Glasser v. Blixseth et al

Filing 399

FINDINGS OF FACT AND CONCLUSIONS OF LAW AND ORDER re 397 USCA Order. To this day, Blixseth has not fully and completely accounted for the Tamarindo sale proceeds. He has not provided an acceptable accounting and has not complied, even substanti ally, with the Court's Orders of January 9, 2015 and April 20, 2015. He remains in contempt and, from the record, remains unrepentant. Copy provided via Ad Hoc to Ninth Circuit at [e-mail] Signed by Judge Sam E Haddon on 12/30/2015. (HEG, ) Modified on 12/30/2015 Rcv'd confirmation with Howard of the 9th Circuit via phone call that the NEF of this filing was received and will be docketed in the case before the 9th Circuit on today's date.(HEG, ).

FILED
DEC 3 0 2015
Cieri<, U.S. District Court
District Of Montana
Helena

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
BUTTE DIVISION
In re

No. 15-73820

YELLOWSTONE MOUNTAIN
CLUB, LLC,

Case No. 08-61570-11
Adversary No. 09-00064

Debtor
No. CV-13-68-BU-SEH
BRIAN A. GLASSER, SUCCESSOR
TRUSTEE OF THE YELLOWSTONE
CLUB LIQUIDATING TRUST,
Plaintiff,
vs
TIMOTHY L. BLIXSETH, CASA 20
LLC, TAMARINDO LLC, JOHN
DOES 1-100, and XYZ CORP. 1-100,
Defendants.

FINDINGS OF FACTS
CONCLUSIONS OF LAW
AND ORDER

INTRODUCTION
Contempt proceedings against Timothy L. Blixseth ("Blixseth") commenced
December 23, 2013 .1 Two separate hearings were conducted before a final on the
record evidentiary hearing was held on October 19, 2015. 2 Plaintiff Brian A.
Glasser, as Trustee of the Yellowstone Club Liquidating Trust (the "Trust") was
represented by Michael L. Murphy, Esq., Kevin W. Barrett, Esq., and Shane P.
Coleman, Esq. Blixseth was represented by Paul Brain, Esq., Phillip J. Defelice,
Esq., and Michael J. Ferrigno, Esq. Oral testimony was presented and
documentary evidence was introduced. The findings of fact and conclusions of
law stated below are drawn from the record. 3
FINDINGS OF FACT

Background
1.

These proceedings arise from the continued failure of Blixseth to

account fully and properly for the proceeds of the sale of the Tamarindo Resort
("Tamarindo"), a sale carried out in direct defiance of the Bankruptcy Court's
order, and his subsequent refusal and failure to fully and properly account for

1

Doc. 58.

2

See Doc. 99, 158, and 343.

3

2:13-cv-00068-SEH; Bankruptcy Case No. 08-61570-11.
2

those proceeds in compliance with the requirements of the Court's Orders of
January 9, 2015 4 and April 20, 2015. 5
2.

The Trust is charged with prosecuting, enforcing, and collecting

approximately $260 million in existing federal court judgments against Blixseth
and his related corporate entities for absconding with the assets of the Yellowstone
Mountain Clubs' defrauded creditors. Those responsibilities encompass the
recovery of the proceeds of the sale of Tamarindo, and the injunction against the
sale ofTamarindo which served as the Trust's sole security for its judgments, from
Blixseth, from his lawyers and representatives, and from any other third parties
who aided and abetted in the sale of Tamarindo. 6
3.

By order of Court dated April 20, 2015, Blixseth is currently

incarcerated for his ongoing and continuing failure to account for the Tamarindo
sale proceeds. 7

4

Doc. 112.

5

Doc. 159.

6

On July 17, 2015, the Trust moved against approximately 20 third parties requesting that
they appear and show cause as to why they did not aid and abet Blixseth in the sale and
distribution of the proceeds from the sale of the Tamarindo Resort. (Docs. 201-246). On July 21,
2015, the Court entered each of the requested orders. (Docs. 249-270). Those third parties filed
responsive pleadings on or about August 24, 2015. Those proceedings remain pending before
the Court. The Trust is considering pursuing a number of remedies against these third parties,
including imposing a constructive trust, upon a finding by the Court that they violated Rule 65.
7

Doc. 159.
3

Factual and Procedural Background8

4.

On September 21, 2009, Blixseth stipulated to, and United States

Bankruptcy Judge Ralph B. Kirscher issued, a temporary injunction in adversary
proceeding No. 09-00064 prohibiting Blixseth from selling or transferring a hotel
and resort in Mexico known as Tamarindo. 9 Judge Kirscher extended the
temporary injunction by stipulated orders entered November 6, 2009, December
29, 2009, February 8, 2010, and February 26, 2010. 10
5.

On May 10, 2010, Blixseth stipulated to, and Judge Kirscher entered,

the following injunction:
Defendants and others acting on their behalf or in concert with them are
prohibited from selling, transferring, disposing, encumbering or otherwise
liquidating the Tamarindo resort property described in Count III of the
Complaint (the 'Tamarindo Property'). Furthermore, Defendant Timothy
Blixseth is enjoined from any actions to sell, transfer, dispose of, encumber
or otherwise liquidate, or causing any entity owned or controlled by him to
sell, transfer, dispose of, encumber or otherwise liquidate, the Tamarindo
Property without prior order of the Court. 11

8

The material in this section is drawn from the records of prior proceedings in the United
States Bankruptcy Court and this Court.
9

See Kirschner v. Blixseth, AP 09-00064-BU-RBK, Doc. 9 at 1 (Bankr. D. Mont. Sept.
21, 2009).
10

See Kirschner v. Blixseth, AP 09-00064-BU-RBK, Docs. 17, 36, 44, 46 (Bankr. D.

Mont.).
11

See Kirschner v. Blixseth, AP 09-00064-BU-RBK, Doc. 57, at 2 (Bankr. D. Mont. May
10, 2010).
4

6.

Two months later, with the stipulated injunction remaining in place,

Blixseth moved for an order vacating the injunction. 12
7.

Notwithstanding the continuing injunction prohibiting sale, in late

2010 or early 2011, Blixseth began an effort to sell Tamarindo. 13
8.

