Russell?
16
17
MR. GLASSER:
Do you know the date, the exhibit
number of that one?
18
MR. HOLAHAN:
117.
19
MR. GLASSER:
117.
20
THE WITNESS:
The reason I'm asking the
21
question I'm asking is because the top one appears that
22
it came from Sam to me with -- and also Jory and it
23
says, "What is your YCW title for docs?"
24
25
But then the next one that comes a couple of

hours later doesn't answer that question, so it cuts in
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1
another something that Sam says and then an answer from
me, so it doesn't look like -- it looks like there was
something in between or something because it doesn't
make sense.
BY MR. FLYNN:
Q.
Did you write, "You, Jory and me are the only
ones that will know that because we have to sign papers
on this"?
A.
I don't know.
10
Q.
You don't know?
11
A.
Well, it looks like I wrote that, but I don't
12
think it goes with how you presented this email, because
13
it's not -- there's something that's not -- this has
14
either been cut and pasted in because it doesn't make
15
sense.
16
17
MR. FLYNN:
that's the way it came off Jory Russell's computer.
18
19
I'll represent for the record
MR. HOLAHAN:
So you're not representing that
you know what this is referring to then?
20
MR. FLYNN:
No, I know exactly what it's
21
referring to.
22
the exact form it is in and nothing has been cut and
23
pasted unless Mr. Russell did it.
24
25
It came off Jory Russell's computer in
MR. HOLAHAN:
What's it referring to, do you
know?
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THE WITNESS:
But there's a whole other thing
on here that's not on this.
BY MR. FLYNN:
4
5
Q.
I'm moving on.
We've got the testimony as it
is.
Next exhibit, did you and --
A.
I want to ask a question, because I didn't --
Q.
I don't care about your questions.
can ask them at a later time.
10
MR. HOLAHAN:
11
MR. FLYNN:
12
Your lawyer
What is the question?

We're moving on to the next
exhibit.
13
THE WITNESS:
My question is he asked me to
14
answer a question that now I think I've answered, but
15
how do I know what this means?
16
that.
17
18
MR. HOLAHAN:
I don't know what it means
THE WITNESS:
So I don't want to answer any
either.
19
20
questions on this.
21
BY MR. FLYNN:
22
23
It's doesn't gibe with
Q.
Did you tell Jory Russell at any time to
destroy documents off his computer?
24
A.
25
times.
Never.
I've answered that question tons of
I never told Jory Russell to destroy documents.
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1
Q.
Did you delay the June 24th deposition of Jory
Russell so he could destroy exhibits by having John
Roselli come to the deposition?
A.
Absolutely not.
Q.
Do you know who John Roselli is?
A.
To the best of who we could check out, we knew
who he was.
Q.
Did you have him come to the deposition?
A.
We had him meet us there to say that he wanted
10
to do a deal and take out Sam Byrne's position and
11
Western's position.
12
13
Q.
Did he take out that -- was that a delaying
tactic, Ms. Blixseth?
14
A.
No.
15
Q.
Was it actually intended for Mr. Roselli to pay
16
17
18
19
20
$13 million to Western Capital?

A.
It was to take out Western Capital's position
and CrossHarbor's position.

Q.
Did you tell anyone in that meeting Sam Byrne
would put up $13 million?
21
A.
Absolutely not.
22
Q.
Did you tell anyone during the meeting that Sam
23
Byrne had approved Roselli putting up $13 million and
24
would stand behind it?
25
A.
Absolutely not.
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1
Q.
What exactly was Mr. Roselli doing to come into
a deposition and get the deposition suspended after
roughly an hour or two in which only 6 inches of
documents had been produced?
How did he get there, Ms. Blixseth?
A.
He wasn't in the deposition.
Q.
But how did he come in in the middle of the
deposition to -- or when the deposition was taking place
to get the deposition suspended on the representation
10
that he would pay $13 million?
11
12
Who arranged that?

A.
He -- he came in and said that he was going
13
to -- he wanted to have Porcupine Creek because of his
14
dealings with the Ritz Carlton.
15
based on that.
He gave me letters
16
Q.
The question is:
17
A.
I'm trying to answer.
18
Q.
Did you arrange it, Ms. Blixseth?
19
A.
I absolutely did not arrange it.
20
Q.
Who did?
21
A.
I can't remember.
22
Who arranged that?
It was all a big discussion
of what he would do and what he wouldn't do.
23
Q.
Who knew Roselli?
24
A.
Oh, who introduced me to him?
25
Q.
Yeah.
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1
A.
Oh, Peggy Lane from Stewart Title.
Q.
I see.
So how is that right in the middle of the
deposition that Mr. Roselli happened to represent that
he buy out Western Capital Partners?
A.
It wasn't right in the middle of deposition.
Q.
Did Peggy Stewart arrange that?
A.
Tell me when I can answer it.
9
10
11
12
MR. HOLAHAN:
Yeah.
BY MR. FLYNN:
Q.
Did Peggy Stewart arrange it or did you arrange
it, for Roselli to get involved?
13
A.
It wasn't --
14
Q.
Peggy Sue Lane.
15
A.
It wasn't Peggy Sue Lane was the entree to
16
Roselli and we had been ongoing in discussions about
17
Porcupine Creek and -- because of his involvement with
18
the Ritz Carlton.
19
on how we can get this done and resolved and I can make
20
an offer?"
21
He said, "What else do I need to do
We talked about the Western Capital Partners
22
issue, we talked about the collateral that they had and
23
he said he was willing to do that as well.
24
come in the middle of the deposition.
25
He didn't
The deposition happened to be going on.
He
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1
made the offer to that he was going to do that.
Q.
During the deposition?
A.
No.
Q.
He was going to make the offer before?
A.
You keep interrupting me, so I can't answer my
question -- your question.
He presented it to us the day or two before.
We asked him to collectively show us both and show us
his part with the Ritz.
We believed that it was true
10
that's what he was going to do, so we asked Western if
11
they wanted to meet with him and postpone Jory's
12
depositions to see if they could work out a deal on
13
trying to get something done.
14
15
16
We had done that before, seeing if CrossHarbor

could work out a deal with Western Capital.
Q.
Did you have any conversations with Dennis
17
Montgomery on or about June 25th or exchange any text
18
messages regarding --
19
MR. HOLAHAN:
20
MR. FLYNN:
21
22
What year, please?

'09, during this deposition, on
either side of the deposition.

Q.
-- that you were buying time so Jory Russell
23
could destroy emails and that was it was a tactic to buy
24
time?
25
A.
Absolutely not.
Anybody that says that is a
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1
liar.
Q.
So Dennis Montgomery then would be a liar if he
said that?
A.
If he said that, he's a liar.
Q.
And, in fact, after the deposition was
suspended, did Jory Russell, in fact, admittedly delete
or destroy emails off a computer?
8
9
A.
Jory Russell -- there's a deposition that has
what his record of what he said he did.
Jory Russell
10
was never instructed by myself or Gary Deschenes to do
11
anything except turn everything over he had and tell the
12
truth when he went to depositions, period.
13
Q.
You know there's an admission by Mr. Russell
14
that he destroyed -- after the deposition was suspended
15
he destroyed emails.
16
17
A.
else's saying that he should do it.
18
19
Q.
Are you also aware that he did virtually
everything under your instructions?
20
21
And he testified that it wasn't under anybody
Are you aware he testified everything he ever

did was under your instructions, Ms. Blixseth?
22
A.
I think that he testified that when it came to
23
getting okays on what to send out for bills and that
24
kind of thing, always fell under getting an okay from
25
me.
Not everything he did, because he certainly
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1
testified that I had never instructed him to destroy any
emails.
Q.
The night he showed up before his deposition he
brought the laptop to your office at your home even
though it was under subpoena; isn't that correct?
6
7
8
9
10
11
12
13
14
A.
He brought that and some other things that he
left there.
Q.
And the next day even though it was subpoenaed,
that laptop was not turned over, was it, Ms. Blixseth?
A.
It was brought to the depositions, but not
turned over.
Q.
Is it your testimony that on June 24th the
laptop was brought to the deposition?

A.
I believe it was in -- I'm not sure if the
15
laptop was brought to the deposition.
16
had it when -- the next deposition we had it in the car
17
when the next deposition resumed.
18
brought it to the one we ended up not having.
19
Q.
I know that we
I'm not sure if we
You were in possession of the laptop the night
20
before the Jory Russell deposition took place on
21
June 24th; is that correct?
22
A.
I believe I was.
23
Q.
And you did not produce it at the deposition,
24
25
did you, on June 24th?

A.
The deposition -- is that the deposition that
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2
3
didn't go forward?
Q.
The deposition that was suspended because of
Roselli, Ms. Blixseth.
A.
That wasn't turned over at that time then.
Q.
And thereafter Mr. Russell destroyed documents
off --
A.
He couldn't have destroyed off that computer,
because he didn't have possession of that computer.
Q.
Only you did and you gave it to Pat Yarborough?
10
A.
I never gave it to Pat Yarborough.
I put it in
11
a drawer to give to her next time she was here.
The
12
forensic accounting proved that I never plugged it in, I
13
never turned it on.
It was never turned on.
14
Q.
I got it.
15
A.
We turned it over the next time there was a
16
deposition, it was turned on then and I had nothing to
17
do with it.
18
Q.
How do you know the forensic accounting proved
19
that it had never been turned on after it came into your
20
possession?
21
A.
I was told that.
22
Q.
By whom?
23
A.
I don't remember if it was Gary Deschenes or if
24
it was Western or somebody told me that, that it proved
25
that what was trying to be alleged by Western of both
Page 279
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1
2
Gary Deschenes and me was not accurate.

Q.
Now when you got possession of the laptop, how
long after you possessed it did you give it to Pat
Yarborough?
5
6
A.
I just told you I never gave it to Pat
Yarborough.
Q.
You kept it?
A.
Yeah, it was in a drawer.
MR. FLYNN:
10
11
12
Let's go to Exhibit 118.

BY MR. FLYNN:
Q.
This is from Jory Russell to you.
He asks you
13
to respond to the Joe Harris email.
Now Joe Harris was
14
a consultant for CrossHarbor Capital; is that correct?
15
A.
Correct.
16
Q.
Harris writes, "Jory, we had previously worked
17
out a check signing and approval method involving Hans,
18
Moses and myself for all Yellowstone Club entities other
19
than the World Club, which is consistent with the
20
agreement to form between CrossHarbor and Edra, which
21
does not have Edra as a signer on the Stockman Bank
22
accounts"; is that true, Ms. Blixseth?
23
Did you work out an agreement as part of the
24
agreement to form where you would not be a signer but
25
that Hans, Moses and Harris would be the signers?
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1
A.
I don't think I was ever a signer before this.
I think that Moses and Hans were on it.
to be a signer on the accounts.
Q.
I wasn't there
Let's go down to the email below that, Jory
Russell to Desta Dusenberry on which you were CC'd.
"Desta, I hope this finds you well and appreciate all
you have done for us.
Blixseth is to be on all accounts that pertain to her
operation, Yellowstone Club, et al., Big Springs,
10
et cetera.
11
12
This is to confirm that Edra
Thanks, Jory."
Did you tell Jory to send that email?

A.
Yes.
I told Jory that what our agreement was
13
was for signature, we wanted to stay the same with it
14
being Moses and Hans with Joe, which was my suggestion,
15
being the interim COO, but that my name needed to be on
16
things so that I could get information and accounts and
17
information on the accounts.
18
the accounts.
19
Q.
It wasn't as a signer on
And, in fact -- and, in fact, you were
20
prohibited from being a signer by CrossHarbor Capital;
21
is that correct, Ms. Blixseth?
22
A.
Sam Byrne wasn't a signer either.
23
Q.
We're not talking about Sam Byrne.
We're
24
talking about whether you were prohibited by CrossHarbor
25
Capital and its representative, Joe Harris, from being a
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1
2
signer on the accounts?

A.
I don't know if I would use the word
"prohibited."
It wasn't how it was set up before.
Q.
It's not the way we set the things up.
After you signed the MSA and got the
$35 million, did you have any signing authority for
Yellowstone Club?
A.
No, I don't think I did before.
Q.
You were chief operating officer before that?
10
A.
Yes.
11
Q.
And after you signed the MSA and got the
12
$35 million and turned over control of the club to
13
Byrne --
14
A.
15
Byrne.
16
are false, I can't answer your questions.
17
18
19
Q.
I didn't turn over control of the club to

You ask me questions and make statements that
Who controlled the hiring and firing after you
got the $35 million?

A.
We were negotiating with Discovery Land to come
20
in and be the -- which is one of the promises I made if
21
I was able to do this -- because it was one of the big
22
concerns of the ad hoc membership is that they wanted
23
professional management.
24
25
We were negotiating with Discovery Land at that

time and Discovery Land would have been in charge of
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1
doing all the hiring and firing.
MR. FLYNN:
Look at this next exhibit in order.
This is dated September 5th.
MR. HOLAHAN:
What exhibit?
BY MR. FLYNN:
Q.
What exhibit number is that, Ms. Blixseth?
A.
I'm having trouble with the nines.
114 or 119.
10
11
It's either
MR. HOLAHAN:
I think it's got to be 119.
this the last exhibit?
12
MR. FLYNN:
13
THE WITNESS:
14
MR. HOARD:
I thought they went to 121.
15
MR. FLYNN:
Ms. Blixseth --
16
THE WITNESS:
17
18
19
Is
No.
And then it's --
I'm trying -- sorry, what?
BY MR. FLYNN:
Q.
This is dated September 5th, 2008, and I'd like
to go to the charts.
20
A.
I'm not familiar.
21
Q.
This is roughly three weeks after Byrne gave
22
Give me time to --
you the 35 million.
23
A.
Okay.
24
Q.
Go to the charts at the end, please.
25
Go to the last chart.
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1
A.
On the last page?
Q.
Uh-huh.
And it says at the top, "CrossHarbor
Capital Partners, LLC, Existing Yellowstone Club
Ownership and Control as of August 19, 2008," and it
shows at the top of the pyramid, Edra Blixseth,
50 percent, Blixseth Family Investments and then that
breakdown.
Do you see that?
A.
I do.
10
Q.
Why was that as of August 19, 2008, when
11
this -- showing that ownership, if you know, when this
12
document is dated September 5th?
13
August 19th, Ms. Blixseth?
14
A.
I have no idea.
Why did they pick
This is a working document, it
15
looks like, between Sam and Matt and Joe with their
16
legal counsel.
17
I'm not on it, so I don't know if this was an
18
internal working document for something that they were
19
going to then present to me or what, but I can't answer
20
that question.
21
Q.
Let's go to the next, second page from the
22
back, Draft as of September 8, 2008.
And now
23
CrossHarbor Capital -- CrossHarbor Institutional
24
Partners is now in the proposed Yellowstone Club
25
ownership and control as of September 8, 2008.
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2
3
4
You see that, Ms. Blixseth?

