Snow v Blx #319 | Edra Blixseth Depo - Bankr.D.mont._09-00018_319-1_Ex P

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FLYNN AFFIDAVIT

EXHIBIT P

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



Edra D. Blixseth - December 17, 2009

Yates Court Reporters 800.669.1866

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 800.669.1866Page 2

1 Deposition of EDRA D. BLIXSETH, taken on behalf of

2 the Plaintiff, before Stephanie P. Borthwick, a

3 Certified Shorthand Reporter, commencing at the hour of

4 9:14 a.m., Thursday, December 17, 2009, at the offices

5 of Yates Court Reporters, 74-967 Sheryl Avenue,

6 Palm Desert, California.

7 APPEARANCES:

8 For the Plaintiff Timothy L. Blixseth:

9 MICHAEL FLYNN, ESQ

10 Attorneys at Law

11 BY: MICHAEL FLYNN, ESQ.

12 6125 El Tordo

13 Rancho Santa Fe, California 92062

14 (858) 756-0771

15 For the Debtor, Edra D. Blixseth:

16 LAW OFFICES OF DENNIS HOLAHAN

17 Attorneys at Law

18 BY: DENNIS HOLAHAN, ESQ.

19 2049 Century Park East

20 Suite 3180

21 Los Angeles, California 90067

22 (310) 286-3344

23 ///

24 ///

25 ///






1 DESCHENES & SULLIVAN

2 Attorneys at Law

3 BY: GARY DESCHENES, ESQ. (via speakerphone)

4 309 1st Avenue North

5 Great Falls, Montana 59401

6 (406) 761-6112

7 For Marc Kirschner, Trustee:

8 BAILEY & GLASSER, LLP

9 Attorneys at Law

10 BY: BRIAN A. GLASSER, ESQ.

11 209 Capitol Street

12 Charleston, West Virginia 25301

13 (304) 345-6555

14 MULLIN HOARD BROWN, LLP

15 Attorneys at Law

16 BY: STEVEN L. HOARD, ESQ.

17 800 Amarillo National Plaza Two

18 500 South Tyler

19 Amarillo, Texas 79101

20 (806) 337-1112

21 ///

22 ///

23 ///

24 ///

25 ///






1 For the Trustee BLX:

2 BALLARD SPAHR ANDREWS & INGERSOLL, LLP

3 Attorneys at Law

4 BY: CHRISTINE K. MIN, ESQ.

5 2029 Century Park East

6 Suite 800

7 Los Angeles, California 90067-2909

8 (424) 204-4400

9 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: DAVID B. COTNER, ESQ. (via speakerphone)

14 Central Square Building

15 Suite 201

16 201 West Main

17 Missoula, Montana 59802

18 (406) 728-0810

19 For the Montana Department of Revenue:

20 Joel Silverman, Esq. (via speakerphone)

21 125 North Roberts

22 Helena, Montana 59604

23 (406) 444-7990

24 ///

25 ///






1 For CrossHarbor, CIP Yellowstone Lending:

2 DUANE MORRIS, LLP

3 Attorneys at Law

4 BY: PAUL D. MOORE, ESQ. (via speakerphone)

5 470 Atlantic Avenue

6 Suite 500

7 Boston, Massachusetts 02210-2243

8 (857) 488-4230

9 For Western Capital Partners:

10 HATCH JACOBS, LLC

11 Attorneys at Law

12 BY: CHRISTOPHER J. CONANT, ESQ. (via speakerphone)

13 950 Seventeenth Street

14 Suite 1700

15 Denver, Colorado 80202

16 (303) 298-1800

17 Also Present:

18 Timothy L. Blixseth

19

20

21

22

23

24

25






1 INDEX

2

3 Deposition of EDRA D. BLIXSETH

4 Taken on December 17, 2009

5

6 Examination By: Page

7 MR. FLYNN 15, 358

8 MR. GLASSER 319

9

10 Information Requested: Page Line

11 298 18

12

13 Questions Instructed Not to Answer:

14 Q. Have you made any cash transfers within 15 13

15 the last year?

16 Q. Did Mr. Scalia purchase a Bentley from 17 7

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 17 21

21 return a gift of $220,000 wire-

22 transferred to Mr. Scalia?

23 Q. The amount was 230,000 that you wire- 18 2

24 transferred. Did you do that,

25 Ms. Blixseth?






1 Q. Did Mr. Scalia report it as income? 18 7

2 Q. Within the two-year period prior to 18 13

3 your filing your bankruptcy petition,

4 Ms. Blixseth, did you transfer or give

5 to Mr. Scalia approximately $450,000?

6 Q. Would it surprise you if I told you it 19 9

7 is in the range of close to half

8 a million dollars?

9 Q. Is any of that cash -- was any of that 22 3

10 cash given to Mr. Scalia?

11

12 Answer Requested Marked: Page Line

13 A. Well, I don't know how to answer 36 8

14 that, because I didn't have anything to

15 do with fake letters. Tim Blixseth

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 ///






1 Exhibits: Page

2 8 One-page letter dated 54

3 December 12, 2007, on the

4 letterhead of the US Department

5 of Justice Criminal Division

6 from Ronald Sharpe, Assistant

7 United States Attorney

8 9 One-page letter dated 54

9 November 8, 2007, on the

10 letterhead of the US Department

11 of Justice Environment and

12 Natural Resources Division with

13 name of author redacted

14 10 16-page Western Capital 80

15 Partners, LLC, Loan Affidavit

16 11 14-page Western Capital 97

17 Partners, LLC, Loan Agreement

18 14 Letter dated May 24, 2007, on 102

19 Jaffe and Clemens letterhead to

20 Mr. Hatch from Mr. Ryden

21 ///

22 ///

23 ///

24 ///

25 ///






1 15 11-page Plaintiff's Reply Brief 119

2 in Support of Motion for

3 Indemnity; Supplemental

4 Declarations of Edra D.

5 Blixseth and Robert M. Shore in

6 Superior Court of California,

7 County of Riverside Case

8 No. INC 066840

9 16 37 pages identified as First 111

10 Promissory Note, Loan

11 Agreement, Trust Deed and

12 Security Agreement Modification

13 17 Four-page Order re Case 122

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 125

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 127

23 Investigation report of SAs

24 Piser and West

25 ///






1 20 FBI report, Bates 128

2 Nos. 00119-00137, Dated

3 September 11, 2006

4 21 Three-page Second Declaration 129

5 of SA Michael A. West

6 22 Nine-page March 6, 2008, 135

7 Wachovia Bank letter to

8 Ms. Blixseth

9 23A Five-page Collateral Assignment 148

10 of License Agreement

11 24 Pages 1-4 and 6-8 of a Software 149

12 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 36 Six pages of emails 212