Blixseth produced a document during proceedings in this case

purportedly dated November 1, 2010, by which he asserted to have engaged
Kawish LLC, a Washington limited liability company he owned and managed, to
act as the exclusive agent for the sale ofTamarindo. 14 In reality, however, he
appears to have marketed Tamarindo only through his Mexican attorney, Ben
Rosen. 15
9.

Initial sale efforts, however, drew little interest and no firm offers. 16

Effort to sell Tamarindo, however, took on a much greater sense of urgency when,
on April 5, 2011, the States of California, Idaho, and Montana filed an involuntary

12

Doc. 68.

13

See Doc. 335-1 at 33-34.

14

See Doc. 354-1.

15

See, e.g., Doc. 325-1 at 118 (Testimony of Blixseth); Doc. 335-1 at 31.

16

See, e.g., Doc. 325-1 at 118 (Testimony ofBlixseth) (noting that "we [including Mr.
Rosen] really got no satisfactory offers"); Doc. 335-1 at 33-34 (noting some interest at "lowball"
prices but no "firm offer[s]")).
5

bankruptcy petition against Blixseth in the State ofNevada. 17
10.

Blixseth thereupon implemented a controversial strategy intended, at

least in part, to avoid his involuntary bankruptcy: 1) he would pay off his debts to
the States of California and Idaho, and then 2) move to dismiss the involuntary
petition for lack of a sufficient number of petitioning creditors. 18
11.

The chosen strategy, however, required very significant sums of

money: 1) for "the defense [of the] involuntary bankruptcy petition", 2) in order to
pay offBlixseth's debts to California and Idaho and, 3) to employ lawyers and
others to execute the strategy in Nevada. 19
12.

A "friendly" bid to purchase Tamarindo by Roberto Hernandez

("Hernandez"), the former owner of Tamarindo who first sold the property to
Blixseth and who held a right of first refusal to repurchase the resort in the event
of any Blixseth sale was devised. 20
13.

Blixseth contacted James Dolan ("Dolan"), a close personal friend and

business partner, who agreed to submit a "friendly" bid to purchase Tamarindo for

Doc. 49-1 at if 9 (when Montana [sic] filed the involuntary petition "I had absolutely no
choice but to quickly sell El Tamarindo")).
17

18

See generally Doc. 49-4.

19

See generally Doc. 49-1 at if 9.

20

Doc. 325-1 at 118-20; Doc. 335-1 at 35.

6

$13.8 million. 21 Dolan orally provided such a bid to Blixseth, a bid that, in
Blixseth's words, "had so much swiss cheese in it you could make a sandwich." 22
14.

Blixseth orally transmitted the bid to Hernandez who shortly

thereafter agreed to purchase Tamarindo at the price established in Mr. Dolan's
"friendly" "swiss cheese" bid. 23
15.

Bilxseth consummated the sale ofTamarindo and of a separate

residence at the resort known as "Casa 18" to the same purchaser, Plan Resort,
S.R.L., a Mexican entity controlled by Hernandez, on the same day, April 18,
2011, with the same people attending the closing, and before the same notary
public in Guadalajara, Jalisco, Mexico. 24
16.

Immediately after the sale, Blixseth caused approximately $1.925

million of the sale proceeds to be wire transferred to Attorney Michael J. Flynn. 25
Funds from the transfer were used at least in part to pay Blixseth's debts to the
California and Idaho taxing authorities involved in the involuntary bankruptcy

21

Doc. 325-1 at 119.

22

Doc. 325-1 at 119-20; Doc. 335-1 at 39.

23

Doc. 325-1 at 120; Doc. 335-1 at 40.

24

Docs. 41-3 and 303-5.

25

Doc. 337-1 at 186:23-187:21.

7

proceedings. 26
17.

Notwithstanding that Tamarindo had been sold contrary to the

injunction against sale, Blixseth continued to prosecute the motion to vacate the
injunction27 and, later, appeal of the Bankruptcy Court order denying the motion to
vacate. 28
18.

In the summer of2013, while appeal from the order denying vacation

of the injunction was pending before this Court, the Trust first discovered that
Blixseth had sold Tamarindo. 29 The Trust moved the Court to hold Blixseth in
contempt. 30
19.

On December 23, 2013, the Court found Blixseth in contempt for

having intentionally violated the injunction and for deliberately misleading the
court. 31 On February 3, 2014, it issued its order of contempt against Blixseth. 32
The contempt order, among other things, required Blixseth to "account fully for

26

Id

27

Paragraph 6, supra.

28

Doc. 61 at 38.

29

Docs. 37 and 40.

30

Docs. 37 and 40.

31

Doc. 58.

32

Doc. 65.
8

the receipt, use, disposition or transfer of any of the proceeds of the sale of the
Tamarindo Property, with full documentation of such receipt, use, disposition or
transfer, (including, but not limited to, all documents relating to the sale
transaction and all bank statements, checks, fund transfer receipts, and any other
relevant bank records of any immediate, mediate, or ultimate recipient of such
proceeds )." 33
20.

On February 14, 2014 and February 18, 2014, Blixseth submitted sets

of heavily-redacted documents purporting to account for the proceeds of the sale
ofTamarindo. 34 Upon review ofBlixseth's submissions, the Trust requested a
show cause hearing to address Blixseth's failure to comply with the Court's
February 3, 2014 Order. 35
21.

On February 28, 2014, the Court ordered Blixseth to appear and show

cause why he had failed to comply with the Court's February 3, 2014 Order. 36
That order to show cause was vacated after Blixseth filed an appeal on March 3,
2014, of the February 3, 2014 Order to the United States Court of Appeals for the

33

Doc. 65 at if 5.

34

Docs. 68 and 70.

35

Doc. 72.

36

Doc. 73.

9

Ninth Circuit. 37 On October 9, 2014, the Ninth Circuit upheld this Court's
findings of contempt against Blixseth and the remedies set for in the February 3,
2014 Order. 38 This Court received the appellate court's mandate on November 3,
2014. 39
22.

