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Blixseth seeks damages over Mont. bankruptcy suit

Matthew Brown, Associated Press

BILLINGS, Mont. (AP) -- Luxury real estate developer Tim Blixseth said Thursday he intends to seek damages against the state of Montana over its failed attempt to force him into bankruptcy to collect $57 million in alleged back taxes.

A federal judge in Las Vegas threw out the state's case Wednesday, saying it did not meet legal requirements under bankruptcy law.

Blixseth, who resides in Washington state, said the forced bankruptcy lawsuit against him was filed in bad faith, and that the state's efforts had been politically-motivated by supporters of the Yellowstone Club, which went into bankruptcy protection soon after he gave up control of the private ski and golf resort in southwestern Montana in 2008.

"Yesterday's decision paves the way to try to get a little justice," he said Thursday. "That (tax) bill is not due. It's never been due."

One of his attorneys, Brett Axelrod, said Blixseth will file paperwork in federal court in Nevada before the end of the month seeking reimbursement for legal fees and punitive damages, which Blixseth said could range from $200 million to $600 million.

He also plans to go after the Yellowstone Club's creditors. They had joined the state's case in an attempt to get Blixseth to pay a $41 million judgment from another judge who said Blixseth fraudulently transferred a 2005 loan meant for the club to his personal use.

The state contends the money he got from the loan was taxable personal income. But Blixseth has maintained it was a legitimate business loan intended to finance his creation of an international version of the Yellowstone Club.

Montana Department of Revenue Director Mike Kadas said the state expects to prevail on a planned appeal of Wednesday's ruling.

Kadas rejected the assertions of political influence in the tax case, which Blixseth claimed was orchestrated by former Gov. Brian Schweitzer as a favor to Yellowstone Club supporters who funneled money toward the Democrat's election.

"Mr. Blixseth's allegations are (and have always been) only that — unsubstantiated allegations, stories without any foundation in reality," Kadas said in an emailed statement to The Associated Press.

His victory in the forced bankruptcy case came on a more technical matter.

The state had pursued the case under a provision in federal law that allows three creditors with undisputed claims to force a debtor into bankruptcy. But two other plaintiffs, Idaho and California, dropped out after Blixseth settled their claims against him for almost $2 million. And the state was unable to convince Judge Bruce Markell that a portion of its own claim was undisputed, leading to the dismissal.

Kadas said that as part of its appeal, the agency will seek a court-ordered stay on related proceedings. That would delay Blixseth's attempt to seek damages.

The state successfully appealed an earlier dismissal, after Blixseth challenged whether Las Vegas was the proper venue. A three judge appellate panel revived the case based on the fact that Blixseth has most of his assets in a Nevada-based trust.