A.
Are you saying that they're in ownership and
control because they're at the top?

Q.
I'm saying that this document reflects them as
of September 8th as owning and controlling the
Yellowstone Club.
7
8
MR. HOLAHAN:
what?
And you're saying that based on
I mean do you know who drafted this?

MR. FLYNN:
The words read for themselves.
10
I'll read the actual words into the record, "CrossHarbor
11
Capital Partners, LLC, Proposed Yellowstone Club
12
Ownership and Control, first scenario (CSFB does not
13
permit assets to be dropped down to a new entity) Draft
14
as of September 8, 2008."
15
THE WITNESS:
16
documents.
17
fruition so I --
This is all draft and working
I've never seen this and this never came to
18
MR. HOLAHAN:
You've never seen this?
19
THE WITNESS:
I don't believe I've seen this
20
and it says proposed and it says draft --
21
BY MR. FLYNN:
22
Q.
Did you have discussions with Mr. Byrne about
23
Yellowstone Club and you negotiating with Credit Suisse
24
to drop down their loan to a new entity so that
25
CrossHarbor could take control?
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1
A.
No.
We had discussions that BGI -- this keeps
saying BFI and I think they mean BGI -- had to retain
the control and ownership of 51 percent of Yellowstone
Club during the Credit Suisse loan and that if they were
going to do part of what the agreement to form was, was
raise the 75 million to put into Yellowstone Club for
the much-needed cash flow it needed of -- we had
discussions on how that would change the ownership or
how we would go about doing that, but this -- this to me
10
looks like an internal document that has draft all over
11
it, has --
12
Q.
Let's focus in on a couple of things.
13
A.
I didn't get to finish my sentence -- has draft
14
and has proposed things, but that doesn't mean that any
15
of this ever came to fruition.
16
Q.
Here's what I want to know, Ms. Blixseth, very
17
simply:
18
and September 8th, 2008, yes or no, did you and
19
Mr. Byrne participate in discussions with Credit Suisse
20
to have Credit Suisse renegotiate its loan in any way?
21
22
As of September 8th -- between August 14, 2008,
Did you participate with Mr. Byrne in those

discussions?
23
A.
No.
24
Q.
Thank you.
25
I did not.
Did Mr. Byrne disclose to you at any time
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1
between September 8th and August 15 when you got the
35 million -- August 14, when you got the 35 million,
that he was negotiating with Credit Suisse?
A.
We had an agreement.
It's not a yes-or-no
question, so you're going to have to indulge me here.
Sam and I had an agreement that without the others'
approval, either someone from CrossHarbor or me from
Yellowstone Club, couldn't talk to Credit Suisse -- and
I believe there's some other creditors, how we were
10
trying to go about doing things without the other one's
11
approval or being on a call.
12
Sam had talked to me about wanting to talk
13
with, I think it was, Steve from Credit Suisse about
14
where things were and did I care if he was on a call
15
without me on it because I was tied up and I said I
16
didn't care.
17
So to answer your question, I had the right to
18
be on a call, just like Sam had a right to be on a call
19
if I was trying to negotiate, because we were trying to
20
do the best thing for Yellowstone Club to stabilize it
21
and I didn't have an objection to him talking --
22
23
24
25
Q.
Where is that evidenced in any document, this
agreement that you just referenced?

A.
It might be in the agreement to form.
It might
be -- we had the same agreement when it came to press
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1
releases and those kind of things, so I don't know for
sure but it might be like that.
Q.
Was Mr. Byrne forwarding you emails in
connection with his negotiations with Credit Suisse
during this time frame?
A.
I don't recall that he was, no.
Q.
Do you recall seeing any emails during this
time frame between -- you knew at the time he was a
bondholder with Credit Suisse?
10
A.
I knew he was one of the bondholders.
11
Q.
And did you know that he had been negotiating
12
with Credit Suisse before the MSA was signed relative to
13
the 375-million-dollar loan?
14
A.
I knew that he had had some discussions with
15
him as part of his due diligence for the purchase of the
16
Yellowstone Club, but I didn't know the details of it.
17
Q.
Did you fly from the West Coast on US Air
18
No. 683 to Newark, New Jersey, arriving at 10:58 p.m. on
19
7/31/09, renting a car from National Rental Car and
20
drive to Boston?
21
A.
I can't answer that question.
22
Q.
Do you remember flying into Newark and then
23
I have no idea.
driving from Newark to Boston, Ms. Blixseth?
24
A.
Tell me the date again.
25
Q.
July 31st.
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A.
What year?
Q.
Of 2008.
3
4
MR. BLIXSETH:
'-9.
BY MR. FLYNN:
Q.
I mean of 2009.
A.
Oh, I do remember that.
My granddaughter
Madelina was in camp there and I drove and landed at
Newark and rented a car and drove to camp with her.
I never saw Sam Byrne.
I never did anything
10
workwise and I took her to fly to Sweden when she left
11
and I flew home.
12
Q.
Why did you fly to Newark?
13
A.
Because her flight was out of Newark and I was
14
going to be taking her to her international flight, she
15
was traveling alone, so when my daughter told me that
16
her flight was out of Newark, I just changed mine to fly
17
in and out of Newark.
18
19
20
21
22
23
24
25
Q.
How many times had you flown into Newark and
driven to Boston?
A.
I'm not sure I drove to Boston.
I think where
I went was her -- was either in New York or New Jersey.

Q.
How many times during that time frame -- strike
that.
Between May 1 and September 1 of '09, how many
meetings have you had with Sam Byrne?
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A.
Give me the time frame again.
Q.
May 1 to September 1, '09.
A.
A hand -- I don't even remember.
think we've had phone calls.
MR. HOLAHAN:
MR. FLYNN:
THE WITNESS:
Yeah, in person.
Creek with the trustee.
actually recall.
meetings with Sam.
11
BY MR. FLYNN:
12
Q.
I don't think we've had --
Do you mean in-person meetings?
10
I mean I
I think we came to Porcupine

I can't -- I can't really
I haven't had hardly any in-person
How much money has Sam Byrne given you to
13
maintain Porcupine Creek since the MSA?
14
the $35 million you owe, how much money has he given to
15
you?
16
A.
Notwithstanding
Well, Sam Byrne, nothing, but the CrossHarbor,
17
who has the mortgage, started doing protective advances
18
to protect the asset.
19
February.
20
21
Q.
I believe it was in January or
I'm not sure what the total amount is.

Did Mr. Byrne give a check for $90,000 in the
last four, five months?
22
A.
To me?
23
Q.
Yes.
24
A.
No.
25
Q.
Who did he give it to?
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A.
I don't know.
Q.
Did he give it to Mr. Deschenes?
A.
No.
Q.
Do you know anything about a $90,000 check as
part of a consulting agreement that you have with
Mr. Byrne?
A.
Mr. Byrne.
Q.
I don't have a consulting agreement with
Do you have any agreement of any nature or
10
description to get anything from the Yellowstone Club,
11
effective transfer by you to Mr. Byrne?
12
A.
No, I do not.
13
Q.
Do you have any type of a side deal of any
14
nature or description whereby you have ended up with no
15
ownership of any of the Yellowstone Club assets?
16
17
18
A.
I have no ownership of the Yellowstone Club
assets.
Q.
So let me see if I understand this and you can
19
explain to me why did you this.
20
the marital settlement agreement you have a net worth of
21
a billion dollars and you own the Yellowstone Club.
22
As of August 14 under
As of today you have no ownership of the
23
Yellowstone Club and you've received nothing for it; is
24
25
A.
That is correct.
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Q.
Please explain how that happened.
A.
Well, it's not what I had in my plans, but with
the things that we thought we were going to be able to
do --
MR. FLYNN:
THE WITNESS:
I know.
-- after closing hinged on a lot
of different things and those just didn't come together.
BY MR. FLYNN:
Q.
So the answer why you lost this -- depending on
10
how you want to value it -- $1.2 billion asset,
11
$500 million asset, depending on which one of your
12
financial statements you want to believe, the answer
13
is --
14
A.
Wait.
15
Q.
-- the answer is you lost it, as I understand
16
your testimony, because, quote, "things didn't come
17
together"; is that correct?
18
A.
Yes, that's correct.
19
Q.
And the same with regard to Porcupine Creek.
20
Porcupine Creek is in foreclosure by Mr. Byrne,
21
temporarily stayed.
22
23
24
25
Is your answer that you've lost control of

Porcupine Creek because things didn't come together?
A.
My -- my loan with Sam Byrne, if you look at
the original loan, was only going to be 30 to 45 days,
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because I thought I had the other financing behind it
and that didn't come together.
Subsequent to that I've been working to try to
put -- before I had to file for the personal
bankruptcy -- actually, even after that, but before I
couldn't get from the 7 back to the 11 -- I was still
trying to put things together to take Sam out of that
part and have Porcupine Creek and go forward.
Q.
So you've lost roughly, depending on your
10
valuation, taking your most conservative ones on your
11
financial statements, the 500 and the 200 million,
12
you've lost $700 million of assets within a year or less
13
to Sam Byrne because things didn't come together and you
14
haven't got anything from it; is that a correct
15
statement?
16
A.
It is a correct statement.
17
Q.
And you have no expectancy of getting anything
18
19
20
21
from Sam Byrne; is that correct?

A.
I have no expectations and I have no
agreements.
Q.
Now let's focus in on the things not coming
22
together.
Were some of the things not coming together
23
the roughly $40 million in loans that you had borrowed
24
from these lending institutions that I'm going to
25
represent for the record reflect false statements.
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Is that part of things not coming together,
that you owe some $40 million plus and you can't pay
them?
A.
Is that part of the things not coming together?

The part of the things not coming together that
I'm talking about is if everything would have been as
advertised with Yellowstone Club and the other assets
and not having anyone behind the scenes interfering with
going forward on the assets, I would have been able to
take those loans and have assets that were free and
10
clear that had equity in them and that could have cash
11
flow in them and take care of my obligations and
12
long-term Yellowstone Club with having the proper amount
13
of money put in and the restructure of the ownership
14
could have, long-term, ended up being still a good deal
15
for me.
16
That didn't come to fruition based on not
17
things coming together and things being perceived by me
18
and told to me that ended up not being facts.
19
Q.
I want to take the interfered part of your
20
testimony.
21
interfere in things not coming together as you just
22
described?
23
A.
You and Tim.
24
Q.
How did we do it?
25
A.
Tim Blixseth with contact people, there would
Who interfered and what did they do to
Who did that?
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1
be things that you filed in Reno court and then you
would contact the press and have them then have it in --
in press releases or things in the press and then the
judge would throw them out the next day, but the damage
was done because they were already in the paper; things
that you filed in court that the judge threw out that
were just these arbitrary comments and statements that
the judge didn't allow to stand in the courtroom were
thrown out, but in the meantime calls had been made to
10
11
12
13
14
the press and press reports were done on them.

Q.
What was reported in the press that interfered
with your ability to pull everything together?

A.
The credibility on Dennis Montgomery.
I mean,
you keep talking --
15
Q.
16
first.
17
A.
The credibility on -- let's just enumerate them

The credibility on Dennis Montgomery.
-- Dennis Montgomery, the slant on his
18
character and his being.
19
sent me a text and said, "Do you think I should go
20
after -- do you think that I should go after this,
21
because I think Dennis's deal probably could work," and
22
I said what I said, "I'm staying out of this.
23
discussing this with you."
24
25
I mean three weeks ago Tim
I'm not
So you guys go back and forth on when it's

convenient and credible and it's worth something and
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when it's not convenient, he's a mad scientist and the
technology has no basis.
The things you gave me today on the FBI reports
were -- if someone didn't know what those were about,
were based on what you defended Dennis on, on saying
there was a false FBI raid which it was determined it
was a false FBI raid and Dennis got everything back.
Agent West's testimony was based on false
information that was determined false information,
10
things were given back.
11
right now proving my point in this room that if it works
12
to your benefit to sabotage something that has to do
13
with me, that you'll do it in that way and yet if it
14
looks like something that is going to be credible that
15
you guys might benefit from somehow in working with
16
Western Capital and all the conniving you did behind the
17
scenes with that, then that's what you do and that's
18
been ongoing.
19
Q.
So you're giving information
We got Montgomery.
So we're clear on this, in
20
what way did this exposure of Montgomery and the fraud
21
and everything you're talking about prevent you from
22
pulling everything together?
23
A.
Because --
24
Q.
How did that prevent you?
25
A.
Because it taints things.
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1
Q.
Did you not get money from a federal contract
or another contract that you would have otherwise gotten
but for the press exposure, as you put it?
A.
There's a lot of things I didn't get.
I had a
loan that was set for Porcupine Creek that would have
taken CrossHarbor out when one of the articles came out
in the Reno case and they called and said, "You know,
until this is settled, we can't go forward because even
if it's not true what's being said, that's what's being
10
said in the press and we've got people that are going to
11
vote on this loan and we can't do it."
12
13
14
So I've been harmed several times of those

kinds of things.
Q.
There was an article in the press that
15
prevented you from getting what loan, Ms. Blixseth, and
16
who told you that?
17
18
A.
I don't have the name in front of me, but I can
get the name.
19
Q.
Was PEM?
Was it Archer?
20
A.
No.
21
Q.
Was it Kennedy?
22
A.
No.
23
Q.
Which was one it?
24
A.
It wasn't any of those.
25
Q.
How much was the loan for?
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1
A.
The loan was going to be for 50 million.
Q.
And as you sit here today you have no idea who
3
4
this mysterious loaner is after -A.
I didn't say it was a mysterious loan and I
didn't say I didn't have any idea.
his name off the top of my head, but I can certainly get
it for you.
8
9
10
11
Q.
I said I don't have
Had you submitted financial documents to this
lender?
A.
I would assume so, because they had been out to
Porcupine Creek and they were ready to --
12
Q.
-- give you the 50 million?
13
A.
-- make the deal.
14
Q.
It's not PEM?
15
A.
No.
16
Q.
It's not Archer?
17
A.
No.
18
Q.
Would you please supplement the record and put
19
the name of that lender down that was going to give you
20
the $50 million?
21
(Information requested_______________________
22
____________________________________________.)
23
A.
Yeah, I have no problem with that.
24
Q.
Okay.
25
Now what article did this lender read
and what was untruthful in the article that caused them
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1
2
not to give you the $50 million?