On November 20, 2014, this Court reinitiated the prior contempt

proceedings and directed that Blixseth appear at a hearing on December 18, 2014,
and show cause why he should not be held in contempt for failing to account for
the Tamarindo proceeds as required under the February 3, 2014 Order. 40 On
December 5, 2014, Blixseth submitted additional documentation related to the sale
of Tamarino and a first declaration to support the accounting. 41 Several additional
Spanish-language documents purportedly related to the sale ofTamarindo were
submitted by Blixseth on December 16, 2014. 42
23.

On December 18, 2014, the Court conducted a show cause hearing

37

Doc. 77.

38

Doc. 79.

39

Doc. 82.

40

Docs. 83 and 84.

41

Docs. 89 and 90.

42

Docs. 97 and 98.
IO

concerning Blixseth's compliance with the Court's February 3, 2014 Order. 43 At
that hearing the Court found Blixseth had failed to account for the Tamarindo
proceeds. 44 It ordered that Blixseth be incarcerated and held until he fully
complied with the requirements outlined in the Court's February 3, 2014 Order. 45
24.

On December 19, 2014, Blixseth filed emergency motions in this

Court to clarify and stay the Court's December 18, 2014 contempt order. 46 Once
again, Blixseth did not await a decision on those emergency motions and on
December 23, 2014, filed a petition for a write of mandamus and motion for a stay
of the incarceration order in the Ninth Circuit. 47 On December 24, 2014, the Ninth
Circuit, without input from this Court, granted Blixseth's motion for a stay in part
and stayed his incarceration for thirty days to allow this Court to enter an order
further specifying how Blixseth could comply with the Court's February 3, 2014
Order. 48
25.

On January 9, 2015, this Court issued its order specifying precisely

43

Docs. 99 and 103.

44

Doc. 100.

45

Id.

46

Docs. 104 and 106.

47

Doc. 109.

48

Doc. 110.
11

what Blixseth had to provide to properly account for the proceeds of the
Tamarindo sale. 49 On January 16, 2015, Blixseth submitted an additional
declaration and declarations from Salvadore Palomino, Alejandro Moya, Patrick
Ratte, and Benjamin C. Rosen, along with additional supporting documents. 50
26.

On January 22, 2015, the Court held a status conference and granted

Blixseth an additional two-week period within which to comply with the January
9, 2015 accounting order. 51 On February 6 and 7, 2015, Blixseth filed several
hundred pages of additional documents and declarations purporting to comply
with the Court's previous orders of February 3, 2014. 52 On February 20, 2015, the
Trust filed a response to what Blixseth then claimed to be a complete accounting
in which it identified numerous deficiencies in the accounting and numerous
failures to comply with the Court's previous accounting orders. 53
27.

On April 20, 2015, the Court held yet another show cause hearing to

address Blixseth's several submissions, purportedly in compliance with the

49

Doc. 112 at 2-8.

50

Doc. 113.

51

Docs. 119, 121, and 125).

52

Docs. 129-150.

53

Doc. 152.
12

Court's prior orders to account for the sale proceeds ofTamarindo. 54 In a twentyeight page order, which followed the hearing, the Court concluded that the
accounting still failed to comply with the Court's prior orders and immediately
ordered that Blixseth be incarcerated until he provided a full accounting of the
Tamarindo proceeds. 55 The Court's order provided a detailed procedural history
of the proceedings up to that point. It also outlined numerous specific deficiencies
in the accountings and failures to comply with the Court's prior orders, including
the January 9, 2015 Order. 56
28.

Blixseth responded with yet another petition for a writ of mandamus

and emergency motion for a stay. 57 The Court of Appeals denied the motion for a
stay three days later. 58 However while the petition for a write of mandamus was
still pending, on June 4, 2015, Blixseth filed yet another accounting, his most
recent, in which he repackaged his prior accountings with a new summary
prepared by Cameron Keller, a certified public accountant with the firm of Keller

54

Docs. 158, 159, and 162.

55

Doc. 159.

56

Id

57

Doc. 167.

58

Doc. 169.
13

CPAs. 59 Based upon the "new accounting," Blixseth once again petitioned the
Court on June 4, 2015, for immediate release from incarceration60 and once again,
without waiting for the Court to consider the June 4, petition, filed a new motion
for a stay of the proceedings before the District Court on June 5, 2015.
29.

On June 8, 2015, Blixseth filed an emergency motion with the Court

of Appeals seeking immediate release. On June 11, 2015, the Court of Appeals
dismissed Blixseth's second petition for a writ of mandamus and all pending
motions. 61 On June 12, 2015, the Trust filed a response to the "new accounting"
and to Blixseth's petition for immediate release. 62
30.

On July 2, 2015, the Court convened a status conference to address to

Blixseth's most recent petition for immediate release. 63 By order entered with the
parties' advice and consent, on July 21, 2015, the Court set the matter for an
evidentiary hearing and established a detailed schedule for discovery and for
submission of pre- and post-trial pleadings. 64 Even after participating in the

59

Doc. 178.

60

Doc. 177.

61

Doc. 188.

62

Doc. 189.

63

Doc. 194.

64

Doc. 248.
14

discussions concerning the scheduling of the contemplated hearing, Blixseth filed
yet another petition for a writ of mandamus-his third such petition-along with yet
another emergency motion for a stay of incarceration. 65 After briefing on the
mandamus petition, the Court of Appeals dismissed the petition and denied
Blixseth's stay motion as moot. 66
31.

On October 5, 2015, the Court conducted a pretrial conference with

the parties. At this conference, the Court noted that it expected "Mr. Blixseth and
his witnesses to be prepared to meet each and all of the requirements as set out in
the Court's prior orders. No exceptions. No - as has been endeavored before - no
substantial compliance efforts by Mr. Blixseth. I will not accept substantial
compliance. " 67
At the hearing on October 19, 2015, Blixseth introduced into evidence the
deposition transcripts of Fausto Verde, a former Blixseth employee at the
Tamarindo Resort, Salvadore Palomino, the former accountant for the Tamarindo
Resort, Benjamin Rosen, an attorney who represented Blixseth in connection with
the sale of the Tamarindo Resort and Tamarindo house, and Patrick Ratte,

65

Doc. 200.