25 ///






1 37 Nine-page email packet to 215

2 Michael Sandoval and Dennis

3 Montgomery dated August 11,

4 2006

5 41 Five-page Edra Blixseth 224

6 Executive Summary

7 51 Three-page Personal Financial 218

8 Statement of Edra Blixseth as

9 of 10/13/2007

10 55 Four-page Edra Blixseth Post 227

11 Settlement Asset List and

12 Liability as of 7/15/08




16 56A Four-page Edra Blixseth Post 331



19 111 Email dated July 8, 2008, from 247

20 LearG2 to Jory Russell

21 112 Edra Blixseth Personal 249

22 Financial Statement as of

23 6/30/08

24 ///

25 ///









4 114 Three-page email string, top 253

5 email dated July 22, 2008, from

6 Andrea Heller to Jory Russell

7 re $20mm from PEM tomorrow

8 115 Email dated August 5, 2008, 255

9 from LearG2 to Jory Russell re

10 Interest

11 116 11-page document entitled 256

12 Discussions between Edra/YC

13 Entitites and CrossHarbor

14 Capital Partners, August 1,

15 2008

16 117 Email string, top email dated 270

17 August 20, 2008, from Sam Byrne

18 to Edra Blixseth, Jory Russell

19 re Lot 48

20 118 Email string, top email dated 280

21 August 22, 2008, from Jory

22 Russell to Edra Blixseth re

23 Stockman check signing

24 ///

25 ///






1 119 Ten-page Memorandum dated 283

2 September 5, 2008, from Marc

3 Heller

4 122 Five-page letter on Jaffe and 245

5 Clemens letterhead dated

6 June 10, 2008

7 123 Three-page July 6, 2008, letter 305

8 to Yellowstone Club Members

9 from Ms. Blixseth

10 124 Document entitled Exhibit 16 319

11 Tim Blixseth Solvency Analysis

12 Balance Sheet Test as of

13 December 31, 2007

14 125 33-page Assignment of Company 355

15 Interests Agreement, Bates

16 Nos. YSC00305964-980

17 126 Six-page Amendment to Marital 357

18 Settlement Agreement dated

19 June 26, 2008, Bates

20 Nos. CHE02114-119

21 127 Seven-page Second Amendment to 357

22 Marital Settlement Agreement,

23 Bates Nos. CHE26010-016

24 ///

25 ///






1 128 55-page Marital Settlement 358

2 Agreement, Bates

3 Nos. CHE02059-113

4 129 Three-page email string, top 358

5 email dated March 20, 2008,

6 from LearG@ to

7 [email protected] re

8 FYI

9 130 Four-page email string, top 366

10 email dated 3/28/2008 from Jim

11 Fultz to

12 [email protected]

13 ///

14 ///

15 ///

16 ///

17 ///

18 ///

19 ///

20 ///

21 ///

22 ///

23 ///

24 ///

25 ///






1 EDRA D. BLIXSETH,

2 having been first duly sworn by the court reporter,

3 was examined and testified as follows:

4

5 EXAMINATION

6 BY MR. FLYNN:

7 Q. State your name, please.

8 A. Edra Blixseth.

9 Q. Ms. Blixseth, have you concealed any cash

10 amounts that are not reported on your bankruptcy

11 s che dul es ?

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 o f t his d ep osi tio n, M ike -- t hi s m ust b e w hy yo u' re

17 starting with these questions -- is for your adversary.

18 I t i s no t r ega rdi ng t he a dv er sa ry t ha t y ou f ile d

19 regarding objection to her discharge.

20 This is regarding the Yellowstone case and the

21 S now ca se , n on e o f wh ich ar e t he se an sw er s t o t he se

22 questions relevant.

23 BY MR. FLYNN:

24 Q. Please answer, Ms. Blixseth.

25 MR. DESCHENES: I'm instructing her not to






1 answer.

2 MR. FLYNN: In order not to delay,

3 M r. D esc hen es, I' m g oi ng to m ov e f orw ar d, bu t t ha t

4 o bst ruc ti on -- I w ill st ate f or th e r ec or d o nce i s

5 obstructing our discovery, the overall defenses involved

6 h ere , in pa ri d eli cto , u n cl ea n h an ds, a l arg e s c hem e b y

7 M s. B yrn e - - b y M r. B yrn e a nd M s. B lix set h t o ba sic all y

8 s tea l t he Y ell ows to ne Cl ub i s w hat 's a t i ssu e a nd a re

9 t he d efe nse s i n Ad ver sar y 1 4 an d 1 8 a nd t his qu es ti on i s

10 directly germane.

11 Q. Ms. Blixseth, did you --

12 MR. COTNER: Mike --

13 MR. FLYNN: Gary, I'm moving forward. You

14 state your objections under the rules.

15 MR. COTNER: -- this is Dave Cotner. I just

16 w ant to i nt rod uce m ys elf . T he c ou rt r epo rte r h ad a ske d

17 for all the participants and Paul had given his answer

18 and information and then everybody chimed in.

19 And I just wanted the record to reflect that

20 D ave Co tn er is al so o n t he p hon e r efl ec ti ng - -

21 representing Dick Samson as Trustee of the Edra Blixseth

22 bankruptcy estate.

23 And, Court Reporter, I didn't catch your name,

24 b ut I 'm h ap py t o g et y ou m y i nf orm ati on w ith re sp ec t t o

25 m y f irm d ur ing a b rea k, i f t hat wo uld h el p y ou.






1 THE REPORTER: Thank you.

2 MR. COTNER: Thank you.

3 BY MR. FLYNN:

4 Q. Ms. Blixseth, did you write out a $225,000

5 c hec k t o J ac k S cal ia t o p urc has e a Be nt le y?

6 A. No.

7 Q. Did Mr. Scalia purchase a Bentley from Desert

8 E uro pea n M ot or s b as ed on fu nd s t ha t y ou h ad w ir e-

9 transferred to him in the amount of roughly $220,000?

10 MR. HOLAHAN: I don't think -- I don't think

11 t his ha s a ny th ing t o d o w it h t he c ase t ha t w e'r e h er e

12 o n, s o I 'm g oi ng t o o bje ct t o t hat q ue sti on.

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. You've done it before; let's do it

16 again.