A.
It was an article that came out.
I believe it
came out in Reno first and then came out in the Desert
Sun and it was basically talking about every time
anything was mentioned with Dennis Montgomery or
questions on Dennis Montgomery, it would say his
employer, Edra Blixseth, Yellowstone Club.
you know, tie it all in.
It would,
I have -- I've had two reporters that --
10
Q.
What was untruthful about the article?
11
A.
I don't remember the specific article, but I've
12
had two reporters that have called to ask for things and
13
specifically said that you called them and Tim Blixseth
14
called them.
15
Q.
Who were those reporters?
16
A.
I'll have to get the names for you.
17
Q.
What did they tell you that we said?
18
A.
Said, "Chase this lead.
19
Look at this thing.
We want to get this out."
20
Q.
Let me see if I understand your testimony
21
correctly:
22
some reporters and wrote some articles, you lost some
23
$700 million in assets that you got in the marital
24
agreement.
25
A.
Because Flynn and Tim Blixseth contacted
That's not what I testified to.
I said that
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1
contributed to doubts and questions of other things.
Q.
What about your responsibility, Ms. Blixseth?
Do you take any responsibility for the loss of
$700 million and writing these loans and defaulting on
these loans?
A.
Do you take any responsibility, Ms.?
I didn't ever take a loan that I didn't think I
had a plan probably A, B and C of a way to try to repay
it.
figure out ways that I could still make it work.
When the facts came to light even then, I tried to
10
Do I take responsibility for any of this?
Of
11
course I do.
12
wrong people and not asking for facts of things.
13
responsibility for the things that I could control which
14
was, maybe, you know, trying to get more information,
15
trying to have things -- there were some things that
16
were out of my control that we're still trying to find
17
out if the actual offer on Farcheville was legitimate or
18
not, because that came through Gary Peters.
19
I take responsibility for believing the

I take
I have no control over the market hitting when
20
it did.
21
quite a few things that had to come together in order to
22
raise the much-needed cash flow for Yellowstone Club to
23
stabilize it and when the domino effect happened of the
24
certain things not closing, that jeopardized it.
25
Q.
Some of the things on the agreement to form had
Ms. Blixseth, do you have any bases whatsoever,
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1
as you sit here today, any facts that you know of, to
try to set aside the marital settlement agreement?
MR. HOLAHAN:
You can -- you can answer in
general, but I'm going to cut it short because it's not
on the subject here.
THE WITNESS:
I think I do.
Okay.
I think I do based on books and
records that were turned over that were different than
what I had been led to believe, certain statements in
10
the actual MSA that say specifically things that then
11
turned out not to be accurate.
12
BY MR. FLYNN:
13
Q.
What statements?
14
A.
I told you a couple.
I told you Big Springs
15
Realty, saying it was 30 to 60 days behind on
16
commissions when it was much greater than that.
17
And again, the Credit Suisse loan for -- the
18
Credit Suisse loan for -- at the time of the MSA was a
19
secured loan.
20
just -- there were many things that ended up not being
21
from the very moment I signed the MSA.
22
Q.
Now it's an unsecured loan.
And there
So as of going forward from the date of the
23
MSA, closing of the MSA on August 14, at some point
24
thereafter the Credit Suisse loan went from being a
25
secured, nonrecourse loan to now being an unsecured

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loan, it's your testimony that that fact entitles you to
set aside the MSA; is that correct?
A.
I said that is one of the considerations.
Q.
Okay.
5
6
Realty.
And then you mentioned Big Springs
Are there any others?

MR. HOLAHAN:
Just for the record, Mr. Flynn,
as you know that's going to be -- this subject is going
to be the subject of another adversary proceeding and
you'll have an opportunity to depose Ms. Blixseth again
10
11
12
13
14
on these specific issues then.

I would rather defer all that to that action.
I think that -MR. GLASSER:
Well, I was going to say,
actually, it's actually going to come up in 14 and 17 --
15
MR. FLYNN:
16
MR. GLASSER:
-- 18.
-- the case we're going to try in
17
February, because they're going to go next.
18
going to put on their defense.
19
that the marital settlement agreement extinguishes the
20
trustee's claim; we're going to say well, that's not so,
21
so I plan to get into it when I get my chance to talk.
22
23
24
25
MR. HOLAHAN:
They're
They're going to say
Well, then maybe you could let
them have their turn now.

MR. FLYNN:
No.
I'm going to finish with my
questions on this subject.
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MR. GLASSER:
Well, I've got a question for
you.
today.
hour.
rules of seven hours unless she needs some time -- I
don't know if you need some time, Christina, or somebody
on the phone.
8
9
Ms. Blixseth has said she's going to be here

You've gone over six hours.
I'd like to go an
If the judge stops us, then we've met the federal
There's a chance a judge will say, "You're

done.
Today's your only day."
I understand you're
10
going to make arguments to the contrary.
11
Ms. Blixseth's lawyers are going to make arguments that,
12
you know, against that, but we don't know how that's
13
going to turn out.
14
15
16
I understand
I'm here; I'd like to ask an hour's worth of

questions.
MR. FLYNN:
But Brian, you're going to get
17
your -- there's no way Judge Kirscher is going to deny
18
you from getting your chance.
19
seven hours and I need two or three days.
20
MR. GLASSER:
I have not had even my
But the rules provide, as I read
21
them, unless the court orders otherwise the deposition
22
lasts seven hours.
23
on the record, so when do I get my share?
24
MR. CONANT:
25
the additional time?
And I take that to mean seven hours
I'm just curious, who's asking for
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MR. FLYNN:
Is this Judge Kirscher?
MR. BLIXSETH:
MR. GLASSER:
For the notice --
No, it's CJ.

This is Brian Glasser saying I
want my hour.
MR. FLYNN:
I'm the noticing party and I
subpoenaed Ms. Blixseth.
seven hours.
MR. GLASSER:
10
MR. HOARD:
11
MR. HOLAHAN:
12
MR. FLYNN:
Under the rules I get the
Okay.
That's not accurate.
No, that's not true.
Well, I think it's subject to
13
decision by Judge Kirscher, but I intend to go forward
14
now and I'm going to get into the MSA now.
15
16
MR. GLASSER:
that --
17
MR. FLYNN:
18
another day, Brian.
19
20
21
And I'm just saying to you
MR. GLASSER:
I think you'll have to do it
-- that I would like to do it
today.
MR. HOARD:
No.
We're going to do it today.
22
If Dennis will permit us to and you're going to come to
23
a stop and we're going to go and then you guys crank
24
back up and decide what you're going to do.
25
MR. FLYNN:
I'm nowhere close to being done.

Page 304
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2
MR. GLASSER:
point --
3
4
MR. FLYNN:
How much time do you think you
have?
MR. GLASSER:
MR. FLYNN:
MR. GLASSER:
I'm just saying, you at some
I'd like to have an hour today.

Oh, well.
I'm nowhere close.
Right, but you're not going to be
any closer an hour from now.
MR. HOLAHAN:
Right.
10
MR. GLASSER:
So my point is you've covered the
11
whole panoply of time.
12
minutes of important things you'd like to get, because
13
we're right here right now I don't have any problem with
14
that, but I'd like an hour.
15
MR. FLYNN:
If you have maybe another 15
Let me see what I can do in the --
16
I've got days.
I haven't even really got into the
17
impeachment evidence, the emails, some of which are
18
here, which belie much of Ms. Blixseth's testimony.
19
Let's --
20
MR. BLIXSETH:
21
MR. FLYNN:
22
MR. GLASSER:
23
(Recess taken.)
24
25
Three minutes.
Let's take a three-minute break.

Uh-huh.
///
Page 305
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2
BY MR. FLYNN:
Q.
This is a document, Ms. Blixseth, that you sent
on July 6, 2008, to all the Yellowstone Club members via
email right after you agreed to the marital settlement
agreement and I just want to go through a couple of
parts of it.
You say in the second paragraph, "This past
Thursday, the judge signed an order regarding the
personal and professional issues between Tim and me."
10
Now at that date that you made that statement,
11
you will agree with me there was a settlement of all
12
personal and professional issues between you and
13
Mr. Blixseth?
14
A.
Restate your question.
15
Q.
Yeah.
16
17
18
As of July 6, you agree that there was a

settlement -- let me give you a little background.
On July 3rd you went to a prove-up meeting
19
which is attached to these exhibits and in the prove-up
20
hearing you testified over and over and over again,
21
going on for pages, as the court led you through the
22
marital settlement agreement and the releases that you
23
and your counsel agreed and approved with full knowledge
24
and disclosure to everything.
25
Do you recall the prove-up hearing?
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1
A.
I do.
Q.
And do you recall your testifying, which is one
of these exhibits which we don't have the time to go
into, over and over again and informing the court you
had plenty of time, you had spent millions of dollars on
lawyers and accountants?
7
8
9
MR. HOLAHAN:
We'll stipulate to all that.
BY MR. FLYNN:
Q.
So you understand three days before you signed
10
this you had been in court at this prove-up hearing and
11
you had agreed to the marital settlement agreement.
12
understand and your counsel has so stipulated.
13
14
15
16
17
You understand that, Ms. Blixseth?

A.
I don't know about the millions and lawyers,
but yes.
Q.
How much had you paid Liner and Jaffe and
Clemens -- strike that.
18
19
You
How much had Liner and Jaffe and Clemens and

billed you as of July 6, 2008?
20
A.
I don't know.
21
Q.
Over 5 million?
22
A.
I don't have any idea.
23
Q.
How much had you paid Deloitte & Touche your
24
forensic accountants that went through every document
25
conceivable at the Yellowstone Club?
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2
MR. HOLAHAN:
have to start.
3
4
5
I'm going to
You're now getting into --
MR. FLYNN:
Q.
Hold on a second.
I'll withdraw it.
How much did you pay Deloitte & Touche, the
forensic accountants you hired?
A.
I don't recall.
Q.
Is it your testimony that any documentation was
withheld from you that Deloitte & Touche didn't get that
had been requested?
10
11
A.
Yeah.
I don't think we got all of the
documentation.
12
Q.
What didn't you get?
13
A.
I'm not sure.
14
Q.
"This past Thursday, the judge signed an order.
15
Therefore, there has been a firm agreement reached" --
16
"a firm agreement reached which allows us to pursue the
17
directions each of us consider important in our lives."
18
Did you write that, Ms. Blixseth?
19
A.
I did.
20
Q.
Was it a firm agreement?
21
A.
I believed it to be.
22
Q.
Now what is it about the Credit Suisse loan
23
going from being a secured loan to an unsecured loan
24
that relates to your setting aside the marital
25
settlement agreement?
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2
A.
That part was -- was -- that had nothing to do
with this letter.
Q.
Just tell me:
What did Tim Blixseth have to do
with the Credit Suisse loan going from secured to
unsecured?
A.
I don't think that's been determined yet,
because the UCC versus Tim Blixseth trial hasn't
continued so I don't know if that's been determined.
Q.
But there is no UCC.
There's a liquidating
10
trust.
11
A.
Yeah, that's what it was.
12
Q.
So what are you telling me?
What does Tim
13
Blixseth have to do with secured versus unsecured in
14
your own mind?
15
MR. HOLAHAN:
I've got to, at the point --
16
you're really asking for a legal opinion from her which
17
she's not qualified to give.
18
MR. FLYNN:
19
20
I want her understanding.
That's
all.
Q.
Just give me your understanding, Ms. Blixseth,
21
that's all I want, of whatever you know of the secured
22
versus the unsecured as to how it impacts my client,
23
Mr. Blixseth.
24
25
MR. HOLAHAN:
She's already stated the loan
going from secured to unsecured was something she didn't
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1
know was going to happen when she signed the marital
settlement agreement.
3
4
MR. FLYNN:
with it?
MR. HOLAHAN:
to do with it.
BY MR. FLYNN:
8
9
10
11
What does Mr. Blixseth have to do
Q.
He doesn't have to have anything
It's a mistake.
Ms. Blixseth, is it true that Mr. Blixseth has
got nothing -- that's all I need from you -- has got

nothing to do with this?
A.
Well, he had something to do with it, because
12
part of that came out of when it was the UCC versus
13
Credit Suisse and Tim Blixseth.
14
for how that came out came out because of that trial.
15
Q.
Part of the decision
But you were 50 percent owner of the
16
Yellowstone Club at the time.
17
there were unsecured creditors.
18
the accounting shows, the unsecured creditors,
19
90 percent of them came in after you took control, so
20
what does that have to do with Mr. Blixseth?
21
A.
You were fully aware that

As a matter of fact, as
That was just another statement that's not
22
accurate that is now on the record that wasn't a
23
question to me.
24
25
Q.
What does Mr. Blixseth have to do with this
secured versus unsecured?
Can you just tell me your own
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2
understanding?
A.
Because some things came out in the UCC versus
Credit Suisse and Tim Blixseth that caused that to be
changed.
not the one that filed the suit and I didn't have
anything to do with that.
I didn't have anything to do with that.
And the -- the determination from what the
judge did came out of that lawsuit which Tim did
participate in and had something to do with.
10
11
12
13
14
15
Q.
But you engineered the entire reorganization,
Ms. Blixseth.
A.
I didn't have anything to do with that lawsuit
with the trial for the UCC.