66

Doc. 283.

67

Doc. 327 at 9:22-10:2.
15

Blixseth's former controller. 68 Blixseth called only one live witness at the hearing,
Cameron Keller, the accountant who prepared the June 4, 2015, accounting and
upon which Blixseth relied to support compliance with the Court's accounting
Orders and in petitioning for his immediate release in June 2015. 69
32.

Blixseth attended the hearing. He elected not to testify. He made no

statement in support of the June 4, 2015, accounting about which Keller testified
or otherwise. 70
Findings of Fact Regarding Blixseth 's Accounting

33.

The Court's orders of January 9, 2015, and April 20, 2015, set out in

specific detail the form and substance of statements, data and explanations to be
furnished by Blixseth which were necessary to appropriately account for the
expenditure and disposition of the proceeds received from the sale ofTamarindo.
Portions of those requirements, together with the Court's findings as to whether
Blixseth has met or complied with the Orders' terms are discussed in the table
which follows.

68

Doc. 346 at 14-15.

69

Doc. 346 at 17; It is of course the settled law of the Ninth Circuit that opinions of
persons testifying as experts "should be judged just like any other testimony" to be accepted or
rejected or given as much weight as deserved. See Ninth Circuit Model Jury Instructions 2.11.
70

See Doc. 346.
16

1. Separate account statements by Blixseth personally, under penalty of
perjury, in compliance with 28 US.C. § 1746, together with documents which
support and verifY the statements and annotations in the statements which provide
pinpoint citations to the record, disclosing and setting forth each of the following:
A.
The receipt of each payment from the purchaser of the
Tamarindo Resort (including payments made to third parties,
such as the Tamarindo Club Association) by date, amount and
banking institution information (account owner name,
institution name, account number, etc .. .) in which the deposit
was made. Every transaction is to be supported by appropriate
supporting documentation (deposit ticket and check copy, wire
transfer documentation, contract, applicable bank statements,
etc.) or bates stamp reference to appropriate documentation.
The statement is to include a calculation of the total of the
transactions;

Blixseth made no personal declarations or offered any testimony as required
by the Court's orders. Instead he cited prior declarations, relied fully and
completely upon the work of others and declared only that their work
appropriately accounted for the Tamarindo sale proceeds. 71 Blixseth did not
attempt, by way of proffer, to place before the Court any declarations he may have
made prior to October 19, 2015. He did not seek to have any such prior
declaration made a part of the hearing record. Although present in court at the
hearing, he declined to testify and declined to submit himself to examination or
cross-examination by counsel or to answer questions by the Court.

71

Docs. 89-1, 113-1, 130, and 178.
17

No statements or statements supporting or verifying any of the accountings
have been provided by Blixseth. Notwithstanding that Blixseth directed and
controlled every aspect of the sale of Tamarindo and of distribution of the
proceeds, he has provided nothing of significance to assist in the task of producing
the required accounting.
Blixseth did not, as ordered, separately identify each payment from the
purchaser by date, amount, and banking institution. Instead, compliance if any,
must be gleaned from bank accounts, general ledgers, and the Keller accounting
summary of the various Blixseth entities into which the payments were made.
Such a task, requiring the Court to carry out and complete a trace of particular
information through at least four different documents plainly does not comply
with either the letter or spirit of the Court's orders. 72 Blixseth provided no
supporting documentation for any of the payments received from the purchaser of
Tamarindo, other than (1) the deed of trust and (2) the bank statements into which
such proceeds were deposited. 73
The bank account statements referenced in the Keller accounting summaries
as the relevant backup documentation for receipt of the payments are, moreover,

72

See generally Ex. 83 and Doc. 178-1.

73

See, e.g., Ex. 83, Doc. 181-1 at 1, Doc. 180-15 at 1, and Doc. 180-17 at 1.
18

written entirely in Spanish and denominated in pesos, making it impossible, absent
reliable translations into English, to corroborate the summaries. 74 The Keller
accounting reports 75 are purported to cross-reference to English translations of
those bank account summaries, but cannot be relied upon or accepted as reliable.

B.

Each payment by payee, date, amount, and purpose, ofall
other costs associated with the closing of the Tamarindo Club
sale transaction. Every transaction should be supported by the
appropriate documentation (contract, cancelled checks, wire
transfer information, etc.) or bates stamp reference to the
appropriate documentation. The statement is to include a
calculation of the total of the transactions;

The accounting for the costs of closing of the sale transaction remains as
one of the most elusive, unsatisfactory, and unreliable aspects of the entire
accounting. Closing costs were accounted for in multiple different ways in
multiple different accountings. The various accountings, some by express
admission, provided entirely different and inconsistent accountings of the closing
costs. 76 As a result, it remains practically impossible to construct an accounting of

74

See id., (cross-referencing ER 5606, 6926, 6917, and 6972).

75

Doc. 333-2.

76

See, e.g., Doc. 113-1.
19

the costs associated with the closing. In particular, there is no reliable information
regarding the purpose of any of the closing costs beyond the most general
statements made without any real documentary backup.
C.

Each intercompany and banking institution transfer of the
proceeds of the Tamarindo Resort sale denoting payer, payee,
date, amount, banking institution information, and purpose.
Every transaction should be supported by appropriate
documentation (cancelled checks, deposit details with check
copy, bank statements, etc.) or bates stamp reference to
appropriate documentation;

The accounting contains intercompany and banking institution transfers of
proceeds from the Tamarindo sale denoting payer, payee, date, amount, and
banking institution information. 77 Nowhere, however, is there any explanation of
the purpose, as required, of such intercompany transfers. 78 Indeed, Keller testified
that he had "no understanding of what the different entities' functions were or
what they did" and did not know "why all the intercompany transfers were
happening on any ofthese." 79 Moreover, on the face of the accounting, there are
gaps in the documentation concerning intercompany transactions. 80
77

See, e.g., Ex. 83, Doc. 180-1 and documents referenced therein.

