Founder of luxury Montana resort will stay in jail

The founder of a Montana resort for the ultra-rich will stay in jail for failing to account for the “vanished” money from a Mexico property sale made in defiance of a court order, a federal judge said.

Tim Blixseth, founder of the Yellowstone Club that filed for bankruptcy in 2008, has been behind bars since last April, when he was found in contempt of court. He sold the luxury Tamarindo property, located in the Mexican state of Jalisco, for $13.8 million in 2011, violating a bankruptcy judge’s order.

U.S. District Judge Sam Haddon said Blixseth’s incarceration is meant to coerce him into revealing what happened to the money.

“Literally hundreds of thousands of dollars in disbursements made to various Blixseth family members or to entities he owned or controlled have simply vanished without adequate or even plausible explanation,” Haddon wrote in a Friday order.

Creditors from the Yellowstone Club’s bankruptcy are seeking more than $250 million from Blixseth. They have argued for him to remain incarcerated.

Blixseth has submitted more than 22,000 pages of documents in his numerous attempts to satisfy Haddon and get out of jail. Attorneys for the real estate developer have said repeatedly that he’s done all he can to account for the Tamarindo proceeds.

“There is nothing more to produce, no further documents and Tim has no control over former employees who kept any records,” Blixseth attorney Phil Stillman said Monday.

But more than $2.6 million remains unaccounted for, the judge said. That includes $1.2 million transferred to Blixseth and his wife and $1.1 million designated as loans to a timber company that disappeared without explanation, Haddon said.

The judge added that Blixseth’s claims that he’s done all he can to say what happened to the money “rings hollow.”

Stillman said he would again take the case to the 9th U.S. Circuit Court of Appeals, which turned down several prior petitions from Blixseth to be released. The attorney said Haddon has changed the terms of what Blixseth must do to get out of jail each time his client has tried to comply.

The Yellowstone Club near Big Sky went bankrupt after Blixseth, a resident of Washington state, pocketed much of a $375 million Credit Suisse loan to the resort and later gave up control of the enterprise to his ex-wife during their 2008 divorce.