Q.
You went and got Mr. Byrne as the DIP lender,
did you not?
16
You were the debtor in possession.
MR. HOLAHAN:
You're talking about two
17
different things, Mr. Flynn.
18
MR. FLYNN:
19
20
I'm
I'm just trying to understand where
your client is coming from.

Q.
Ms. Blixseth, doesn't the evident and,
21
literally, I'm going to say, 200 emails prove that you
22
shepherded throughout the entire bankruptcy process to
23
make Mr. Blixseth the fall guy.
24
25
You wanted all fingers pointing at Tim,

according to one of your emails.
Didn't you write that?
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A.
I wrote that certain things that Tim was trying
to -- between you and Tim calling Mark Chehi at Skadden
and trying this conspiracy theory against Sam and me
which was not true, that people needed to be looking and
pointing the fingers and look in the direction of Tim.
6
7
8
Yes, I did say that.

Q.
understand what you're saying.
9
10
11
So because we took on -- let me see if I
Because we contacted Mark Chehi, there's a

conspiracy between Tim and Credit Suisse?
A.
I didn't say that.
I said that you guys
12
contacted Mark Chehi from Skadden saying there's
13
conspiracy that had been ongoing between Sam Byrne and
14
me which made them think that there might have been and
15
made them go down that direction when there was nothing
16
there.
17
18
19
The judge ruled there was nothing there.

Q.
Okay.
The judge ruled there was nothing.
So
how did that impact you?
20
A.
Exactly.
21
Q.
How did that impact you to set aside the MSA?
22
A.
I didn't say that part did.
I said that Tim
23
and things that came out in the trial impacted the
24
Credit Suisse loan going from the secured to unsecured
25
loan.
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2
Q.
But you're the one who engineered the entire
bankruptcy along with this.
MR. HOLAHAN:
We're not talking about the
bankruptcy.
in clear and concise language about the Credit Suisse
loan and why it was predatory lending and why it went
from a secured to an unsecured.
8
9
We're talking about what the court stated
We're talking about what happened and what the

court ruled.
She did not know that was going to happen
10
when she signed the MSA.
11
BY MR. FLYNN:
12
Q.
Do you agree with your -- I will not ask one
13
more question if you simply say that you agree with the
14
statement of your counsel.
15
16
A.
Yeah, I agree with that.
the loan was going to go from secured to unsecured.
17
MR. FLYNN:
18
MR. GLASSER:
19
MR. FLYNN:
20
I didn't know that
Q.
Thank you very, very much.

All right.
Cool.
My turn.
I'm not quite done, Brian.
Then you write, "Naturally, this will be
21
appearing in the press.
22
have learned about this from the media before receiving
23
this letter.
24
press attention to minimum."
25
I'm sorry that many of you will
I can assure you that I intend to keep
Do you know that there are emails in there
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1
where you and others were engineering press leaks
attributing falsely to Mr. Blixseth?
A.
I do not believe that to be true.
Q.
I'm representing the emails are in that batch.
A.
You show me the emails and I might change my
6
7
mind, but I doubt it.

Q.
"To that end, I have retained the Edelman PR
firm in Chicago, contact Bill Keegan, to field all media
requests."
10
Then you say you sat back in silence and you're
11
not going to do so any longer even though you filed this
12
200-page motion that appeared all over the world.
13
14
How could you say you sat back in silence when

you've engineered press for years, Ms. Blixseth?
15
A.
I didn't engineer press for years.
16
Q.
Then you say, "After what seems like an
17
eternity, a whole lot of agony and negative press, I am
18
pleased to announce that I will retain ownership of
19
Yellowstone Club."
20
Isn't that the whole ball, the whole story
21
here, Ms. Blixseth?
22
it took.
23
loan applications to get control and you won.
24
control.
25
A.
You wanted control no matter what
You went and borrowed $40 million on false

You got
What's the question, Mike?
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1
Q.
Isn't it a fact that everything you've done for
the last two years in your divorce from Mr. Blixseth was
to get control of the Yellowstone Club?
A.
No.
That, in fact, is not accurate and all I
wanted to do was save Yellowstone Club from imploding
and the --
Q.
And what's happened?
A.
I didn't get to finish my answer.
Has it imploded?
That with the ad hoc members committee that was
10
put together and how they felt about Tim, with me being
11
told that there were going to be five lawsuits filed by
12
CrossHarbor, the other B shareholders were getting ready
13
to file lawsuits, all these things were coming down to
14
right when the MSA was done, that -- that my intent was
15
not -- that Yellowstone Club would not -- I'm sitting
16
here now not benefiting at all from this.
17
18
19
20
21
Would I have been better off to let it implode

and Tim take on the things that he created?
Q.
You didn't say any of that.
Yes.
You only said I
will retain ownership.

A.
I didn't know at the time.
Had I known it at
22
the time I probably wouldn't be writing this letter,
23
Mike.
24
25
Q.
Next paragraph, "Additionally, I've been able
to make this happen without adding partners or selling
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1
or borrowing against any Yellowstone Club assets"; is
that true?
A.
That is true.
Q.
"I used personal, separate assets to gain
ownership of the 50 percent of the Yellowstone Club I
did not own"; is that true?
A.
That is true.
Porcupine Creek was not part of
Yellowstone Club nor was the family compound.
the collateral I used.
10
Q.
That's
So your testimony is you collateralized those
11
assets personally owned by you to Sam Byrne to get
12
control; is that correct?
13
14
15
A.
One was personally owned by me and one was BGI,
but it wasn't owned by Yellowstone Club.

Q.
And the purpose of your collateralizing those
16
assets with Byrne was to get control of the Yellowstone
17
Club?
18
A.
The purpose was to end the insanity, get the
19
MSA closed and try to move forward.
20
going to move forward with the things that he got and
21
not stay his campaign on me.
22
I thought Tim was
I thought that I could try to put together --
23
if all the information would have been true, a
24
reformatting of how Yellowstone Club was without
25
pledging at the time to get this closed any Yellowstone
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1
Club assets or fire-selling additional lots and how that
had been going on for months.
3
4
Q.
And then in league with Sam Byrne, you put the
club in bankruptcy?
A.
Q.
Yeah.
A.
No.
Q.
Did you voluntarily file a bankruptcy?
A.
I absolutely had to.
10
Q.
Thank you.
11
12
13
14
15
16
17
Is that a question?
And you say, "I have always felt the

Yellowstone Club is," quote, "'my baby'"?
A.
You're reading it and I'm not objecting to what
you're reading.
Q.
So at all times you believed that Yellowstone
Club was "your baby" and belonged to you?

A.
No.
I think that at the time when Yellowstone
18
Club was started that it was -- it was Tim and I and
19
that -- that we did a great job together of creating
20
something that will probably never be created again.
21
And I think that he had his part that he did
22
and was very successful at, I had my part that I did and
23
was successful at and then reality of life hit and for
24
me saying it's "my baby" was that -- that trying to
25
protect it from disaster for the members, for the
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1
employees, for the community, was -- was more of a
maternal or thing I just -- I didn't want to see it die.
Q.
And did you borrow all the monies that you
borrowed all the way along the way to try to keep your
dream alive so the Yellowstone Club wouldn't die?
A.
No.
I actually really thought that Tim was
going to do it.
along during the time that I was frozen out trying to
survive until we say that it was either going to sell or
10
I actually really was borrowing all
Tim was going to buy out of it.
11
I really didn't think it was going to end up
12
the way it did.
13
it.
14
had that we were either going to try to run Yellowstone
15
Club together -- that became easy that we couldn't
16
because we couldn't even speak -- and I thought Tim
17
would buy me out or it would sell.
18
I thought I was going to come out of
I really thought from the very first sheet that we
Q.
So the reason for borrowing all those monies
19
and all those loans we went into in excess of
20
$40 million was for what, Ms. Blixseth?
21
borrow all that money for?
22
MR. HOLAHAN:
23
You can -- one more time.
24
THE WITNESS:
25
What did you
She's --
I've been repeating saying to --
first of all, you keep saying 40 million, but to survive
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1
the time until I got the assets that were free and clear
in my name that I could try to borrow against,
consolidate that, monetize and bring forward into a
business that had a cash flow.
MR. FLYNN:
Pursuant to our accommodation, Brian.
MR. GLASSER:
Okay.
MR. HOLAHAN:
This 123.
10
MR. GLASSER:
This will be Exhibit 124.
11
12
MR. HOLAHAN:
13
Thank you.
What exhibit number are we
up to?
Mike, what did you want to do
with the rest of these?
14
MR. FLYNN:
15
MR. HOLAHAN:
16
MR. FLYNN:
17
MR. GLASSER:
18
reporter and I got --
Hold on to them.
Are they on the website?
They're on the website.
Here you go, and the court
19
20
THE WITNESS:
This is a little font.
21
MR. GLASSER:
Yeah, I'm sorry.
22
out loud.
23
24
25
I'll read it
EXAMINATION
BY MR. GLASSER:
Q.
I've handed you what's been marked as
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1
Exhibit 124, Ms. Blixseth, and I just want to walk
through Exhibit 124, which is a balance sheet for
Mr. Blixseth dated as of December 31, 2007.
And I want to identify those entities which
ought to be removed from the balance sheet of
Mr. Blixseth as a result of the marital settlement
agreement; okay?
A.
Okay.
Q.
I guess we can skip the cash, securities and
10
automobiles, unless you can remember.
11
that for now.
Let's just skip
12
A.
Okay.
13
Q.
Blixseth Group, Inc., did you get that or did
14
he get that?
15
A.
I got Blixseth Group, Inc.
16
Q.
Okay.
17
Can you, please, put a line through on
Exhibit 124.
18
A.
Do you want me to do that?
19
Q.
Yeah, just scratch through.
20
I'll scratch through and then I'll give it to
21
you and then you can check it.
22
MR. HOLAHAN:
Are we going to underline?
23
MR. GLASSER:
No, just scratch through the
24
25
Blixseth Group, Inc.

MR. FLYNN:
You want it removed because it's no
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1
longer Tim's.
MR. HOLAHAN:
You want her to do it on the
exhibit, Blixseth Group, Inc., the first one.
BY MR. GLASSER:
5
6
Q.
281-, just scratch through that line.
7
8
That line under 376 million, 94 million and
MR. FLYNN:
The record is clear this is as of
12/31/07.
MR. HOLAHAN:
You want her to put a line
10
through the whole thing?
11
BY MR. GLASSER:
12
13
Q.
Just that last column, fair market value -- or
just line through Blixseth Group, Inc., is fine.
14
A.
I already did it.
15
Q.
Now Blixseth Group, Inc., I take it, at the
16
time of the MSA ate cash.
17
that correct, on a cash-flow basis?
18
A.
It didn't create cash, is
Well, BGI had Porcupine Creek in it, but at the
19
time that he did this he shouldn't have had Porcupine
20
Creek as part of it.
21
shouldn't have been part of it.
22
It had Casa Captiva, which
Those would have been negative cash flow, but
23
Yellowstone Club was part of BGI.
24
positive cash flow.
25
Q.
That should have had
Let's go to the day of the MSA.
I'm just using
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1
this because it's a list prior to the MSA.
A.
Okay.
Q.
On the day of the MSA, all in, Blixseth Group,
Inc., ate cash, it didn't create cash, counting
everything under it; correct?
A.
Correct.
Q.
So when you received it on the day of the MSA,
you received an entity that on a cash-flow basis
couldn't meet its debts as it came due, absent some
10
transactions which you've talked about today a lot?
11
A.
Correct.
12
Q.
So Blixseth Group, Inc., ate cash.
13
Desert Ranch project, who got that?
14
A.
Tim did.
15
Q.
So leave that alone.
16
Mobile Home, RM, California, who got that?
17
Before we go on from Desert Ranch, did Desert Ranch eat
18
cash or make cash on the day of the MSA?
19
A.
If it was -- it would eat cash if you're
20
talking about sustaining it with taxes and that kind of
21
thing.
22
would eat cash.
23
24
25
Q.
If you're talking about starting a project, it

It didn't make cash.
It was not a cash-making entity at the time of
the MSA?
A.
Correct.
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1
2
Q.
So on a cash-flow basis it couldn't be expected
to throw off cash?
A.
Correct.
Q.
Okay.
A.
I'm assuming that's something that I got that
Mobile Home, RM, California?
one of the employees for Porcupine Creek lived in.
Q.
All right.
A.
Unless there was another mobile home I don't
9
10
11
Scratch that.
know about.
Q.
Blixseth Family Investments, LLC.
You got that
in the MSA; correct?
12
A.
Correct.
13
Q.
So scratch that off, please.
14
Now did Blixseth Family Investments eat cash or
15
make cash?
16
A.
It made cash.
17
Q.
We'll get to Exhibit 56 later, which has your
18
cash flow on the back.
19
A.
Okay.
20
Q.
One lot, 28 North Subdivision, Big Sky,
21
Montana, who got that?
22
A.
Is this for Lot 1?
23
Q.
Yeah.
24
25
Well, it says "One lot, 28 North
Subdivision, Big Sky, Montana."

A.
Well, at the time of the MSA -- I've got to go
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1
into a little explanation on this.
There was one --
Q.
Is that the one that was sold?
MR. HOLAHAN:
Who got it?
THE WITNESS:
Yeah.
I'm not quite sure.
BY MR. GLASSER:
Q.
Sold prior to the MSA?
A.
Right, but I'm not sure exactly.
Q.
Well, scratch it off then, because it wasn't
10
there.
11
A.
Yeah, I don't think that was there.
12
Q.
Do you know if that lot made cash or ate cash?
13
A.
Well, I think that Tim sold it but borrowed the
14
money from Yellowstone Club to sell it, if I'm thinking
15
it's the right one.
16
You can correct me, Tim.
17
By the way this is worded, it's tough for me to
18
19
20
I don't know.
tell.
Q.
Section 5 640 acres in Bozeman, Montana.
At
the time of the MSA who got that?
21
A.
I don't know.
22
Q.
We'll skip it.
23
Do you know if it made cash or ate cash?
24
A.
I don't know.
25
Q.
Lot 200A Subdivision, Big Sky, Montana?
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1
A.
I believe that would be part that ended up
being part that went to Yellowstone Club, but I'm not
positive on that.
positive.
Q.
6
7
8
9
All right.
When it's listed as Lot 200A, I'm not
So put a question mark beside that.
Lot Bighorn Golf Club.