78

See, e.g., Ex. 83, Doc. 178-2 at 1 and 15-17 (failing to attribute and "purpose" for
dozens of intercompany transfers involving Western Air & Water).
79

Doc. 346 at 101.

80

See, e.g., id. (showing many blanks in the column "For Additional Support
Documents," each indicating a transaction without any supporting documentation).
20

D.

Each payment denoting payer, payee, date, banking institution
information, and amount of the taxes and labor debts for which
the Tamarindo Resort purchaser withheld for each of the
$2, 000, 000 holdbacks. Every transaction should be supported
with appropriate documentation (contract, invoice, cancelled
check, wire transfer information, etc.) or bates stamp reference
to appropriate documentation. The statement is to include a
calculation of the total of the transactions; and

Nowhere are payment of taxes and labor debts for which the purchaser held
back $2,000,000 categorized. 81 The Keller accounting simply produced
summaries in one form or another of the payments said to have been made by
Blixseth's Mexican entities. 82 The accounting provides no information from
which the Court can identify with any specificity or certainty the payer, payee,
date, banking institution information or amount of the taxes and labor debts for
which funds were held back. The accounting does not include a calculation of the
total of those transactions.

E.

Each payment or other distribution of the proceeds of the
Tamarindo Resort sale to third parties denoting payer, payee,
date, amount, and purpose. Every transaction should be
supported by appropriate documentation (contract, invoice,
cancelled check, wire transfer information, etc.) or bates stamp
reference to appropriate documentation. The statement is to
include a calculation of the total of the transactions.

81

See, e.g., Doc. 346 at 118.

82

See id. at 117-18.

21

Numerous entries fail to identify or specify the payee to whom payments
were made. 83 Only the barest statements of the purpose of any of those
transactions (e.g., the broadest of categories such as operating or vendor expenses)
are provided. 84 The amount of missing documentation and information, including
information concerning the specific payees of payments, is increased significantly
for the Mexican entities. 85 In addition, the referenced supporting documents for
the Mexican entities are written entirely in Spanish and denominated in pesos, 86
making it impossible to reliably corroborate the accounting summaries to English
translations of the documents. 87 The accounting totals payments and distributions
only on an entity-by-entity basis. It does not separately categorize the payments
and distributions or provide totals of such payments and distributions. 88
In particular, Blixseth has not supported by appropriate documentation, as
ordered, each payment or distribution of the proceeds of the Tamarindo sale to
third parties. The accounting does not set out each payment to third parties and

83

See, e.g., Doc. 346 at 126-27.

84

See Ex. 83 at passim.

85

Doc. 346 at 132.

86

Doc. 346 at 114.

87

Doc. 333-2.

88

See Ex. 83, Doc. 178-1.
22

does not provide adequate supporting documentation as reasons that third party
recipients were entitled to specific amounts of Tamarindo sale proceeds. A total
of$3,389,156.l 7 in payments were made to third parties without any supporting
documentation. Without such proper supporting documentation, the Court is left
without capacity to determine whether the initial transfer was for a legitimate
purpose, whether it was in reality a devise for movement of funds through a third
party to get it to Blixseth, or whether or to what extent the money ultimately
wound up in Blixseth's hands or in the hands of some other entity that he owned
or controlled. The accounting and supporting documentation do not comply with
or meet the requirements of the January 9, 2015 Order.

2.
The general ledger of the entity owned by Mr. Blixseth or any ofMr.
Blixseth 's companies that owned or shared partial ownership of the Tamarindo
Resort for the period covering sale of the Tamarindo Resort and any subsequent
disbursement ofsale funds. Identification or cross-reference to any production in
response to this Order should be clearly identified with pinpoint citations to the
record or otherwise described.
Blixseth has not submitted general ledgers of any of the Mexican entities
that appeared to own or share ownership ofTamarindo. Instead, Excel
spreadsheets prepared by Palomino, Blixseth's Mexican accountant, purportedly
containing information from the Mexican entities' books and records were
submitted. Palomino provided no testimony specifically explaining the
background and circumstances of his preparation and production of these
23

spreadsheets. 89 The ownership structure of Tamarindo remains fundamentally
undefined. Meaningful evidence concerning its ownership structure was never
provided. 90
3.
The general ledger of any individual or entity that directly received
funds from the purchaser of Tamarindo Resort for the period covering sale
receipts and any subsequent disbursement ofsale funds. Identification or crossreference to any production in response to this Order should be clearly identified
with pinpoint citations to the record or otherwise described.
Blixseth provided no general ledgers, as required, of any of the Mexican
entities that directly received funds from the purchaser of Tamarindo, although
general ledgers of the U.S. entities that appear to have received Tamarindo
proceeds were provided. The accounting did not cross-reference or identify
distributions in those general ledgers. Keller testified that he primarily used the
bank account statements rather than the general ledgers in preparing his
accounting, as, in his words, "the general ledgers can be changed or manipulated
or someone could put in whatever they, you know, chose to put in." 91 His reliance
on documents other than documents ordered produced was neither reliable nor

89

See, e.g., Doc. 346 at 86-90.

90

In a recent declaration Blixseth purported to describe the ownership structure of the
Tamarindo Resort. (Doc. 303-1). Blixseth's statement appears, however, to be internally
inconsistent, as he states unequivocally that both he and Casa 18, LLC owned Casa 18 S.R.L.
(Doc. 303-1 at~ 3).
91

Doc. 346 at 46-47.
24

acceptable as a substitute.

4.
Legible and successively chronological bank account statements (a)
showing all deposits of the funds received directly from the purchaser of the
Tamarindo Resort at closing or at any time thereafter; and (b) documenting the
full present and future disposition of those funds from all accounts into which the
funds received at closing were deposited. Identification or cross-reference to any
production in response to this Order should be clearly identified with pinpoint
citations to the record or otherwise described.
Blixseth has produced legible and largely successively chronological bank
statements showing deposit of funds from the purchase of Tamarindo which
documented most of the disposition of those funds from those accounts. He did
not, however, produce full and complete bank account statements of Casa 18, the
entity that sold Blixseth's allegedly separate home on the Tamarindo Resort
property and which appears to have received proceeds of the Tamarindo sale. 92 He
also failed to produce complete copies of his wife's bank account statements,93
leading the Court at the hearing to express its concerns that the documents had
been "high graded." 94 Although Blixseth's lawyer committed in open court to
making an offer of proof as to the circumstances surrounding the failure to
produce certain documents, 95 no such offer of proof was ever made.