17 No, she's not going to answer the question.

18 MR. FLYNN: You're instructing her?

19 MR. HOLAHAN: Yeah.

20 BY MR. FLYNN:

21 Q. Did you report on your income tax return a gift

22 of $220,000 wire-transferred to Mr. Scalia?

23 MR. HOLAHAN: She's not going to answer that

24 question.

25 ///






1 BY MR. FLYNN:

2 Q. The amount was 230,000 that you wire-

3 t ran sfe rr ed . D id y ou d o th at , Ms. B li xse th?

4 MR. HOLAHAN: She's not going to answer that

5 question.

6 BY MR. FLYNN:

7 Q. Did Mr. Scalia report it as income?

8 MR. HOLAHAN: How would she possibly know?

9 S he' s n ot g oin g t o an swe r t ha t q ue sti on f or t he s am e

10 r eas on. Th is i s be yo nd t he p ro per s co pe o f thi s

11 d epo sit io n, a s y ou w el l kno w.

12 BY MR. FLYNN:

13 Q. 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 I t's an i nv asi on o f p riv acy a nd ha s n ot hi ng t o d o w ith

19 t he s co pe o f t his d ep osi tio n, s o y ou c an g o a he ad a nd

20 a sk a nd s he 's n ot g oi ng t o a nsw er.

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 i n ca sh f ro m yo ur b an k ac co un ts ?






1 MR. HOLAHAN: You can answer that, if you know.

2 THE WITNESS: Every week, no.

3 BY MR. FLYNN:

4 Q. Virtually every week?

5 A. No.

6 Q. How much money for the two years before you

7 f ile d b an kr upt cy d id y ou ta ke o ut i n c ash ?

8 A. I don't know.

9 Q. Would it surprise you if I told you it is in

10 t he r an ge o f c los e t o h al f a mi lli on d oll ars ?

11 MR. HOLAHAN: If you're going to testify, we

12 c an s we ar y ou i n a nd t he n y ou c an t est ify in ste ad o f

13 h er. W e' re n ot g oi ng t o p ro cee d do wn t hi s ro ad , Mi ke.

14 T his is n ot ab out h er ba nkr up tc y, s o s he' s n ot g oin g t o

15 a nsw er a ny q ue sti on s.

16 MR. FLYNN: Concisely, and then you be quiet,

17 Mr. Holahan.

18 MR. HOLAHAN: No, I won't be quiet. Don't tell

19 me to be quiet.

20 BY MR. FLYNN:

21 Q. Ms. Blixseth --

22 MR. HOLAHAN: I'm not through.

23 BY MR. FLYNN:

24 Q. -- what did you do with the cash?

25 MR. HOLAHAN: Don't tell me to be quiet. I






1 represent h er. If I have a n o bjection t o a ny o f y our

2 questions, you're going to listen to the entire

3 o bje cti on - - e ven i f t ak es s eve n h our s - - an d t he n w e' ll

4 leave, so don't try to tell me to be quiet.

5 MR. FLYNN: Mr. Holahan, you're obstructing and

6 prejudicing my client's rights.

7 MR. HOLAHAN: You're out of record.

8 BY MR. FLYNN:

9 Q. Ms. Blixseth, what did you do with the cash

10 t hat yo u t oo k o ut i n t he t wo ye ars p ri or t o f ili ng

11 b ank rup tc y?

12 MR. HOLAHAN: Object to the form of the

13 q ues tio n. I t' s i rr el eva nt a n d b ey ond t he sc ope o f

14 this -- this c ase and this e xam.

15 You can answer if you know. It's also vague,

16 overbroad. If y ou - - if y ou c an p ossibly - -

17 THE WITNESS: I don't know.

18 BY MR. FLYNN:

19 Q. Did you deposit it into any other bank

20 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.






1 Q. So for two years if you were taking out

2 routinely $9,000, you don't know what you were doing

3 w ith i t; i s t ha t yo ur t es tim ony ?

4 A. That's not my testimony; that's your testimony.

5 M y t es ti mon y w as I do n't r ec all an d m y t es ti mon y w as I

6 did n ot t ake o ut 9 ,000 a week.

7 Q. How much did you take out?

8 A. I'm not sure.

9 Q. What's your best estimate?

10 A. I'm not sure. I don't want to guess on

11 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 m one y; i s th at c or rec t?

18 A. I didn't say that. I said I don't recall.

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 that you have not reported on your bankruptcy schedules?

23 A. No.

24 I mean, do you want me to answer?

25 But no.






1 MR. HOLAHAN: Let him ask two more.

2 BY MR. FLYNN:

3 Q. Is any of that cash -- was any of that cash

4 given to Mr. Scalia?

5 MR. HOLAHAN: She's not going to answer any

6 q ues tio ns a b ou t M r. S c al ia. Th at' s b ey on d t he s c op e o f

7 t his a nd it 's a n i n va sio n o f p ri va cy.

8 MR. FLYNN: Okay. It's on the record and we'll

9 t ake t ha t u p w it h t he ju dg e a t t he a pp rop ria te t ime .

10 MR. HOLAHAN: Good.

11 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 f rom M an tec a Hi gh S ch ool ?

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 school?

21 A. I'm trying to think of the year.

22 '72 or '73.

23 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?






1 A. There were notes given, I don't recall exact

2 amounts.

3 Q. What is your best estimate of the amounts?

4 A. I think there was one for 5- and then there was

5 a not her o ne an d I d on 't r eme mbe r w hat t ha t a mou nt w as.

6 Q. Was it for 3-?


8 Q. Okay. Where, physically, are those notes

9 today?

10 A. I would assume they're in the -- I would assume

11 they're in the files with the settlement with Opsprings

12 a nd x Pa tt er ns, b ut I 'm n ot p osi tiv e. I d idn 't - - J ory

13 had them and Jory is not with us, so I'm not sure.

14 Q. Did you give the notes to Mr. Samson?

15 A. He's aware of them. I don't -- I don't think

16 t hat h e h as t he m ph ys ica lly .

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 O psp rin gs . Wh o h as th os e f il es ?

21 A. I believe Pat would have those now. Jory had

22 them and so most of the things Jory had Pat now has, Pat

23 Y arb oro ug h.

24 Q. Is Pat Yarborough the same Pat Yarborough --

25 the Pat Yarborough that is currently your bookkeeper, is






1 t hat t he sa me P at Y ar bor oug h th at h as b ee n c o nv ic te d o f

2 e mbe zzl em en t?