A.
I believe that's the Johnson residence and Tim
got that.
Q.
10
Okay.
Leave that alone.
Did that eat cash or make cash?
11
A.
That would -- the overhead.
12
Q.
Eat?
13
A.
You know what?
Tim just reminded me of
14
something by laughing at me.
15
owned and I did get and I sold it prior to the MSA.
16
17
Q.
All right.
That was a lot that I
Scratch it off because at the time
of the MSA that didn't exist.
18
A.
Thanks, Tim, I appreciate that.
19
Q.
All right.
20
A.
Tim got that.
21
Q.
Did it eat cash or make cash?
22
A.
It ate cash during the time I was aware of.
23
Q.
I'm particularly concerned with my questions on
24
25
Condominium in San Diego?
the day of the MSA?

A.
I can't answer on the day of the MSA.
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MR. FLYNN:
I'll object to this whole line.
Move to strike.
no foundation for the ate cash or didn't eat cash that
has been laid with the witness, so I object and move to
strike.
BY MR. GLASSER:
Q.
Lacks foundation.
There's absolutely
All my questions are based on your personal
knowledge, Ms. Blixseth, and thank you for pointing out
when you don't have it.
10
11
Miscellaneous acreage 640 acres, do you know

what that is?
12
MR. HOLAHAN:
It's another section.
13
THE WITNESS:
Yeah, it's a section of land.
14
I'm not sure if that's what I was considering part of
15
the Desert Ranch project.
16
to be able to answer that question.
17
MR. FLYNN:
I'd have to know where it was
I'll also object this is as of
18
December 31, '07.
19
eight months later, so this whole line of questioning is
20
completely irrelevant.
21
BY MR. GLASSER:
22
23
24
25
Q.
The MSA was
Yellowstone Club compound, 160 acres.
did that go?

A.
It's all irrelevant.
Yes.
Where
The family complex?

That ended up going to me, and that was
the value that I was told with the contract with Sam
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1
Byrne, which would have been in place as of
December 31st, the value was 40 million.
Q.
So delete that?
A.
Delete that.
Q.
Scratch through Yellowstone Club compound
because he didn't have it on the day of the MSA.
A.
Correct.
Q.
Did it eat cash or make cash on the day of the
10
A.
Ate, but not substantial amount.
11
Q.
It wasn't cash generating?
12
A.
No, it was not.
13
Q.
Buffalo Bill Ranch, Cody, Wyoming.
14
MSA?
Who got
that?
15
A.
Tim got that.
16
Q.
Did it eat cash or make cash, to your
17
knowledge?
18
A.
19
Again, for the overhead it would have eaten
then.
20
Q.
Turks and Caicos property, who got that?
21
A.
Tim got that.
22
Q.
Did it eat cash or make cash at this time?
23
A.
That would be eating cash.
24
25
MR. FLYNN:
And lacks foundation and
irrelevant.
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1
BY MR. GLASSER:
Q.
3
4
On the day of MSA; right?

By the way, you know this because you helped
buy this and knew it wasn't fully developed yet; right?
A.
Yeah.
Turks and Caicos was almost completely
developed, but the Yellowstone Club World never came to
fruition, so the -- how it was going to be used for the
cash flow and that kind of thing never came about.
Q.
Nashville?
10
A.
That was a house that Tim bought, I wasn't even
11
aware of, for somebody.
12
13
Q.
He got that.
Western Aviation & Marine, did that exist on
the day of the MSA?
14
A.
I believe it did and I believe that went Tim's
16
Q.
Monarch Design Showroom and Inventory?
17
A.
That went my way.
18
Q.
Do you know if Western Aviation & Marine ate
19
cash or --
20
A.
I would assume it did.
21
Q.
Okay.
15
way.
22
23
24
25
MR. FLYNN:
Object.
Move to strike.
BY MR. GLASSER:
Q.
Is that based on your personal knowledge of
what it cost to run the airplanes when you guys ran them
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1
together?
A.
Correct.
Q.
Monarch Investments, who got that?
A.
I did.
Q.
Did it eat cash or make cash?
A.
That actually -- that's the building that
Monarch was in and so it didn't pay rent, so it kind of
ate cash for the overhead of it but not much.
9
10
Q.
Furniture, antiques and equipment, I guess you

all split it up in the MSA some ways; right?
13
A.
I believe that's -- yes.
14
Q.
All right.
15
18
So just -- just put a question mark
beside that.
16
17
Please delete
both of those.
11
12
So you got the two Monarchs.
Heavy equipment, I guess that was split as

well; right?
A.
I'm going to go back to the furniture, antiques
19
and equipment.
I believe that that's probably what was
20
considered part of Porcupine Creek.
21
There was some equipment that Tim was attached
22
to and wanted to have and he did get that off, but it's
23
not worth going into.
24
25
Q.
So delete furniture, antiques and equipment,
because that went with Porcupine Creek.
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A.
Correct.
Q.
Heavy equipment we'll skip over because it's
small.
4
5
Western Pacific Timber, did he get it or you

get it?
A.
He got it.
Q.
Do you know if that ate cash or made cash?
A.
That should have made cash.
Q.
Yellowstone Club World, did he get it or you
10
get it?
11
A.
I got that.
12
Q.
And take it that ate cash at the time of the
A.
At the time of the MSA, actually when the MSA
13
MSA?
14
15
was signed, I found it was just insolvent.
16
17
Q.
are.
Okay.
I don't know what the other investments
What's TWJ, LLC?
18
A.
I don't recall.
19
Q.
Okay.
20
A.
I'm assuming he got it since I don't recall.
21
Q.
Big Sky Ridge, you got that; right?
22
A.
Correct.
23
Q.
So delete that.
Do you know if he got it or you got it?
24
And I take it at the time of the MSA that ate
25
cash and, in fact, owed a lot of money to salesmen and

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2
the like; is that right?

A.
Right.
That, and there was a lot of back and
forward of some things that I wasn't aware of, of
selling to individuals and back to the club and that
kind of stuff, so there was a lot that went on with
that.
Q.
So just sign the bottom.
Just write your name,
Edra Blixseth, right next to Exhibit 124 on the bottom
of that, please.
10
A.
Sign my name or write my name out?
11
MR. GLASSER:
Either way is fine.
12
MR. HOLAHAN:
There's no promissory notes on
13
here.
14
MS. MIN:
Yeah.
We'll get to that.
15
Actually, can you go back to Exhibit -- I'll
16
give you -- this is Exhibit 56, but because I'm going to
17
cause you to write on this as well, I'm going to give
18
you a new one.
19
MR. HOARD:
20
MR. GLASSER:
21
(Exhibit 56A was marked for identification.)
22
23
24
25
You want to make it 56A?

Yeah, let's make it 56A.
BY MR. GLASSER:
Q.
I want turn your attention, Edra -- or
Ms. Blixseth -A.
You can call me Edra.
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Q.
Okay.
Thanks.
-- the third page of Exhibit 56A and that's
where you have the revenue and expense projections as of
the day, you know, as of 8/15/08.
You see that?
A.
I do.
Q.
Okay.
Now it's fair to say that as of the day
of this financial statement on a cash-flow basis, look
there in September, you expected negative net cash flow
10
in the next month; right?
11
A.
I did.
12
Q.
So the day of the MSA, the day it was signed,
13
14
you were on a cash-flow basis not solvent; right?

A.
Correct.
And even some of these thing that are
15
listed on here for cash flow -- if you see at the top it
16
says Assumptions and those are based on assumptions of
17
us being able to create some cash flow and revenue that
18
when the market hit for things didn't come to fruition.
19
Q.
Right.
20
A.
Okay.
21
Q.
It says here, and we'll get into this a little
22
bit, "Assumption 1 CF is sold by September 15, 2008."
23
You see that?
24
A.
I do.
25
Q.
That's Castle Farcheville; right?
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A.
Actually --
MR. HOARD:
THE WITNESS:
4
5
Yeah, Chateau Farcheville.
BY MR. GLASSER:
Q.
6
7
Chateau Farcheville.
That's my West Virginia heritage, sorry.

That's why in October you get a $21 million
infusion of cash there next to YC October; correct?
A.
Correct.
Q.
And the club filed bankruptcy in November;
10
right?
11
A.
Correct.
12
Q.
Now I think it's true on the day of the MSA
13
that absent the sale of Farcheville, you knew, everyone
14
knew, that Yellowstone Club could not make the payments
15
expected under the Credit Suisse loan absent the
16
Farcheville sale; is that right?
17
MR. FLYNN:
18
THE WITNESS:
19
Object.
Farcheville had to sell.
BY MR. GLASSER:
20
Q.
Farcheville had to sell?
21
A.
Correct.
22
Q.
So on the day of the MSA, Yellowstone Club --
23
by that I mean Yellowstone Club, Yellowstone
24
Development, BSR, the entities I represent --
25
A.
Correct.
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1
Q.
-- were all insolvent on a cash-flow basis to
meet their debts as they came through over the next
couple of months without some infusion; right?
A.
Correct.
That's why of the 35 million -- you
have to remember the 35 million that already -- that --
that I got, 13 million was assuming a $13 million
receivable note that Sam had already loaned to Tim, so
there was only 22 million cash.
And so if you look at how that cash was used --
10
I don't know if that was a final agreement to form that
11
he used or working papers, but that didn't leave
12
anything left over.
13
I mean it all went into taking care of what
14
needed to go into Yellowstone Club, including
15
5.3 million because we needed to make Yellowstone Club
16
receivables that had not been paid.
17
18
Q.
And, actually, so the infusion of CrossHarbor
the day of the MSA allowed Yellowstone Club to --
19
A.
-- get by.
20
Q.
-- to basically make its payroll and get by,
21
but by November it was bankrupt and had to file; right?
22
A.
Exactly.
23
Q.
So the bottom line is on the day of the MSA the
24
debtors, you know, the debtors I just described, were
25
all hopelessly insolvent absent some external infusions
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2
3
of capital; right?
A.
Capital had to be brought into Yellowstone Club
to stabilize it.
Yes.
Q.
next page.
loan detail details all the loans you owed, except for
the 120-, $187 million that Mr. Flynn asked you about
that you also executed on the day of the MSA; right?
A.
10
11
12
And so were you, because -- let's look at the

You see where it says Loan Detail?
Correct.
MR. FLYNN:
Q.
More than a 180 million; right?

MR. HOLAHAN:
14
MR. FLYNN:
16
Is that right?
183.
181.
BY MR. GLASSER:
Q.
17
18
Object to the amount.
BY MR. GLASSER:
13
15
This
All right, okay.

So there's $63 million on page 4, 56A; is that
right, Ms. Blixseth?
19
A.
That's correct.
20
Q.
And in addition to that we could write in the
21
181- -- let's write 181 under there -- which was a
22
demand note that you executed in favor of, I guess, BGI;
23
right?
24
A.
Personally in favor of BGI.
25
Q.
Yeah.
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1
2
3
A.
Club.
Q.
4
5
BGI -- on behalf of BGI to the Yellowstone
Right.
And then there was the Tamarindo note which was
roughly 39-95-?
A.
40-.
Q.
Call it 39,995-; right?
A.
Okay.
Q.
Okay.
And so I don't know about the Tamarindo
10
note, but every other note on here was either a demand
11
note, right, or going to be already due or going to be
12
due in the remainder of '08; right?
13
14
15
16
A.
They were all -- yeah.
They were all
relatively coming up on me.

Q.
And that's listed on the maturity date on the
right side of 56A; right?
17
A.
Yeah.
18
Q.
If the test is did you have adequate current
19
capital to meet your capital demands as they would come
20
in the next two months, on the day of the MSA the answer
21
is no, you didn't have adequate capital to meet those
22
current capital demands; correct?
23
A.
That would be correct.
24
Q.
And everyone knew that on the day of MSA;
25
right?
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1
A.
I don't know who knew.
Q.
Well, you knew it; right?
A.
I knew things had to fall into place or we
wouldn't have enough.
Q.
And Tim knew it?
A.
I can't speak for Tim.
Q.
And you wanted to do some transformative
transactions over the next few months to save the club?
A.
That was the reason for the agreement to form.
10
Q.
It was at that time, in that context, that the
11
release agreement was entered; right, Ms. Blixseth?
12
The release agreement that released Tim, that
13
had all your entities release all his entities and all
14
his entities release you; right?
15
A.
That's correct.
16
Q.
So I want to walk through what each of my
17
clients gave up at the time of that release, okay, with
18
you?
19
A.
Okay.
20
Q.
Just a --
21
A.
As part of this document?
22
Q.
No.
23
Go ahead.
MR. FLYNN:
24
who are your clients?
25
THE WITNESS:
You can put 56A aside.
By the way, Brian, for the record
Yellowstone Mountain Club,

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1
Yellowstone Development, Inc., BSR, I'm also here on
behalf of the Bs, the 7Bs who settled.
MR. FLYNN:
controlled by Credit Suisse.
client?
6
7
MR. GLASSER:
10
MR. FLYNN:
13
My client is the trust, the
But four of the seven votes, you
will agree with me, are controlled by your client,

Credit Suisse; is that correct?
11
12
Is Credit Suisse your
liquidating trust.
8
9
Four of the seven votes are
MR. GLASSER:
I'm asking the questions.
Don't
burn my hour, Mr. Flynn.