92

See Ex. 83, Docs. 180-23 and 180-25.

93

See Doc. 346 at 173-79.

94

Doc. 346 at 176-77.

95

Id. at 178.
25

5.
A statement by Blixseth personally, under penalty ofperjury, in
compliance with 28 U.S.C. § 1746, together with documents which support and
verify the statement and which include pinpoint citations to the record, showing
all subsequent transfers offunds associated with the sale ofTamarindo Resort to
any individual or entity for any purpose (including payment of debt) and the
reasons such individuals or entities were entitled to the money (with documents
that verify the entitlement). Identification or cross-reference to any production in
response to this Order should be clearly identified with pinpoint citations to the
record or otherwise described.
As noted, Blixseth's prior declarations were not proffered at the hearing and
were not a part of the hearing record. Blixseth has yet to make any statements
personally attesting to the receipt or disposition of any of the Tamarindo proceeds,
despite the fact that he attended the closing as the seller's sole representative and
personally received a check representing at least $8.7 million of those proceeds at
the closing. 96 Similarly, Blixseth never testified as to the purpose or reasons for
which any individuals or entities were entitled to and did receive any payment or
distribution of money. 97 Blixseth's failure to testify as to his receipt of proceeds
and the purpose of any of the transfers or distribution is fatally problematic. None
ofBlixseth's accountants or former employees testified as to either subject, other
than Ratte's very limited testimony regarding some of the transfers between
Blixseth's U.S. entities. 98
96

See Docs. 89-1, 113-1, 130, and 178.

97

See id.

98

SeeDoc. 337-1at183-84.
26

6.
The general ledgers and bank account statements ofany current or
former Blixseth-controlled entity or individual account bearing Blixseth 's name
into which the Tamarindo Resort sale proceeds were transferred from the initial
individual or entity depository account or accounts. Identification or crossreference to any production in response to this Order should be clearly identified
with pinpoint citations to the record or otherwise described.
Blixseth produced general ledgers for only part of his U.S. entities. He has
not produced, as required, general ledgers for any of the Mexican entities or for
Western Pacific Timber, LLC or Desert Ranch Management, LLC in the U.S. 99
Some bank account statements for certain Mexican and U.S. entities, other than
Western Pacific Timber, LLC and Desert Ranch Management, LLC were
produced. Ioo However, bank account statements produced for Casa 18 S.R.L. and
his wife, Jessica Blixseth, are incomplete. IOI The Keller accounting summary
cross-references and identifies the transfers only to bank account statements and
not as to the general ledgers. 102 As to the Casa 18 transfers, the Keller accounting
summary cross-references very limited transactions identified in the limited
portions of the bank account statements produced, without any explanation. 103 The
materials provided do not permit any meaningful review or assessment as to
99

See generally Ex. 83.

100

See generally Exs. 60-68, 76, 78-81, 83.

101

See, e.g., Ex. 38, Doc. 359-5, Ex. 83, Doc. 180-23, and Doc. 346 at 173jf.

102

See Ex. 83; Doc. 346 at 25.

103

See, e.g., Ex. 83, Docs. 180-23, 180-24, and 180-25.
27

whether the Keller accounting summary included all transfers identified in the
bank account statements and general ledgers.

7.
Legible copies of all cancelled checks, all wire transfer records, and
supporting documentation that verify, support, or identify the purpose of the
payment relating to the disposition of Tamarindo Resort proceeds from any of the
foregoing accounts. Identification or cross-reference to any production in
response to this Order should be clearly identified with pinpoint citations to the
record or otherwise described.
The U.S. bank account statements contain copies of cancelled checks. And
the Keller accounting summary asserts to cross-reference and identify supporting
documentation for some parts of payments relating to the disposition of the
Tamarindo Resort proceeds. 104 There are, however, significant gaps in the backup
documentation. It remains difficult and in some cases impossible to identify the
purpose of payments made. And, as noted, the specifically cross-referenced
backup documentation is in Spanish and denominated in pesos. What is claimed
to be backup documentation written in Spanish and denominated in pesos is of
little to no useful purpose to the Court.

8.
With respect to each Blixseth entity or personal accounting document
produced, a 28 US.C. § 1746 certification must be included by the accountant,
custodian ofthe record thereof, or another person qualified to testify as to the
facts and circumstances relating to the preparation, accuracy, and completeness
ofeach document.
No testimony or certification was provided as to the documents and

104

See Ex. 83.
28

information furnished by or on behalf of Jessica Blixseth. No assessment or
verification of the accuracy or completeness of such information is possible.
9.
All documentation (including emails), from February 3, 2014, through
the date of this Order, concerning or relating to Blixseth 's efforts, and responses
to his efforts, to locate and communicate with his or Tamarindo Resort's former
employees or agents in Mexico and to locate and obtain accounting documents
and bank statements in their possession or of which they have knowledge.
The record discloses that Blixseth did little, if anything, after February 3,
2014, to locate and communicate with his former employees or agents in Mexico
and to locate or obtain accounting documents and bank statements. 105 He has not
testified or offered other explanation as to his efforts to locate such former
employees or documents since providing limited email correspondence in January
2015.
10. English language translations of all produced documents originally
written in the Spanish language, certified by the translator under 28 U.S. C. §
1746, of all currency conversions for transactions which used Pesos as the
medium ofexchange on the date of the transaction, and which were certified by
the accountant under 28 U.S.C. § 1746.
Blixseth produced English language translations of certain documents
originally written in the Spanish language. Those English translations, however,
generally were not cross-referenced to the Spanish documents. The record fails to
support compliance with this provision of the order. Despite ample opportunities
to do so evidence of compliance has not been provided. Blixseth has not
105

See Docs. 113-1 and 113-3.