3 A. I have no idea.

4 Q. When did you hire Pat Yarborough?

5 A. I didn't hire Pat Yarborough. Jory brought

6 Y arb oro ug h o n a nd I d on' t r ec al l w hen i t w as .

7 Q. Is it your testimony that Jory Russell made the

8 decision and not you?

9 A. He brought her to me as a recommendation to be

10 hired a nd I o kayed i t.

11 Q. What did you know about her background when you

12 brought her on?

13 A. Just the information that I had been given

14 t hro ugh J or y a nd I be lie ve - - I be lie ve a t t hat t im e i t

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 that are not reported on your schedules?

25 A. No, she has not.






1 Q. And do you have any knowledge or understanding

2 from any source about her prior criminal background?

3 A. You keep referring to that she has a criminal

4 background. I'm not aware of any criminal background,

5 so I c an't answer that.

6 Q. Okay. Who currently has -- strike that.

7 Where are the Opspring files with the Sandoval

8 notes?

9 A. I think I answered that. I'm assuming they're

10 w ith th e t hi ng s t ha t J or y t ur ne d o ver t ha t w ere w it h h is

11 r eco rds , bu t I' m no t sur e.

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 A. You asked me again, so I thought maybe you

16 wanted further explanation of that.

17 Q. I do. Where are those files, Ms. Blixseth?

18 A. They're with all the other files of the

19 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.






1 Q. What state is it in?

2 A. California.

3 Q. What city is it in?

4 A. She lives in the LA area, but I'm not sure of

5 the e xact c ity. There's a l ot o f c ities i n L A.

6 Q. So is it your testimony she has all of the

7 Opspring Blxware files and you don't even know what city

8 they're i n? Is that your testimony?

9 MR. HOLAHAN: That's -- I'm going to object to

10 t hat q ue sti on. T he f orm o f tha t qu es ti on i s

11 argumentative and it misstates her testimony.

12 BY MR. FLYNN:

13 Q. Okay. Do you have your cell phone here with

14 you?

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

18 phone number.

19 Q. Okay. At the break --

20 A. Sam -- Dick Samson has all of her information,

21 h er e ma il a ddr ess . H e's g ot e ve ry thi ng .

22 Q. What is your best understanding of where

23 M s. Y ar bo ro ugh l iv es?

24 A. In the LA area.

25 Q. When did she get possession of all the Opspring






1 Blxware files?

2 A. I'm having to guess on this, but I'm assuming

3 when Jory Russell -- you asked two different questions.

4 MR. HOLAHAN: If you don't know, don't guess.

5 THE WITNESS: Okay.

6 MR. HOLAHAN: If you don't know, just say you

7 don't know.

8 THE WITNESS: I'm not sure.

9 BY MR. FLYNN:

10 Q. Is it a fact that Jory Russell turned over all

11 t he f il es t o y ou, M s. B li xs et h?

12 A. Jory Russell turned over no files to me.

13 Q. What is your best understanding of how many

14 files comprise the Opspring Blxware files?

15 A. I really don't know. Other people handled that

16 and I only asked for things when I needed it for

17 s pec ifi c th ing s.

18 Q. So if Mr. Russell testified he turned over

19 e ver yth in g t o y ou , i s h e in co rr ect ?

20 A. I just said nobody turned over files to me.

21 Q. Do you have any Opspring Blxware files at

22 P orc upi ne C ree k?

23 A. Not that I'm aware of.

24 Q. Do you have any of those files at any of your

25 o the r l oc at ion s?






1 A. I don't have any other locations.

2 Q. Do you own homes in Montana?

3 A. No, I don't.

4 Q. Do you have any files at all at Porcupine

5 Creek?

6 A. I didn't really retain files. The files stayed

7 in the offices and when I needed something, somebody

8 w oul d e ma il me t he in for mat io n o r s en d m e t he

9 i nfo rma ti on , I 'd u se i t a nd r et urn th e f il es .

10 I don't have a file-keeping system right now.

11 Q. Have you made any effort to find the Michael

12 Sandoval notes, the actual notes he gave you?

13 A. You keep asking me about those and I keep

14 s ayi ng t h at I' m a ss um ing Jo ry h a d t he m. I 'm as su mi ng

15 Jory g ave t hem t o P at. Nobody h as a sked m e t o find

16 t hos e n ot es an d d o s om et hin g w it h t he m.

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






1 t he C red it S ui sse l oa n in l at e 200 5?

2 A. If Tim made any proceeds available to me for

3 s pec ifi c t hi ng s t he n I w oul d h av e a cc es s t o, bu t o nl y

4 through Tim.

5 Q. In early 2006 how much money did you give to

6 Michael Sandoval and Dennis Montgomery from the Credit

7 S uis se lo an pr oce ed s?

8 A. I don't know if it was from the Credit Suisse

9 l oan p ro cee ds. I t ca me t hr ou gh f ro m Ti m wir ing t he

10 m one y i n, b ut I be lie ve t he i ni tia l p ar t w as $5 m il lio n.

11 Q. And that was an investment in the technology

12 c omp ani es ?

13 A. Correct.

14 Q. And those technology companies were Azimyth,

15 xPatterns and Opspring?

16 A. That is not correct.

17 Q. What is incorrect about that, those three

18 c omp ani es ?

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. I

25 d on' t r ec al l w ith ou t n ot es i n f ron t o f me ex act ly






1 when -- xPatterns came first, Opsprings came second and

2 i t w as a ddi tio nal m on ies af te r t ha t a s w el l.

3 Q. As you sit here today is it your testimony,

4 M s. B lix set h, t ha t y ou d o n ot k now th at t hos e m on ie s

5 c ame f ro m th e Cr ed it S ui sse l oa n?

6 A. I know they came out of bank accounts that Tim

7 s et u p t hat -- s om e o f w hi ch we re o pen ed a nd r em ain ed

8 o pen w it h s ome o f t he fu nd s o f C re dit S ui sse lo an s, bu t

9 I don't know what other monies went in or out of there,

10 no.

11 Q. What was the total amount of your investment in

12 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 p oss ess ed wa s a fr aud ?

21 A. I have not to this day seen FBI reports that

22 said t hat t hey w ere a fraud.

23 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?






1 A. I was never put on notice that he was a fraud.

2 Q. Did you have a meeting with Joseph Jonas, a

3 sit-down, face-to-face meeting with Joseph Jonas, in

4 J anu ary 2 00 7 w her e h e to ld y ou t ha t M on tg ome ry d id n ot

5 possess any of the technology that he had represented to

6 you?

7 A. I don't recall who Joseph Jonas is.

8 Q. So is it your testimony you don't recall the

9 meeting?