Q.
So let's just walk through.
I have the
14
schedule, I have the MSA and if you don't remember
15
something maybe I can give you a copy of it and we look
16
for it.
17
A.
Okay.
18
Q.
I'll pull one of those.
19
Okay.
First, just assume for purposes -- my
20
client -- we have put forward an expert report that says
21
the value of -- of what Mr. Blixseth had taken out was
22
over $280 million at the time of the MSA and he owes the
23
money back.
24
25
You don't have to assume -- don't care about

the number, but whatever it is that he owed into the
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1
clubs was being waived on this day, right, by the
release?
3
4
A.
Are you saying that the notes that he was
personally --
Q.
Yes.
A.
-- yes.
Q.
Okay.
A.
Sorry was --
Q.
So he owed notes in favor of BGI and BGI owed
10
notes to the clubs; right?
11
A.
Correct.
12
Q.
Now, in addition, Tim got removed from a
13
$746,000 line of credit at American Bank to secure a
14
Yellowstone Development bond; is that right?
15
A.
That is right.
16
of the MSA.
17
happen.
18
Q.
That didn't happen on the day
I think I had 30 days to cause that to
Okay.
Now you were unaware Tim also got 27
19
pieces of Yellowstone Development Club equipment, like
20
dozers and excavators; right?
21
A.
I was aware of that.
22
Q.
Yellowstone Development Club, did it have extra
23
24
25
dozers and excavators?

A.
Tim gets attached to equipment.
It was stuff
that meant something to him, so he asked me if I cared
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1
and I said, "Make a list and let me check with the guys,
if it's something that they need to have there," and
just to kind of get it done everyone said, "If that's
what he wants, let him have it."
Q.
And he got Tamarindo; is that right?
A.
That's correct.
Q.
Which was valued at what?
A.
40 million.
Q.
40 million.
10
11
That used to be owned by Yellowstone

Development; right?
12
A.
Correct.
13
Q.
And he got -- he got extinguished Yellowstone
14
Club World's rights, allegedly, to use Tamarindo or the
15
Turks and Caicos; is that right?
16
A.
I'm sorry.
17
Q.
Also in the MSA it talked about you using your
18
best efforts to extinguish any rights Yellowstone Club
19
World would have to use Tamarindo; right?
20
A.
21
Sorry.
Now I understand.
Turks and Caicos or Tamarindo?
22
Q.
Tamarindo.
23
A.
Yes.
24
Q.
Right?
25
That is correct.
On Lot 90 at Yellowstone Club, you assumed a
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1
$2 million note executed by Tim in favor of Yellowstone
Development; is that right?
A.
Yes, but there was supposed to be consideration
in that for that.
That was something that was brought
up at the trial with an expert witness there.
Q.
But I'm just --
A.
Yes.
Q.
-- that was what he got; right?
A.
Yes.
10
Q.
And so Yellowstone Development, Yellowstone
11
Club World and BSR waived all their claims against him
12
and he got all this money and all these releases; right?
13
A.
Correct.
14
Q.
At the time of that waiver you're not aware of
15
a single claim Mr. Blixseth had against the entities
16
that released him, are you?
17
A.
No.
18
Q.
So, in other words, you can't point -- there
19
was no equivalent value exchanged for that release, was
20
there?
21
22
MR. FLYNN:
Object to the form, the relevancy
and the lack of foundation.
23
THE WITNESS:
24
benefit.
25
///
Well, yeah.
There was no
That's just what he got.
Page 341
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1
2
BY MR. GLASSER:
Q.
That's just what he got.

And what he got had nothing to do with what
Mr. Blixseth claims the clubs might -- against
Mr. Blixseth?
MR. FLYNN:
conclusion.
BY MR. GLASSER:
9
10
Q.
And objection.
Calls for legal
In other words, the clubs gave up Tamarindo,
40 million; right?
11
A.
Correct.
12
Q.
They gave up the right to chase him for the
13
money he'd taken out?
14
A.
Right.
15
Q.
Which is at least the 187 million you stepped
16
in his shoes on; correct?
17
A.
Correct.
18
Q.
They gave up, you know, the line of credit,
19
they paid him a management fee; right?
20
A.
Correct.
21
Q.
And they gave him a release; right?
22
A.
Correct.
23
Q.
But he didn't -- but what did he give them for
24
25
all that?
A.
Nothing; right?
Right.
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1
2
Q.
Can you put your finger on a single thing he
gave for all that?
MR. FLYNN:
THE WITNESS:
talking about BGI?
BY MR. GLASSER:
7
8
Q.
When you say "they," are you
No, talking about Yellowstone, Yellowstone
Club --
9
10
Object.
A.
Yellowstone club did not get benefit from the
things that were taken.
11
Q.
-- Yellowstone Development --
12
A.
Correct.
13
Q.
-- BSR --
14
A.
Correct.
15
Q.
-- none of those entities got a single thing
16
from releasing him of all this and giving him all these
17
assets; is that right?
18
A.
That's correct.
19
Q.
You can't -- and Yellowstone Mountain Club
20
likewise released the claims against him for taking out
21
or breaching his fiduciary duty or all the things he may
22
have done during the time he ran the club; right?
23
MR. FLYNN:
24
conclusion.
25
///
Objection.
Calls for legal
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1
BY MR. GLASSER:
Q.
You've read the release.
A.
Well, I haven't, but just to answer your
question really until Tim made the statement during the
adversary proceeding that the cornerstone of him wanting
the MSA to close was that I took over all the
responsibility and fiduciary of anything he had done was
the first I'd ever thought of that or heard that that
was the cornerstone of him wanting to close the MSA.
10
Q.
But you know that was the purported effect of
11
the mutual waiver and release agreement executed in
12
conjunction with the MSA?
13
14
A.
17
The lightbulb went off when he said
it on the stand.
15
16
I do now.
MR. FLYNN:
Objection.
BY MR. GLASSER:
Q.
So far as you know as the person who did the
18
releasing, the actual entities who gave those releases,
19
to your knowledge, got nothing?
20
A.
21
22
23
Correct.
MR. FLYNN:
Objection.
BY MR. GLASSER:
Q.
And at the time of that release, the mutual
24
waiver and release agreement, Tim had not actually
25
asserted any claims against Yellowstone Mountain Club,
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379
1
had he?
A.
Not to my knowledge.
Q.
Tim had not asserted any claims against
Yellowstone Development, Inc., had he?
A.
Q.
Tim had not asserted any claims against BSR?
A.
Q.
And each of those entities was jointly and
9
10
11
12
13
severally liable on the Credit Suisse loan at the time

of the mutual waiver and release; isn't that right?
A.
loaned to, yes.

Q.
14
15
Okay.
MR. HOLAHAN:
THE WITNESS:
MR. HOLAHAN:
19
out of the room.
20
BY MR. GLASSER:
22
Am I being represented?
Q.
Yeah, you are.
Let's go back to 56A.
I'm not stepping
I'm going to go up to
the assumption of Farcheville itself; okay?
23
A.
Okay.
24
Q.
I think you said in answer to one of
25
Gary,
Dennis is stepping out of the room.
18
21
I'm going to make a quick
emergency call.
16
17
Those were listed as part of what Credit Suisse
Mr. Flynn's questions that the buyer had been presented
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379
1
2
to you by a guy named Gary Peters; do you -A.
The buyer was presented to me by Christie's in
London, but Gary Peters supposedly brought the buyer to
them.
That's correct.
Q.
And at the time of the MSA, time of the marital
settlement agreement, and the waiver and release that
we're talking about here, had you actually laid eyes on
the buyer?
A.
I never have to this day.
10
Q.
Okay.
At the time of the marital settlement
11
agreement and the mutual release, the buyer had not put
12
up any earnest money; isn't that correct?
13
A.
I believe that is correct.
14
Q.
Did the buyer ever have any earnest money up
15
16
against Farcheville?
A.
No.
Every time they were supposed to put -- as
17
certain things were done, they were suppose to put
18
monies up.
19
that -- that other people -- I don't know if they saw
20
the actual buyer, but other people did see -- people
21
that came out, looked at Farcheville, architects, that
22
kind of thing, so it led all of us to believe the buyer
23
was real.
24
25
Q.
They were a foreign buyer.
I can tell you
Do you even know the name of the buyer, the
potential buyer?
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1
A.
I believe I have the name somewhere, but I know
they also had a nondisclosure clause to not release the
name of the buyer.
Q.
Okay.
But independent of whether you tell me
the name right now, you sitting here today don't know
the name of who would actually have done the buying.
A.
I know who was supposed to have bought it.
Q.
But you never talked to them face-to-face?
A.
No.
10
Q.
And no -- no letter of intent was ever
11
executed?
12
A.
Well, there was some things that went back and
13
forth.
14
for Yellowstone Club.
15
before August when they kind of closed down, so I was
16
actually there on the last day of August to hopefully
17
get it closed by September 15th.
James Levy was the lawyer that was working on it
18
I actually got the offer just
So I flew there and was -- met with the
19
lawyers, met with the notaries, thought we were going to
20
get done.
21
lawyers and things, so we still felt it was something
22
legitimate.
23
24
25
Q.
They had met with the potential buyer's
But now knowing what you know about
Mr. Peters -A.
I question the whole thing.
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379
1
Q.
-- question the legitimacy of the whole thing?
A.
I do.
Q.
Let's walk through this page 3 of Exhibit 56A.
I take it every one of the entities on Exhibit 56A in
September, just look at September, ate cash; is that
right?
7
8
Porcupine Creek?
A.
Sorry.
Okay.
10
Q.
Porcupine Creek ate cash; right?
11
A.
Uh-huh, yes.
12
Q.
Yellowstone Club ate cash?
13
A.
Yes.
14
Q.
Big Springs Realty ate cash?
15
A.
Well, you know, that one probably shouldn't
16
have, because Big Springs Realty's cash flow was based
17
on commissions being paid through buyers and then going
18
out to the salespeople, but the fact that the
19
commissions hadn't been paid when money came in there it
20
was, you know, it had to be made up in order to have
21
commissions paid properly.
22
Q.
So even though you had a positive $250,000 on
23
your projection, it turns out you owed the employees
24
there more than the 250-?
25
A.
Oh, there's no question.
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1
2
Q.
So for September that would be a negative
number?
A.
Correct.
Q.
So the total revenue line even for September
was a negative?
A.
Correct.
Q.
And then the expenses are all there; right?
A.
Correct.
Q.
There's just no doubt you had no sources of
10
11
current income as a result of the MSA?

A.
12
13
That's correct.
MR. HOLAHAN:
Do you want her to sign this last
MR. GLASSER:
Yeah.
page?
14
That would be good.
Get
15
her to sign that last page and sign a letter, give that
16
to the court reporter.
17
18
Q.
Let's go over some of the things that you have
testified to here.
19
Now I think you testified here in response to
20
some of Mr. Flynn's questions that 2007 was a bad year
21
for Yellowstone Club as well in terms of current cash
22
needs; is that right?
23
A.
It was.
2005 we were doing really well on cash
24
flow and then September 2005 is when the Credit Suisse
25
loan happened and 2000- -- well, 2006 and 2007, once the
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1
Lemond lawsuit got the negative press it got and the
divorce, yeah.
Q.
It was definitely very difficult.
And I think what you said in response to one of
Mr. Flynn's questions was, quote, "During all of 2007
there was no community cash flow"?
A.
That's what I was told.
Q.
Told by Mr. Blixseth?
A.
Correct.
Q.
And was the -- and it looked to me -- I mean
10
I'm just kind of summarizing what happened the prior six
11
hours of this deposition -- in 2007 and early 2008 the
12
lack of cash flow from the community property to you put
13
you in a situation where you felt like you had to do
14
something desperate to get out?
15
MR. FLYNN:
Objection.
Assumes facts not in
16
evidence.
Misstates completely the record and the
17
testimony of Ms. Blixseth.
18
her sworn declarations, her representations to lenders
19
and almost every statement she made to anyone throughout
20
the entire period of time where she was stealing over
21
$40 million.
It is totally contrary to
22
MR. GLASSER:
I'm not talking about assets.
23
THE WITNESS:
How can you say when I was
24
25
stealing over $40 million.

MR. GLASSER:
You can just object and if it's a
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1
well-founded objection somebody will exclude the answer.
Q.
But I'm not talking about asset values here.
I'm talking about the cash flow or the adequate capital
needed to meet your debts as they came due.
5
6
You were choked down in '07 and early '08; is

that right?
A.
Yeah.
I believe that was intentional because
subsequent to the MSA being signed and closed, things
that were community cash flow, things that should have
10
come to the community and then been divided up, I found
11
that -- that Tim got the cash and none of it came my
12
way.
13
Q.
And so, also, I want to -- he asked you about
14
the values you put -- the value you put on Yellowstone
15
Mountain Club at the time of the MSA; right?
16
A.
Uh-huh.
17
Q.
Remember those questions by Mr. Flynn?
Is it
18
very clear to you that even though the value you put on
19
Exhibit 56A on August 15th, 2008, or your accountant put
20
on 56A, were completely overstated, the asset value for
21
Yellowstone Mountain Club?
22
A.
That's clear to me now based on without the
23
Farcheville selling and the putting in of the additional
24
capital that we were going to put in, yes.
25
Q.
And I think I've read, and it may have been in
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some of the documents Mr. Flynn said, that in addition
to Farcheville at least 50 more million dollars was
needed in the near term for the Yellowstone Mountain
Club properties; is that right?
A.
He stated that based on the filings from BFI
and the state court.
with CrossHarbor we were saying 75-.
8
9
10
Q.
Actually, on our agreement to form
So it is your view at least 75- plus the 21-,
at least $96 million had to be committed to make those

properties possibly make it?
11
A.
Correct.
12
Q.
So those were hopelessly insolvent entities
13
when they executed these releases, weren't they,
14
Mrs. Blixseth?
15
16
17
A.
Without additional cash flow to support what
needed to be done to go forward, yes.

Q.
I think you said that Tim never -- that
18
Mr. Flynn asked you a lot whether you intended to pay
19
back the 181-, the $181 million loan and the roughly
20
$40 million Tamarindo loan; do you remember those
21
questions?
22
A.
Yes, I do.
23
Q.
Was your position on that exactly the same as
24
Tim Blixseth's, that it would basically be a problem you
25
outrun?
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1
A.
Well, I don't think it was a problem you
outrun.
I didn't ever try to emphasize that.
What I
emphasized was that it was a loan, not a dividend.
was a loan to us that BGI took out that then loaned to
the personal, Tim and Edra, even though Tim was in
control of that, that somehow over the course of the
next few years the lot sales for Yellowstone Club would
pay off the Credit Suisse loan and the loans back to
either BGI or BGI back to Yellowstone Club, Tim and
It
10
George Mack had come up with some creative ways of, as
11
that went along -- not anything illegal, not trying to
12
go into gray areas -- but as things went along and we
13
had write-offs that we could do that we could convert
14
those loans to -- whether you want to call them
15
dividends or forgiveness of the loans or whatever and
16
pay that back.
17
18
19
Q.
And you came to this understanding at the time
you were married to Tim?