29

submitted any declaration or other evidence as to the methodology used for
currency conversions for peso-denominated transactions. The failure to provide
such conversions is particularly glaring in the context of the Keller accounting
summary which contains informations in dollar denominations but appears, where
provided, to refer exclusively to peso-denominated backup documentation. Keller
disclaimed knowledge of Palomino's qualifications for evaluating exchange rates
and noted that he personally did not have any particular qualifications. 106
Palomino for his part testified only that he used the same conversion rate as used
in the Tamarindo Resort deed of sale and that he used that same rate for every
transaction, regardless of the date oftransaction. 107 There is no evidence in the
record as to the accuracy or reliability of the peso-dollar conversion used.
34.

Blixseth's accounting, at best, contains major gaps that prohibit

meaningful reliance on the accounting and effectively impede and thwart the
ability of the Court to trace the disposition of the proceeds of the sale of
Tamarindo.
35.

Of significance is the reality that Blixseth's accounting contains

major gaps in the accounting as to Casa 18 S.R.L., gaps that appear to be

106

Doc. 346 at 108.

107

Doc. 338-1 at 35 and 39.
30

deliberate and intended to disrupt and effectively thwart any efforts by the Court
to fully understand the Tamarindo sale and the disposition of sale proceeds.
a.

Blixseth has offered no explanation for fourteen wire transfers
made by Casa 18, S.R.L. to Kawish, LLC between April 25,
2011, and December 28, 2011, totaling nearly $6.5 million. 108

b.

The Palomino Declaration recites that some $4.4 74 million-not
$6.5 as claimed by Ratte 109--ofthe proceeds of the sale of
Tamarindo as stated flowed through Casa 18 S.R.L. before
being transferred to Kawish, LLC. 110 Neither Blixseth nor
anyone else has ever explained this over $2 million dollar
discrepancy or why the Tamarindo Resort proceeds passed in
the first place through Casa 18 S.R.L., an entity which Blixseth
claims was entirely separate and distinct from Tamarindo. 111
The Keller accounting summary provides no explanation of the
purpose of some $3. 7 million of the transfers and only the most

108

See Ex. 71 and Doc. 369-4.

109

See Ex. 71.

110

See Ex. 1 at 1.

111

See Doc. 303-1 at~ 4.

31

cryptic description is provided for $765,000 of those transfers
identified only as "loan payable" without any further
explanation or reference to backup documentation. 112
c.

Blixseth provided no accounting for the proceeds of the
allegedly separate home sale, leading to significant questions,
particularly because Blixseth transferred $4.5 million of
Tamarindo Resort proceeds through Casa 18 S.R.L. with no
meaningful explanation, as to whether the two sales of
Tamarindo and the home really were separate.

d.

The current record supports the conclusion Blixseth that
appears determined to evade any disclosures relating to the
alleged house proceeds and Casa 18 S.R.L.'s financial
information. In stark contrast to more complete bank account
statements he provided for his other Mexican entities, Blixseth
produced only limited and incomplete excerpts of the bank
account statements of Casa 18 S.R.L.11 3

e.

112

Blixseth's failure to produce complete statements for the Casa

See Ex. 83 and Doc. 180-20.

m See Ex. 83, Doc. 180-23, and 180-25.
32

18 S.R.L. bank accounts, accounts into which Blixseth
deposited proceeds of the sale of the Tamarindo Resort, not
only violates the express requirements of the Court's
accounting order, but it also effectively frustrates a full and
complete accounting of the Tamarindo sale proceeds.
36.

At bottom, Blixseth's accounting still fails to effectively trace the

proceeds through his various entities and accounts. Although Keller testified that
he had successfully traced the funds through the system and out to third parties. 114
However, Keller provided no explanation of how he had come to that conclusion
and, in fact, his testimony suggested that some funds remained in some of the
accounts. 115 Records produced fail to identify many payees to whom payments
were made and, as noted above, wholly fail to identify many third-party payees.
The accounting firm hired to produce a complete accounting and tracing of funds
has, inexplicably, failed or declined to effectively to trace the funds through the
accounts to show that the proceeds have, in fact, been fully dissipated.
37.

Blixseth's ongoing refusal to explain to purpose of his many

intercompany transfers, itself, leaves a massive gap in the accounting. The same

114

Doc. 346 at 74-75.

115

See Doc. 346 at 161.
33

may be said with respect to the payments and other transfers of the Tamarindo
Resorts proceeds. The failure is compounded by the fact that the accounting
nowhere attempts to categorize any of the payments and other transfers. 116 The
Court's accounting order expressly required a description of the purpose of those
intercompany transfers and third-party payments and distributions. 117 Blixseth has
failed to provide any description of the former and his accounting contains many
gaps as to the latter.
38.

Citations to full and complete backup documentation were not

provided. Rather the Keller accounting summaries highlight missing information
and backup documentation. This unacceptable technique stands in stark contrast
to the order to produce such records, even as to Blixseth's U.S. entities. In each
Keller summary are numerous expenses for which "additional support
documents," are not provided. 118 Many summaries contain numerous entries for
payees such as "unknown," "payroll," "employees," or "client" for which no other
information is provided on the particular payees as required by the accounting

116

See Doc. 152, Ex. 3.

117

Doc. 112, ~~ Le. and Le.

118

See, e.g., Ex. 83, Doc. 178-2 (Western Air & Water), Ex. 83, 178-7 (Desert Ranch,
LLC) and Ex. 83, 179-8 (Kawish).
34

order. 119 The absence of any further detail on all those items raises questions
which cannot be answered as to whether those funds may have been transferred to
Blixseth or to any of his related companies or family members. At a minimum, the
Court is left to assume the accuracy, reliability, and veracity of the new
accounting's designations with no way of testing or confirming them.
39.

As noted above, impediments arise from Blixseth's production of

financial records in the Spanish language and with funds designated in pesos.
Explanations related to translation of such records into English have not been
satisfactory to permit the Court to make any reasoned determination related to
such matters. 120 Although Keller subsequently provided a table cross-referencing
the Spanish-language documents to the English translations on the eve of the
hearing, 121 it remains difficult, even impossible in some cases, to identify accurate
and comprehensible backup documentation for many of the Mexican transactions.
40.