10 A. I don't recall who he is, so I certainly

11 wouldn't recall a meeting.

12 Q. Do you recall a meeting in your office on

13 A pri l 1 2t h a nd 13 th , 2 00 9, w ith Ja ck K emp an d m ys el f a nd

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 M ont gom er y?

24 A. There was an employment contract with Dennis

25 Montgomery that Michael Sandoval had drawn up, had legal






1 c oun sel d ra w u p, a nd t he re w as a s ign in g b on us f or

2 Dennis and I believe it was either a million or a

3 m ill ion a nd a h a lf . I d o n't re cal l s pe ci fic all y w hi ch

4 one it was.

5 And then it was talking about his salary, which

6 was a hundred t housand a month. He h ad t he r ight t o

7 additional loans or bonuses based on performance and

8 turning over certain specific things that I don't think

9 that h e ever a ctually g ot.

10 He got some additional monies when he was

11 purchasing a home, but I don't recall the exact amount.

12 Q. Okay. Did you give him loans totaling

13 $3 m illion i n A pril o f 2 006?

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 l oan pr oc ee ds. T he y c am e f ro m t he Ti m B li xs eth p er son al

20 account into -- wiring into the xPatterns or Opsprings

21 accounts.

22 Q. 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.






1 Q. What is your best memory, regardless of the

2 s our ce o f t he f und s, a s t o h ow m uc h y ou l oan ed D enn is

3 M ont gom er y in A pr il 2 006 ?

4 A. I've already testified to that. My best

5 recollection is it was a signing bonus, which was either

6 a million or a million and a half, and I don't recall

7 which one it was.

8 Q. So that was a loan?

9 A. That was part of -- I think it was a signing

10 bonus, actually. If it was a l oan, it was a l oan. I

11 d on' t re mem ber t he c on tr act . T her e's b ee n a l ot o f

12 contracts and things between that time frame so --

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 s che dul es ?

17 A. Those were monies that were into corporations

18 that I reported what was invested in the corporations,

19 b ut i t w asn 't f or m e p er son al ly .

20 Q. Are those loans still outstanding?

21 A. That's within the Opsprings Blxware books. I'd

22 have to go b ack and l ook. To t he b est of my knowledge,

23 i f t hat 's h ow t he y w er e a nd t he y w ere n' t s ig nin g

24 bonuses.

25 Q. Just so we're clear, Ms. Blixseth, the loans






1 have never been forgiven; is that correct?

2 A. I'm telling you I'm not sure if they were loans

3 o r si gni ng b on use s. I 'm t el lin g yo u th at I 'm n ot a war e

4 i f t he y w er e l oa ns of an y m on ie s b ein g r ep ai d f ro m

5 D enn is M ont gom ery t o t he c om pan ies . I t wa sn 't t o m e,

6 personally.

7 Q. Did Mr. Montgomery ever turn over to you the

8 s our ce c ode s t hat w er e b ein g g iv en to y ou in ex ch an ge

9 for those loans?

10 A. The reason he wasn't given the additional

11 m one y, w het her it w as lo ans o r n ot lo an s, wa s b ec au se

12 t he s ou rc e c od es h ad n ot be en t urn ed o ver .

13 Q. To this day have the source codes ever been

14 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 How long did you continue to pay him a hundred

25 t hou san d do lla rs a m on th ?






1 A. Until we couldn't afford to keep the company

2 running.

3 Q. Yeah. When was that?

4 A. I think April or May of this year.

5 Q. So from April '06 to April or May of '09 you

6 paid him a hundred thousand dollars a month; is that

7 correct?

8 A. That is correct.

9 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 MR. HOLAHAN: Stop. Stop.

20 BY MR. FLYNN:

21 Q. -- sale of the Yellowstone Club?

22 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.






1 I don't know how you want to answer that

2 question or if you want t o a nswer i t. You w ant to - -

3 Could you read that question, back, please.

4 THE REPORTER: Question, "Have you texted

5 messages with Mr. Montgomery relative to the fake target

6 l ett ers t ha t y ou a nd h e c ont riv ed t o t ry t o d es tr oy th e

7 s ale o f t he Y el low sto ne C lu b? "

8 ** THE WITNESS: Well, I don't know how to answer

9 t hat , b ec au se I di dn' t h ave a ny thi ng t o d o w ith f ak e

10 l ett ers . T im B li xs et h a ctu al ly is th e o ne t hat r ea che d

11 out to me to say he'd like to get a copy of those and I

12 tried t o get a copy o f them.

13 MR. FLYNN: Would you mark that, please.

14 Q. You just testified you didn't have anything to

15 do w ith t he f ake l etters.

16 Is that truthful testimony, Ms. Blixseth?

17 A. You just asked me if I had contrived and had

18 s ome thi ng t o d o w i th m ak ing t he fa ke l e tt ers . I f y ou' re

19 a ski ng i f I wa s a wa re of t he le tte rs - - I ca n' t a ns wer

20 y our qu es ti on t he w ay yo u w or de d i t.

21 Q. When did you first become aware of the letters,

22 Ms. Blixseth?

23 A. Dennis told me he -- actually, I'm only aware

24 of o ne. Dennis t old m e h e h ad a letter s aying t hat Tim

25 h ad r ec ei ve d a ta rg et le tte r t ha t h e w as b ei ng






1 i nve sti ga te d.

2 Q. The question was "when," Ms. Blixseth?

3 A. I don't remember. It was quite a while ago.

4 Q. What does "quite a while ago" mean?

5 A. I think it was sometime in '07, but I don't

6 really recall.

7 Q. Was the discussion about the fake letters --

8 A. I didn't know them to be fake. I only knew

9 that there was letter that was told -- I was told there

10 was a letter, s o I can't a nswer. When y ou s ay f ake

11 letters I can't answer that in that way. I don't know

12 to t his d ay t hey're f ake.

13 Q. In the last three months have you received any

14 notification from any state or federal agency as to

15 w het her y ou ar e t he s ubj ect o f a s tat e o r f ed er al

16 i nve sti ga ti on o f a ny t yp e?

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 l etters. He w anted t he l etters. He c alled m e, h e

24 texted me and said it meant a lot to him to get them and

25 I said, "I d on't h ave them. Why d on't you d o a deal






1 with Dennis and see if you can get them?"

2 I tried to help him do that.

3 Q. When you first learned about the letters, and I

4 b eli eve y ou r t e st im on y w a s s o me tim e i n '0 7, w ho d id yo u

5 learn about it from?