A.
I came to the understanding before we even
20
closed the loan, because I was upset about taking the
21
additional monies of how it was ever going to be paid
22
back.
23
Q.
Tell me what Mr. Blixseth told you about that.
24
A.
Just what I said, that it went from
25
$150 million which kind of made sense when you put the
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1
numbers together at 150,000,000, the lots -- each lot
sale was going to be 500,000 going toward Credit Suisse.
As the loan continued ratcheting up, it was
more and more that of what would have to come out of the
lot sales in order to support the loan.
And I mean Tim even said right after -- within
months after getting the Credit Suisse loan that he
regretted doing it and that it put pressure to have
Yellowstone Club live up to something that might be
10
tougher to live up to.
11
12
MR. FLYNN:
Object to all of that testimony, conversations between.
13
THE WITNESS:
14
MR. FLYNN:
15
Object to spousal privilege.
I think actually I have to say -It's all excludable as a matter of
law.
16
THE WITNESS:
The only thing I can say is I
17
think George Mack was privy to some of those
18
conversations.
19
MR. FLYNN:
All lacks foundation when you're
20
dealing with privilege -- excuse me -- a precise
21
foundation question by question who was present has to
22
be done.
23
24
25
None of that was done.

MR. HOLAHAN:
I think when a husband sues a
wife, those privileges evaporate.

MR. FLYNN:
Not to third parties under Montana
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1
law, Mr. Holahan, as Judge Kirscher has already ruled.
BY MR. GLASSER:
Q.
Is it the case that during the period of '06,
'07, well up until you guys separated, that basically
all of your personal living expenses of you and
Mr. Blixseth were paid by BGI?
A.
Well, not all.
Tim had other things that
Western Capital -- so used to thinking of Tim and
Western Capital as one.
10
Western Pacific Timber had cash flow and some
11
things that would do.
12
would have other cash flow come in to us, so I can't say
13
that's an accurate statement.
14
15
16
17
Q.
So on a regular day, absent some other deal, on
a day-to-day basis?
A.
That was the preponderance of where our cash
flow for our livelihood came from, yes.
18
19
Tim would do other deals that
MR. GLASSER:
Let me take a little break and
talk to Mr. Hoard.
20
(Recess taken.)
21
22
23
BY MR. GLASSER:
Q.
I'm handing you what is marked as Exhibit 125.
24
Do you recognize that as an assignment of company
25
interest agreement that you signed in association with
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1
the MSA and were those your signatures on the agreement,
Ms. Blixseth?
A.
Let me get to where the sig pages are.

Yeah, on the second to last page is my
signature.
Q.
Okay.
All right.
And I want you to turn to
the last page -- or the third to last page, which is
YSC00305978.
Do you see that?
10
A.
I do.
11
Q.
Okay.
Does it say that, in fact, as part of
12
the MSA you're donating to your husband all your
13
interest in Yellowstone Club World, Tamarindo, and
14
Yellowstone Holdings, Mexico?
15
A.
It does say that.
16
Q.
Okay.
17
Thank you.
MR. DESCHENES:
Brian -- this is Gary
18
Deschenes -- do you know how much more you've got?
19
Obviously we've gone beyond the seven hours.
20
MR. GLASSER:
Yeah, I think I'm done.
I don't
21
know if I'll be able to get her to trial, so I'm just
22
making sure a few things are admissible.
23
doing, so I'll be done in five minutes.
24
MR. DESCHENES:
25
MR. HOLAHAN:
That's all I'm
Thank you.
Do you have another copy of that?
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1
MR. GLASSER:
2
3
Q.
Yeah.
Handing you 126, which is just an amendment to
the marital settlement agreement.
Do you recognize that, Ms. Blixseth.
THE WITNESS:
then I can look at it.
7
8
Hang on, she's got to mark it and

BY MR. GLASSER:
Q.
Do you recognize your signature on it?
10
A.
That is my signature, yes.
11
12
MR. GLASSER:
which will be Exhibit 127.
13
14

BY MR. GLASSER:
15
16
Handing you the second amendment,
Q.
Do you recognize it, second amendment to the
marital settlement agreement?
17
A.
You wanted me to look at signatures again?
18
Q.
Yeah.
19
A.
This one has no signatures on it at all.
20
Q.
That one has none?
21
got.
22
23
24
25
That's the only one I've
Do you recognize the writing though?

A.
Yes.
MR. GLASSER:
Okay.
And now I'm handing you
128 which is the Marital Settlement Agreement itself.
Page 357
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1
2

BY MR. GLASSER:
Q.
Do you recognize it?
A.
It looks familiar, with -- even the redacted
parts, so yes.
6
7
MR. FLYNN:
Perfect.
The Irish, they're all
the same.
MR. GLASSER:
10
MR. FLYNN:
11
THE WITNESS:
12
I'm sorry?
13
BY MR. GLASSER:
Okay, I'm finished.

Okay.
I've got about ten --
Did you ask me anything on this,
14
Q.
Just if you recognize it.
15
A.
Yes.
16
MR. GLASSER:
17
MR. FLYNN:
18
21
22
Okay.
I've got about ten minutes and then
we're going to suspend and take it up with the Judge.
19
20
Do you?
FURTHER EXAMINATION
BY MR. FLYNN:
Q.
Ms. Blixseth, let me show you a series of
emails.
23
Would you mark those please, Stephanie.
24
THE REPORTER:
25
129.
Page 358
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1
2
BY MR. FLYNN:
Q.
Now this is an email from you to Yankelevitz at
Gary Peters -- that you sent to Gary Peters dated
March 20, 2008, which I'll represent to be six days
before the Yellowstone sale cratered, one day before you
were under oath in the family court saying you were
doing nothing to interfere with the sale under oath.
8
9
And it reads -- Yankelevitz writes to you, "YC

is pocket change to Dubai.
It would seem to be worth
10
exploring if they're interested.
11
from the deal."
12
Pay Sam to walk away
Did I read that correctly?
13
A.
You did.
14
Q.
Then you write back, "My guy."
15
"My guy,"
that's Gary Peters?
16
A.
Oh, I don't know, but I assume so based on the
17
date here.
18
Q.
"My guy is meeting with Sam in the morning in
19
Boston at 9:30 and then heading this way.
20
letter with him showing we can close and the money is
21
already in the US."
22
He has a
This is six days before the deal cratered,
23
Ms. Blixseth.
Was your guy in Boston trying to
24
negotiate a different deal and get Sam to walk away from
25
the deal?
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1
A.
No.
He was in Boston trying to find out if Sam
really did need money.
Club.
I introduced him at Yellowstone
I started to answer this earlier.
And he said, "If you really don't have all the
money to close," which Sam said he did, that he had
money that might be willing to come in if something
happened that they weren't and that's the reason Sam met
with him.
Q.
Now this guy, "My guy," you're referring to,
10
Gary Peters, this is the guy that you just testified
11
conned you about the Farcheville sale?
12
A.
I didn't testify that he conned me.
13
testified that I questioned -- once I found out more
14
about Gary Peters and how things didn't come, didn't
15
happen that he said were going to happen, I started -- I
16
didn't start questioning about Farcheville until you
17
guys actually started talking to Gary and working with
18
Gary in November or December.
19
That made me think maybe -- maybe you guys were
20
behind him saying that there was sale for Farcheville
21
and that kind of thing, but I definitely questioned
22
everything Gary Peters said because he didn't ever
23
finish anything.
24
25
Q.
Are you saying in August and September Gary
Peters was communicating with either Mr. Blixseth or
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1
2
myself?
A.
3
4
Did I say that?

No, I did not say that.
Q.
Now in order to get control of the Yellowstone
Club, in order to get control, you cooperated with Sam
Byrne.
liquidating trust, you just -- you cooperated with Sam
Byrne to get control of it knowing you were insolvent;
is that the testimony you just gave?
10
A.
As I understand the testimony you just gave the
The testimony I gave was that if Farcheville
11
didn't sell and we weren't able to get money into
12
operating Yellowstone Club with what had gone on with
13
it, that it wouldn't be able to go forward with paying
14
its bills and doing the things that needed to be done
15
after the two years of basically nothing happen with
16
Yellowstone Club and nobody operating it, no sales going
17
through and the negative press with the Lemonds and our
18
divorce.
19
Q.
20
Thank you.
So you knew as of the date of the MSA, if I
21
understand your testimony correctly, that if Farcheville
22
cratered, which was based on Gary Peters, your guy, then
23
everything would collapse and you would be insolvent; is
24
that your testimony?
25
A.
I didn't -- I didn't look at it that way.
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1
knew that Farcheville was pivotal to having everything
else come together, even when it includes the -- what
Sam could do with the agreement to form on raising the
75 million for Yellowstone Club as well as the
additional things that we wanted to do vertically.
6
7
Q.
And you did this -- you had never met the
Russian buyer; correct?
A.
I never said it was a Russian buyer.
Q.
You had never met the buyer; correct?
10
A.
Correct.
11
Q.
The buyer had not deposited any money; correct?
12
A.
Correct.
13
Q.
And you signed a 30- to 40-day note for
14
$35 million to Mr. Byrne knowing that the Farcheville
15
deal had no substance; is that your testimony?
16
A.
No.
That's not my testimony.
I thought the
17
Farcheville deal had substance because of it coming
18
through Christie's in London, which is reputable firm.
19
They verified and said that the party was a
20
legitimate buyer.
21
with their lawyers.
22
Farcheville, including architects and all kinds of
23
people, so we had every indication and belief that they
24
were legitimate.
25
We hired a lawer who talked and met

They sent out people to
Tim thought they were legitimate.
He was
Page 362
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1
trying to get -- to say he got a percentage of the sale,
because it was somebody that he might be involved with.
Q.
Now if the sale went forward for the
68 million, then you wouldn't have been insolvent; is
6
7
8
9
A.
It was 45 million euros so the 65 to -8 went up
and down.
Q.
Whatever, the $45 million euros if the sale had
gone forward that you were betting on when you signed
10
the MSA, according to your testimony, then you would not
11
have been insolvent?
12
A.
If the sale would have gone forward, it would
13
have enabled us to put enough money into Yellowstone
14
Club to stabilize it while Sam Byrne and the other
15
people were taking the step from step one of the
16
agreement to form of raising the 75 million to put into
17
cash flow for Yellowstone Club, because they would have
18
been able to in good faith -- saying Yellowstone Club is
19
stabilized now with the cash flow and they would have
20
been able to raise the, they felt, 75 million that was
21
their obligation and the additional, I believe it was
22
the same amount, 75 million for vertical.
23
24
25
Q.
So you wouldn't have been insolvent then; is

A.
My testimony is that we would have been able to
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1
2
move forward I felt, yes.

Q.
So then your financial statement that the
liquidating trust introduced as 56A, that we put in as
56, then the 800- or $900 million of net worth that you
showed would have been accurate; is that correct?
6
7
8
9
Your net worth would have been still worth

800-, 900 million?
A.
Based on the agreement to form that I signed
with CrossHarbor, looking at Phase 1 and Phase 2, not --
10
not -- not to happen quickly, but two years down the
11
road, let's say, three years down the road when we were
12
able to have everything stabilized where it's moving
13
forward again, it showed the portion of mine -- my
14
portion for that phase to be at $500 million.
15
It's in the agreement to form, if you see it.
16
So I still then had belief that we should be able to do
17
that.
18
Q.
So then you wouldn't have been insolvent and
19
you had Sam Byrne as a back-up partner as you
20
referenced?
21
A.
I didn't reference Sam as a back-up partner.
22
Q.
Oh, you didn't?
23
A.
No.
24
Q.
That's your testimony now?
25
A.
That's my testimony then.
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1
2
3
4
Q.
I think you should reread the documents,
Ms. Blixseth?
A.
I have never referred to Sam Byrne as a back-up
partner.
MR. DESCHENES:
We're at this point a little
over 7 hours and 40-some minutes.
you're probably a good 7 and a half hours.
we're going to call it quits.
9
10
MR. FLYNN:
I think
Well, a couple more minutes,
Mr. Deschenes.
11
MR. DESCHENES:
12
hours.
13
that Brian did.
14
15
Even with the breaks
Well, the rule allows you 7
I gave you another half hour on top of the stuff
MR. FLYNN:
Would you mark that, Stephanie,
please, next exhibit.
16
MR. DESCHENES:
17
MR. FLYNN:
We're done.
I'm going to ask the next question.
18
I cannot -- Mr. Blixseth will be severely prejudiced if,
19
for whatever reason, we are not able to complete this
20
deposition and I have not been able to mark key exhibits
21
involving emails between Ms. Blixseth and others that I
22
now intend to mark and have her identify, so I'm going
23
to --
24
25
MR. DESCHENES:
You're saying five minutes is
going to make that difference?
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2
MR. FLYNN:
I'm saying ten more minutes.
I intend to mark these exhibits in the next ten minutes.
3
4
No.
MR. DESCHENES:
For ten minutes I'm going to go
ahead and let you have that, Mike.
MR. FLYNN:
Mark the next exhibit, please.
MR. HOLAHAN:
MR. FLYNN:
Gary, thank you.
It's
Stephanie, mark the next exhibit,
please.
11
12
Okay.
Dennis, we'll give him ten minutes then I'll --
9
10
You're not giving me anything.
THE REPORTER:
I can't until people stop
talking, I'm sorry.
13
14
THE WITNESS:
15
(indicating)?
16
BY MR. FLYNN:
Are we done with this one
17
Q.
What is the next exhibit?
18
A.
130.
19
Q.
Okay.
Would you go down to this exhibit where
20
it says on the second page, "Fifth, I believe you need
21
also to leak something to the press from an outside
22
source but not through us but for you and I to discuss."
23
24
25
MR. DESCHENES:
The exhibits are not on your
website; is that correct?