Blixseth has yet to produce missing documents first brought to the

119

See, e.g., Ex. 83, Doc. 178-2 at 8, 9, and 11 (showing five payments to unknown
payees for unknown purposes totaling $13,083.53), Ex. 83, Doc. 179-2 at 2-12 (showing
purported payments of payroll to unknown payees totaling $522,078.17), Ex. 83, Doc. 180-1 at 3,
5, 6, and 11 (showing $77,181.74 payment and three smaller amounts to "employees" with no
further information provided), and Ex. 83, Doc. 180-1 (showing roughly twenty-five payments to
"client").
120

See Ex., Docs. 148-150.

121

Doc. 333-2.
35

fore in February 2015. Examples are:
a.

Blixseth has repeatedly claimed that he no longer controls Western
Pacific Timber ("WPT"). 122 However, he made no effort by discovery
to have records of WPT produced by subpoena for inspection,
copying, and assessment.

b.

Blixseth has still failed to produce records of Desert Ranch
Management, an entity he still controls, regarding management fees
claimed to be due from Desert Ranch Management to his son which
were actually paid by a different entity out of the Tamarindo
proceeds. 123

c.

Bank account statements ofBlixseth's wife, which were produced, 124
were heavily excerpted. No bank account statements for his son were
produced despite the fact that both his wife and his son received
substantial amounts of proceeds of the Tamarindo sale. Blixseth
failed or refused to testify to explain the missing documentation or his
efforts to obtain them.

122

See e.g., Doc. 178 at~ 8.

123

See, e.g., Doc. 178 at~ 9.

124

See Ex., Doc. 181-26 (Jessica Blixseth accounts).
36

41.

Finally, Blixseth has still failed to declare or testify based upon his

own personal knowledge as to the accuracy and completeness of the accounting.
It remains the work product of former accountants, former employees, and most

recently, a hired accountant tendered as an expert witness. Blixseth has refused to
testify or to take personal responsibility for the accounting of the proceeds of the
sale of Tamarindo despite the orders of this Court to do so. The conclusion that
Blixseth continues deliberately to conceal matters relating to the disposition of the
Tamarindo proceeds is inescapable. The many inconsistencies and deficiencies
that the Court has repeatedly noted in Blixseth's various accountings, 125 are neither
minor nor inconsequential. The Court remains unable to assess the accuracy,
reliability, or completeness of the accounting. Blixseth has not complied with the
Court's orders for an accounting-either literally as the Court ordered or
substantially. The accounting that has been proffered on the record cannot be and
is not substantial compliance. No justification for immediate release ofBlixseth
under the Court's January 9, 2015, or April 20, 2015, Orders, or otherwise, has
been established. Blixseth will remain in custody until an appropriate accounting
justifying release is made.
CONCLUSIONS OF LAW
125

See, e.g., Doc. 159 at 13.
37

1.

"When a court employs 'the extraordinary remedy of injunction,'

Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, (1982), it directs the conduct
of a party, and does so with the backing of its full coercive powers. See Black's
Law Dictionary 784 (61h ed.1990) (defining 'injunction' as '[a] court order
prohibiting someone from doing some specified act or commanding someone to
undo some wrong or injury')." See Nken v. Holder, 556 U.S. 418, 428 (2009).
2.

"While a court has discretion to excuse minor, technical, or good faith,

violations of an injunction, see, e.g., Go-Video, 10 F.3d at 695, it likewise has
discretion to punish substantial violations when appropriate." Irwin v. Mascott,
370 F.3d 924 (2004).
3.

It is a "settled principle[] of the law of civil contempt" that requires a

party "to comply with a court order that is both specific and definite." Balla v.

Idaho State Bd. o/Corrs., 869 F.2d 461, 465 (9th Cir. 1989). The Court's orders of
January 9, 2015, and April 20, 2015, were both specific and definite.
4.

The Court's January 9, 2015, Order, 126 which spells out exactly what is

required of Blixseth to properly account for the proceeds from the sale of
Tamarindo, was both specific and definite. The order of April 20, 2015, was
equally specific and definite.
126

Doc. 112.

38

5.

Moreover, the Court of Appeals ruled that the January 9, 2015 Order

satisfies those standards when it dismissed Blixseth's orginal petition for a writ of
mandamus as moot. 127 Blixseth remains in substantial violation of the express
terms and provisions of the January 9, 2015 Order.
6.

As a result ofBlixseth's failure to account for the proceeds from the

sale ofTamarindo in accordance with the January 9, 2015 Order, Blixseth remains
in contempt of the Court. Blixseth will remain in custody until he provides an
appropriate accounting in compliance with the January 9, 2015 Order.
7.

Blixseth's present situation is of his own making. He and he alone

controlled and directed every aspect of all that has occurred. His deliberate
violation of the Bankruptcy Court's order against the sale ofTamarindo was his
decision and his alone. The expenditures of the proceeds received from the sale
were carried out precisely as directed by Blixseth. He totally controlled the form
and the substance of the accounting documents produced including what was
disclosed and, more significantly, what was deliberately omitted and withheld
from disclosure. In the end, the Court is left with more unanswered questions
about what happened to the sale proceeds than have been answered.

127

Doc. 165.
39

ORDERED:
To this day, Blixseth has not fully and completely accounted for the
Tamarindo sale proceeds. He has not provided an acceptable accounting and has
not complied, even substantially, with the Court's Orders of January 9, 2015 and
April 20, 2015. He remains in contempt and, from the record, remains
unrepentant. 128
DATED this

:Ay

of December, 2015.

~~frdu!et~
United States District Judge

128

The Court's ruling today does not reach or resolve significant questions which are
presented and remain as to whether the proceeds received by Blixseth from the sale ofTamarindo
were subject in law to a constructive trust prohibiting him from further expenditure or dissipation
of such proceeds. See, e.g., Moore v. Crawford, 130 U.S. 122 (1889); Lockheed Corp. v. Spink,
517 U.S. 882 (1996); In re Seaway Exp. Corp., 912 F.2d 1125 (9th Cir. 1990).
40