6 A. Dennis Montgomery.

7 Q. This was when you were paying him a hundred

8 t hou san d do lla rs p er m on th?

9 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 Q. Did you know at that time that he was hacking

13 into computers on your behalf, namely late '07?

14 A. I'm not aware of him ever hacking to this day

15 i nto co mp ut ers an d - - n or o n my be hal f.

16 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. That is not true.

22 Q. How much money have you paid Mr. Montgomery in

23 the year 2009?

24 A. I think he got his salary. He was owed back

25 salary when I couldn't pay starting, I believe it was,






1 September, October, for the burn rate of Blxware.

2 He got that caught up, I believe, it was in

3 J anu ary a nd th en a fte r t hat I s til l d id n' t h ave m on ey t o

4 be p aying h im. Some f unds d id c ome i n o n s omething we

5 w ere w or kin g o n a nd , t o t he b es t o f m y k no wl edg e, h e

6 w as - - h is s al ar y w as pa id t hro ugh , I t hi nk, Ma y o r J un e

7 of this year.

8 Q. When the $2.5 million was paid by the

9 government, the United States government, for the return

10 o f t he a rch ive s t ha t M r. Mo nt go mer y h ad i n h is

11 p oss ess io n i n F eb ru ar y o f 2 00 9, ho w m uc h o f t ha t

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: Yours or hers?

16 MR. FLYNN: Hers.

17 Q. Is it truthful testimony that the 2.5 million

18 w as n ot f or th e r et ur n o f t he a r ch ive s?

19 A. No, it was not.

20 Q. Now how much of the 2.5 million, regardless of

21 the designation of the funds, went to Montgomery?

22 A. I'm not sure that the instructions were to get

23 e ver yon e pa id c ur re nt w he n th e mon ey c ame i n. T her e

24 were certain people loaned money for Blxware to continue

25 d uri ng t hat t im e. Th e in st ru ct ion s we re t o g et t he m






1 paid back for loaning the money to keep it going, so I

2 really don't have an accounting of exactly what Dennis

3 Montgomery got.

4 It was supposed to be his back salary and any

5 out-of-pocket expenses that he had not been reimbursed.

6 Q. Was it approximately $600,000?

7 A. I don't have it in front of me. I don't know.

8 Q. Well, was it approximately $600,000?

9 A. Same answer.

10 Q. Okay. At the time he got the money was he in

11 W ash ing to n, DC , a nd d id h e e mai l y ou t hat he wa s

12 resigning from Blxware?

13 MR. HOLAHAN: Which question do you want her to

14 answer first?

15 MR. FLYNN: Both.

16 MR. HOLAHAN: Okay. You want to divide it up

17 i nto tw o qu est ion s.

18 BY MR. FLYNN:

19 Q. When he got the money, did he resign from

20 Blxware?

21 A. Dennis is emotionally volatile, so I don't

22 know. He c ould h ave - - h e c ould h ave done t hat, but I 'm

23 n ot - - I 'm n ot a wa re o f g ett ing a r esi gna tio n f ro m h im

24 at that time, no.

25 Q. Are you aware that an article's coming out in






1 Playboy Magazine relating to Mr. Montgomery's fraud in

2 connection with the technology we're discussion?

3 A. Tim Blixseth told me about the article and I

4 w as - - t hro ugh m y P R p er so n w as ap pro ac he d b y t he

5 reporter, but I'm not ware of anything about the article

6 and I never spoke t o t he reporter.

7 Q. Okay. As you sit here today, Ms. Blixseth,

8 have you inquired of Mr. Montgomery whether his

9 technology is legitimate or fraudulent?

10 A. Have I inquired?

11 Q. Yeah. Have you ever asked him, "Is it real,

12 Dennis?"

13 A. Years ago, yes.

14 Q. You sent him many emails asking whether it was

15 real, didn't you, Ms. Blixseth?

16 A. I would not say that's true. That's not a

17 c orr ect r es pon se, n o.

18 Q. The answer is no?

19 Let's go back to the target letters. Did you

20 s end or r ea d t he t arg et l et te rs to Li sa M yer s o f NB C?

21 A. No.

22 Q. Did Lisa Myers visit you in early March 2008

23 j ust be fo re Mr . B yr ne te rmi na te d t he s ale of th e

24 Y ell ows to ne Cl ub a nd y ou ga ve h er a c op y o f t he f ak e

25 t arg et l ett ers ?







2 Q. Did you give a copy or read a copy of the fake

3 t arg et l ett ers to J im Po pki n d ur in g t he e arl y p ar t o f

4 2008, Ms. Myers' executive producer?


6 Q. You may have, but you don't recall?

7 A. I -- I -- not only do I not recall, I don't

8 h ave a ny re col lec ti on at al l o f d oi ng t ha t.

9 Q. John Wilke, you knew Mr. Wilke before he passed

10 on?

11 A. Yes, I did.

12 Q. And you, in fact, had fed Mr. Wilke information

13 relating to Governor Gibbons and purported bribes; is

14 that correct?


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 w ith Mr . W il ke pr io r t o N ov em be r 1 , 2 00 6, re lat iv e t o

22 the bribery of Governor Gibbons?

23 A. I don't have any information on that. John

24 W ilk e's n am e w as g ive n t o m e on , a t t ha t t im e, o ur b oa t

25 by Robert Frank with Wall Street Journal saying he would






1 be someone that might be interested in looking at what

2 Dennis was saying with the allegations.

3 Q. During the settlement with Warren Trepp where

4 you confessed $26.5 million in judgments, did

5 Mr. Montgomery withdraw his allegation that Trepp had

6 bribed Gibbons?

7 A. I don't believe so.

8 Q. Did you confess to a $5 million judgment

9 relating to defamation in connection with Montgomery's

10 claims that Trepp had bribed Gibbons?

11 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






1 a bou t t he e mai ls a nd w he the r o r no t h e ha d f abr ic at ed

2 them?

3 A. I talked to him about -- in general about

4 a nyt hin g t ha t - - i s t her e a ny th ing to d o w it h t he t hin gs

5 t hat y ou 're sa yin g ha ppe ned t ha t's no t tr ue a nd h e t ol d

6 me that it was a ll true.

7 Q. With regard to John Wilke, did you give a copy

8 o f t he f ake ta rg et le tte rs t o J ohn Wi lk e o f t he W al l

9 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 t he f ak e t ar ge t l et te rs t o J ohn Wi lke ?

16 A. I didn't have Dennis Montgomery do anything.

17 Q. Did you have Dennis Montgomery give Lisa Myers

18 a c op y of t he f ake t ar ge t le tte rs?