MR. FLYNN:
No, they're on the website.
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2
MR. DESCHENES:
I'm looking at it.
It ends at
121.
MR. FLYNN:
They're in the middle of the
website.
We had to pull them out in order to -- but
they haven't been marked yet as exhibits, but they're in
the middle of the website.
THE REPORTER:
MR. HOLAHAN:
THE REPORTER:
10
Who was talking, please?

That was Gary Deschenes.
Thank you.
BY MR. FLYNN:
11
Q.
Ms. Blixseth, are you now cooperating with the
12
liquidating trust to set aside the marital settlement
13
agreement?
14
A.
15
trust.
16
Q.
I have had no discussions with the liquidating
In the testimony you just gave with the
17
liquidating trust, was it your intent to cooperate with
18
them to set aside the marital settlement agreement?
19
A.
My intent was no more to cooperate with them as
20
I am to you, except that what I need to do by the law
21
when I'm asked a question, to answer it truthfully as I
22
can.
23
24
25
Q.
Is it your intent now to set aside the marital
settlement agreement?
I'm asking whether it's your intent, not your
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1
lawyers'.
2
3
Is it your intent?
MR. HOLAHAN:
You're asking for a work-product
question and attorney-client.
MR. FLYNN:
MR. HOLAHAN:
You're instructing her?

I'm saying you already know what
the intent is and I thought you were going to use this
ten minutes to mark exhibits.
8
9
MR. FLYNN:
I am.
But I want to know whether
it's your intent, Ms. Blixseth.
10
MR. HOLAHAN:
11
MR. COTNER:
It is our intent.
Mr. Flynn, this is Dave Cotner.
12
As you know, I represent Mr. Samson who's the trustee
13
and the trustee has succeeded to that claim, so Edra
14
Blixseth has no claim to present at this time.
15
16
17
18
MR. FLYNN:
Dave.
Q.
You're saying it's your decision,
Okay, I got it.

Would you go over to the next page,
Ms. Blixseth.
19
A.
I've never seen this email before.
20
Q.
You've never seen them?
21
A.
The email that you presented to me, page No. 1
22
23
24
25
and page No. 2, I've never seen.

Q.
Okay.
Let's go to page 3.
This was to you
from Jim Fultz, LearG2.

Have you seen this email?
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1
A.
I don't really recall it, but let me read.
Jim
Fultz was with things for a very short time and had all
kinds of ideas.
Q.
5
6
I'm not interested about Jim Fultz.

Have you seen the email from Fultz to you dated
March 28, two days after the deal cratered?
A.
I don't recall it, but I can tell you things in
it that he's suggesting in here were not things that I
thought were okay to do.
10
Q.
11
We'll see in subsequent emails.

Let's go to six on that page.
"You must shore
12
up your base with your legal team, fire back this
13
morning with letters recanting everything you agreed to.
14
We need to keep punching Tim hard this morning.
15
"No more emails or direct contact from you to
16
Tim.
He needs to just get slammed.
17
email from Tim with the email from Sam about bankrupting
18
the YC companies?
19
Did you ever get an
"We may want to leak that to the press, of
20
course, attributing this to Tim.
21
off his feet today.
22
Burt Sugarman, loud mouth, but could bring support of
23
some members."
24
25
We need to knock him
Perhaps it is time to wrangle in
Did you get that email?

A.
I'm having a hard time reading this email to
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1
see what part was -- this looks like it was from me, but
there's parts of it that aren't me and then it looks
like I sent it to my lawyers.
Q.
Let's go to the next page.
From LearG2 to
Jaffe, Mendell, Ryden, Klar, et cetera, et cetera, and
I'll represent for the record that you sent all these to
Gary Peters and that's where we got them.
8
9
10
11
12
Subject, new plan of action.

A.
Are you saying these that I just said I had
never saw to Gary Peters?

Q.
You forwarded them all to Gary Peters,
Ms. Blixseth.
13
A.
I couldn't have forwarded these to Gary Peters.
14
Q.
Okay.
15
16
Well, did you write the email, the next
page, LearG2@aol.com?
A.
I'm reading it.
I was actually -- when you
17
were reading the other one, that's the one from Fultz
18
that you read and put on the record.
19
Q.
I'm now on the last page.
20
A.
I know where you are now, I'm just asking a
21
22
23
24
25
question from what you -Q.
Did you write that email?
It's a simple
question.
A.
I understand it's a simple question.
I'd like
to go back to the simple question you asked before that.
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1
Q.
I want a simple question --
A.
But I never answered the question.
Q.
Did you write the March 28th, 3:42 a.m. email?
A.
I believe I did.
Q.
Okay.
For the record it reads, "We get the
pressure on Tim to get PC," that's Porcupine Creek, "and
CC in my control."
8
9
10
11
That's Casa Captiva.

A.
I'm sure I did.
That was already part of my
assets that were supposed to be in my control already.

Q.
"We fight him on all the things that he is
12
trying to pull about the things we're withdrawing for
13
the support.
14
We hit him from all sides.
"And in Montana court I try to get control
15
based on his handling of things this past year now that
16
Sam's deal is dead.
17
need your thoughts now."
18
We have to move fast on this, so I
19
A.
I'm sure I did.
20
Q.
Now when you were trying to get control of the
21
22
Yellowstone Club -MR. HOLAHAN:
Just one thing I have to say
23
about that.
I don't know where you say you got that
24
email, but that email on its face is from Edra to --
25
every addressee that I see on it is an attorney of hers,
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1
so the same objection to this exhibit as I did the other
exhibit which is attorney-client privilege.
3
4
MR. FLYNN:
Q.
We got it from Gary Peters.
Ms. Blixseth -MR. GLASSER:
who's leaving.
you have a key.
He's the last guy here.
THE REPORTER:
MR. GLASSER:
10
11
12
I have a question.
There's a guy
He wonders if
No.
Because he's going to lock up.

BY MR. FLYNN:
Q.
Ms. Blixseth, did you attempt by any means to
13
get control of the Yellowstone Club knowing you were
14
insolvent?
15
A.
I didn't think at the time that I was insolvent
16
when I was trying to get the Yellowstone Club to -- to
17
get their payables paid and that kind of thing.
18
19
20
At that time I didn't -- I wasn't aware of

where things were and how that was going.
Q.
You believe that you had -- you were getting
21
out of the MSA a $500 million asset, by far the biggest
22
asset of the marital community, and a $200 million
23
asset, Porcupine Creek, by far the second biggest asset
24
of the marital community, and Farcheville, a 45 million
25
euro asset, the third biggest asset of the marital
Page 372
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379
1
community.
A.
That was part of Yellowstone Club.
Q.
Did you not -- you believed that that's what
you were getting in the marital settlement agreement; is
A.
That would be correct if you put Farcheville
back into what I thought -- the totality of the
Yellowstone Club entities included Farcheville.
Q.
And for cash to fund all of this to keep you in
10
control of everything, as I understand what you told the
11
liquidating trust, you were betting on Gary Peters
12
selling Farcheville; is that correct?
13
A.
That's not correct.
I was counting on the
14
Christie's, reputable company in London, and what James
15
Levy, our attorney, had told us that it was a credible
16
buyer in there, that Farcheville was going to sell.
17
18
Q.
Now we're almost done.
How many lawyers at the
time of the MSA did you have?
19
A.
For the MSA?
20
Q.
Relating to anything you were working on
21
involving the MSA or related matters.
22
did you have?
23
MR. HOLAHAN:
24
MR. FLYNN:
25
Q.
How many lawyers
Do you mean lawyers or law firms?

Lawyers.
As I understand it somewhere in the range of 15
Page 373
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1
2
or 16, but how many lawyers did you have?

A.
I had the Jaffe law firm as my family law, I
had Liner looking at things from a tax standpoint and a
business standpoint.
retained James Levy in Paris to handle the sale of
Farcheville and they were with -- James Levy was working
in conjunction with Liner firm.
Those were the two law firms.
We
Q.
And how many accountants did you have?
A.
We were relying a lot of George Mack, who had
10
11
been very cooperative.

Q.
12
13
I'm not talking about Mack.

How many did you have?
A.
14
I'm trying to answer your question.

George Mack was helping us.
George Mack was
15
working with Liner firm.
16
You've got emails showing that.
17
firm -- excuse me, an accounting firm, not to be
18
confused with Jaffe, I think it was Stuart Jaffe, that
19
was an accountant, that Liner firm had brought in to do
20
things.
21
MR. HOLAHAN:
22
MR. FLYNN:
23
24
25
Q.
You've got all the emails.

And there was a law
Time's up.
I've got to get financial advisors.
How many financial advisors did you have beside
Goldfarb?
MR. DESCHENES:
You said you would end in ten
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1
minutes.
you haven't gotten any further.
BY MR. FLYNN:
4
5
6
Q.
You've now exceeded ten minutes and, frankly,
Was Goldfarb also representing you at the time
of the MSA?
A.
I think I've been instructed that we're done.
MR. HOLAHAN:
MR. FLYNN:
MR. HOLAHAN:
You can answer it.
10
THE WITNESS:
You're instructing me on what?
11
12
13
14
15
We're done.
I want that answer, Dennis.
BY MR. HOLAHAN:
Q.
Mr. Goldfarb, was he acting as a financial
advisor to you at the time of the MSA?

A.
He was kind of the conduit between him and
Archer and the hard-money lender.
16
MR. HOLAHAN:
17
MR. FLYNN:
We're done.
No, we're not done.
We're
18
suspending, but to you we're done; to us we're
19
suspending.
20
Everybody is leaving.
THE REPORTER:
I'm assuming that as far as
21
signature and the original and all that you want to do
22
whatever was done on the last series; is that correct?
23
MR. GLASSER:
24
THE REPORTER:
25
It's up to the deponent.

It's actually up to noticing
attorney.
Page 375
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1
2
MR. FLYNN:
How do you want to handle it?
She's your client, Mr. Holahan.
MR. HOLAHAN:
I would like you to send me the
original, since I'm down here and Gary's in Montana.
Send the original to my office.
holidays.
have it --
And I'm leaving for the
I won't be back until -- how soon can you
THE REPORTER:
10
11
MR. HOLAHAN:
Off the record?
By Monday, January 4th, and then
we will have it reviewed within 14 days.
12
MR. FLYNN:
13
Dennis, she was going to get me a name that she
14
agreed supplement.
Yeah.
Can you get that to me?
15
MR. HOLAHAN:
Yeah.
Well, when I get it.
16
(The deposition was concluded at 5:50 p.m.)
17
18
///
19
///
20
///
21
///
22
///
23
///
24
///
25
///
Page 376
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1
I hereby declare under penalty of perjury
under the laws of the State of California that I have
read the foregoing deposition and that the testimony
contained therein is a true and correct transcript of my
testimony given at said time and place.
6
7
Dated this ______ day of ______________, 2009,

at
__________________________, _________________.
8
9
10
11
__________________________
Signature of Witness
12
13
14
15
16
17
18
19
20
21
22
23
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25
Page 377
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1
2
CERTIFICATE
OF
CERTIFIED SHORTHAND REPORTER
5
6
7
I, Stephanie P. Borthwick, Certified Shorthand

Reporter of the State of California, do hereby certify:
8
9
10
That the foregoing deposition was taken before

me at the time and place therein set forth, at which
time EDRA D. BLIXSETH was duly sworn by me;
11
That the testimony of the witness and all
12
objections made at the time of the examination were
13
recorded stenographically by me and thereafter
14
transcribed, said transcript being a true copy of my
15
shorthand notes thereof, and a true record of the
16
testimony given by the witness.
17
18
In witness whereof, I have subscribed my name

this date:
December 28th, 2009.
19
20
21
____________________________
22
STEPHANIE P. BORTHWICK, CSR
23
Certificate No. 12088
24
25
Page 378
800.669.1866

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09-00018-RBK Doc#: 319-1 Filed: 07/02/10 Entered: 07/02/10 22:53:51 Page 1 of 379

December 17, 2009

UNITED STATES BANKRUPTCY COURT

) Case No.: 09-60452-RBK

) Case No.: 09-00014

OFFICIAL COMMITTEE OF UNSECURED

December 17, 2009

Yates Court Reporters

December 17, 2009

Deposition of EDRA D. BLIXSETH, taken on behalf of

the Plaintiff, before Stephanie P. Borthwick, a

Certified Shorthand Reporter, commencing at the hour of

9:14 a.m., Thursday, December 17, 2009, at the offices

of Yates Court Reporters, 74-967 Sheryl Avenue,

Palm Desert, California.

For the Plaintiff Timothy L. Blixseth:

MICHAEL FLYNN, ESQ

Rancho Santa Fe, California

MICHAEL FLYNN, ESQ.

For the Debtor, Edra D. Blixseth:

LAW OFFICES OF DENNIS HOLAHAN

2049 Century Park East

Los Angeles, California

DENNIS HOLAHAN, ESQ.

December 17, 2009

DESCHENES & SULLIVAN

309 1st Avenue North

Great Falls, Montana

GARY DESCHENES, ESQ. (via speakerphone)

For Marc Kirschner, Trustee:

BAILEY & GLASSER, LLP

209 Capitol Street

Charleston, West Virginia

MULLIN HOARD BROWN, LLP

800 Amarillo National Plaza Two

500 South Tyler

BRIAN A. GLASSER, ESQ.

STEVEN L. HOARD, ESQ.

December 17, 2009

For the Trustee BLX:

BALLARD SPAHR ANDREWS & INGERSOLL, LLP

2029 Century Park East

Los Angeles, California

CHRISTINE K. MIN, ESQ.

For the Dick Samson as Trustee of the Edra Blixseth

DATSOPOULOS, MAC DONALD AND LIND, PC

Central Square Building

201 West Main

DAVID B. COTNER, ESQ. (via speakerphone)

For the Montana Department of Revenue:

Joel Silverman, Esq. (via speakerphone)

125 North Roberts

December 17, 2009

For CrossHarbor, CIP Yellowstone Lending:

DUANE MORRIS, LLP

470 Atlantic Avenue

Boston, Massachusetts 02210-2243

PAUL D. MOORE, ESQ. (via speakerphone)

For Western Capital Partners:

HATCH JACOBS, LLC

950 Seventeenth Street

CHRISTOPHER J. CONANT, ESQ. (via speakerphone)