19 A. I think I've answered that. I didn't have

20 Dennis Montgomery do anything.

21 Q. Did you give Robert Frank a copy of the fake

22 t arg et l ett ers ?

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






1 working on -- he'd done some articles on Yellowstone

2 Club working on his book. I can't remember what it's

3 called, but it came o ut i n ' 07.

4 So, you know, we had had dinners with him. We

5 had s pent t ime w ith h im.

6 Q. And how many times had you used Robert Frank to

7 spread stories in the media against your opponents,

8 Ms. Blixseth?

9 A. I don't know how to answer a question like

10 that.

11 MR. HOLAHAN: The question assumes facts not in

12 evidence.

13 MR. FLYNN: W e'll see, Mr. Holahan.

14 MR. HOLAHAN: Oh, yeah. We will see.

15 MR. FLYNN: We will, sir. Trust me, we will

16 see.

17 MR. HOLAHAN: Okay.

18 BY MR. FLYNN:

19 Q. Ms. Blixseth, is it your testimony under

20 oath -- strike that.

21 Did you have any discussion with Robert Frank

22 relative to the fake target letters?

23 A. I don't recall having any, but I could have.

24 I t w as J ohn Wi lke t ha t w as w ork ing wi th D enn is, s o n ot

25 that I recall, no.






1 Q. You don't specifically recall, but you may have

2 discussed the fake target letters with Robert Franks

3 [ sic ]; i s t hat y ou r te st imo ny ?

4 A. You keep saying "fake target letters." At the

5 time and to this day I don't know if they're fake, but

6 t he l ett er I w as s how n t ha t w as a t arg et l et ter .

7 Q. What letter were you shown, Ms. Blixseth?

8 A. It was a letter addressed to Tim saying --

9 i nfo rmi ng h im h e w as t he t ar get o f i nv est iga tio n. I t

10 c ame ab ou t t he sa me t ime th at I ha d g ot te n c all s f ro m a n

11 i nve sti ga ti on t o t h e d ea th o f D e ni se T ouh ey a nd t o t he

12 i nve sti ga ti on o f I RS, bo th o f w hic h t ol d I d idn 't

13 believe Tim had anything to do with it and I had no

14 i nfo rma ti on f or t he m.

15 Q. When did you first speak to Sam Byrne about the

16 f ake ta rg et le tte rs ?

17 A. I told him about them -- it was during the same

18 time that we all heard about the investigation on Denise

19 Touhey a nd t he I RS. I d on't r ecall t he e xact d ate. It

20 w as w it hi n tha t sa me t im e fr ame .

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






1 Mr. Blixseth?

2 MR. HOLAHAN: I'm going to start objecting to

3 e ver y q ue st ion th at y ou a sk u si ng t he p hr ase "f ak e

4 t arg et l ett ers ." W e don 't k now w ha t yo u' re t al ki ng

5 a bou t. I d on' t kn ow w ha t yo u'r e ta lk in g abo ut.

6 The deponent has said she doesn't know what

7 y ou' re t alk ing ab ou t, so we o bj ect to t he ph ras e " fa ke

8 target letters" because we don't know that there are any

9 fake target letters and every time you ask that question

10 I'm g oing t o b e object t o i t.

11 If you know how to answer, if you want to read

12 b ack th at q ues tio n a nd y ou c an f ig ure o ut ho w t o an swe r

13 it, you can.


15 BY MR. FLYNN:

16 Q. With regard to the letter that you acknowledged

17 y ou w er e s ho wn by D en nis Mo nt go mer y - -

18 A. Uh-huh.

19 Q. -- that letter, referencing that letter, when

20 d id y ou f ir st s pe ak t o S am B yrn e a bou t t ha t l et te r?

21 A. I don't remember the date. I just said -- we

22 w ere ta lk in g a bou t t hi ng s a nd I sa id, " Ju st f or y ou r

23 k now led ge " - - t hi s c am e a bo ut t he s am e t im e a s t he

24 Denise Touhey investigation was going on and the IRS

25 i nve sti ga ti on a nd n ow I' ve g ot a c opy o f a l ett er .






1 And I don't know -- I didn't do anything with

2 it. I didn't even keep it. I didn't k now if there was

3 any t ruth t o i t. I s aid that w hen I s aid about - - w hen

4 I told him about the letter, but I said, "I don't

5 w ant - - i f t he re 's so met hin g o f th is, t he n I di dn 't sa y

6 anything. I want you to know."

7 Q. How did Dennis Montgomery come about to have

8 p oss ess io n of t hi s le tte r?

9 A. I don't know.

10 Q. Well, he was your employee. Did you ask him?

11 A. I asked him and he said it came across on a fax

12 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 w ith a K i nk o's c ov er s he et?

17 A. That's what I was told when Tim got the

18 l ett ers , bu t I w as n't a wa re o f t ha t. I d idn 't e ven l oo k

19 at that.

20 Q. Did it come from Sam Byrne on a Kinko's cover

21 s hee t i n Fe bru ary o f 2 00 8 j us t b ef ore M r. By rne

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?






1 Q. Did you talk to Steve Crisman about this

2 letter?

3 A. May have. Steve and Nick and everybody was

4 around t hen a t t he t ime o f t his.

5 Q. In the first week of March 2008 did you fly to

6 Cabo San Lucas with Mr. Crisman and Mr. Rhodes and did

7 you have possession of the letter and discuss it with

8 them?

9 A. I don't recall if I had possession, because I

10 ended up not keeping the letter. So there could have

11 been discussion about it.

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. There's

17 all kinds of all those things going on. I don't want

18 anything t o d o with i t. I j ust w ant t o t ry to g et

19 things done the way we're getting done," and didn't do

20 any more with it.

21 Q. Did you discuss the letter with Deborah Klar

22 and g ive h er a copy o f it?

23 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






1 the IRS, I wanted to find out if that included me, and

2 Ellyn Garofalo -- I can't remember her last name, starts

3 with a G - - s he i nvestigated. She m ade s ome c alls t o

4 f ind o ut if I w as a ls o b ei ng in ves tig at ed al ong w it h T im

5 and the IRS.

6 Q. Did you give a copy this letter to the Lemond

7 p art ies o r t he L em ond l aw ye rs ?


9 Q. Did you discuss it with them?


11 Q. Did you discuss it with Conrad Burns or give

12 h im a co py, th e f or me r s ena to r f ro m M on ta na?


14 Q. Did you discuss it or give a copy to Mary Bono?


16 Q. Did you discuss or give a copy to Robert

17 B enn ett o f t he Sk ad de n A rps f ir m?


19 Q. Does the Skadden Arps firm currently represent

20 you?

21 A. They're not representing me for anything going

22 o n, n o. I h av en' t te rmi nat ed t hem , bu t th ey 're n ot

23 representing anything.

24 They were representing Dennis Montgomery and

25 Blxware in connection with things that you had been






1 representing him for and they stepped into your shoes.

2 Q. How much did you pay Robert Bennett of the

3 Skadden Arps firm to represent you and Montgomery?

4 A. I don't recall. They're on my list of

5 schedules for bills still outstanding, but I don't

6 recall what the total was paid to them, what the

7 retainer was and what the total was paid.

8 Q. Did you pay them over $300,000, Ms. Blixseth?


10 Q. Was that paid on your behalf or on behalf of

11 Mr. Montgomery?

12 A. I think it was paid on behalf of the company

13 and Mr. Montgomery.

14 Q. At that time was the Skadden Arps firm

15 representing Credit Suisse?

16 A. I wasn't aware of them representing Credit

17 Suisse.

18 Q. Did Robert Bennett disclose to you that they

19 were representing Credit Suisse at that period of time?


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






1 and the representation of you?

2 A. No.

3 Q. Okay.

4 MR. HOLAHAN: Can we take a quick break?

5 MR. FLYNN: One more question.

6 Q. Do you recall executing three declarations in

7 the summer of '07 in an effort to stop the Yellowstone

8 Club sale to CrossHarbor Capital?

9 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 A. Was that in family court?

25 MR. HOLAHAN: What?






1 MR. FLYNN: Based on?

2 MR. HOLAHAN: You mean 1.3 billion.

3 MR. FLYNN: 1.3 billion.

4 MR. HOLAHAN: You said million, did you mean

5 billion?

6 MR. FLYNN: Thank you. Thank you, Dennis.

7 MR. HOLAHAN: Glad to help.

8 MR. FLYNN: Always appreciate it.

9 Q. -- $1.3 billion based on the total net value

10 appraisal methodology of Credit Suisse?

11 A. In what court are you referring to?

12 Q. Family court.

13 A. Family court. There's been so many things

14 filed. I don't recall my exact declaration then, but I

15 was under the impression at that time that the Credit

16 Suisse things were valid, so it could be.

17 Q. 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






1 $40 million from various lenders, were you holding

2 yourself out to having a net worth of approximately 800-

3 t o $ 90 0 m il lio n b as ed on t he Cr edi t S ui ss e t ota l n et

4 value appraisal system?

5 MR. HOLAHAN: Objection. Vague as to time

6 frame. Vague in general. If you want to be a l ittle

7 b it m ore sp eci fic , m ay be th at w oul d h el p.

8 BY MR. FLYNN:

9 Q. Can you answer the question?

10 A. No, I cannot.

11 MR. HOLAHAN: We need to take a quick break,

12 sorry.

13 MR. FLYNN: Go ahead.

14 (Recess taken.)

15 MR. FLYNN: Let me show you what has been

16 m ark ed a s E xhi bit s 8 a nd 9, M s. Bl ixs et h, an d t he se

17 p urp ort t o b e d oc um en ts f ro m t he U S D ep ar tme nt o f

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. Let's start with that one.

25 MR. HOLAHAN: Are Exhibits 1 through 7 here






1 t oda y b ut y ou h ave n't us ed t hem ye t o r th ey' re f rom th e

2 previous deposition?

3 MR. FLYNN: Have not been used. They're in

4 that pile. Unfortunately, Kinko's didn't collate them

5 so you'll have to find them on your own.

6 Q. Do you recognize Exhibit 8, Ms. Blixseth?

7 A. I'm not sure. It seems familiar, but you guys

8 keep referring to two and I think I only saw one, so I

9 don't know if it's this one or the other one.

10 MR. HOLAHAN: What is this a pile of you put in

11 front o f me, M r. F lynn?

12 MR. FLYNN: It's a -- it's the exhibits we're

13 a ddr ess in g n ow .

14 MR. HOLAHAN: Yeah, but it's not in any order.

15 MR. FLYNN: It's in order; it's not collated,

16 as I just said.

17 MR. HOARD: When you say collated, you mean the

18 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.


24 MR. FLYNN: You have to thumb through it until

25 you find it.






1 BY MR. FLYNN:

2 Q. That document, Ms. Blixseth, purportedly signed

3 by Ronald Sharpe --

4 MR. HOLAHAN: You'll have to wait a minute,

5 Mr. F lynn. I w ant t o s ee t he d ocument b efore y ou a sk

6 her any questions about it. So if you can tell me how

7 many pages in, is it after -- where is it in the pile?

8 MR. FLYNN: You want to hand me the pile and

9 I'll find it for you?

10 MR. HOLAHAN: Yeah. That's good.

11 MR. FLYNN: This is the first part of your

12 file.


14 MR. FLYNN: These are the two documents --

15 MR. HOLAHAN: Thank you.

16 MR. FLYNN: -- 8 and 9. That's the second part

17 of your file.


19 BY MR. FLYNN:

20 Q. Now Ms. Blixseth, how many conversations did

21 you have with Mr. Montgomery about either one of these

22 d ocu men ts ?

23 MR. GLASSER: Is the second one 9, Mr. --

24 MR. FLYNN: The second one is Exhibit 9.

25 THE WITNESS: Can I see both so I can tell you






1 which o ne I know I saw f or s ure? I m ean I don't k now i f

2 I'll be able to tell you for sure, but is this the same

3 one?

4 MR. HOLAHAN: Can you, please, explain what is

5 r eda cte d a nd w h y o n E xhi bit 9 , M r. Fl yn n?

6 MR. FLYNN: No, I cannot.

7 MR. HOLAHAN: Who redacted it?

8 MR. FLYNN: We're going to find out whether it

9 w as B lix set h or M on tg ome ry.

10 MR. HOLAHAN: You did not?

11 MR. FLYNN: Oh, I absolutely have not.

12 MR. HOLAHAN: I'm talking about the redactions

13 here. You d id n ot d o these r edactions?

14 MR. FLYNN: Don't cross-examine me, I just told

15 you I d idn't do them.

16 MR. HOLAHAN: You put an exhibit in front of my

17 client, I'm entitled to ask you questions about it.

18 MR. FLYNN: Do whatever you want, we're moving

19 on.

20 Q. Ms. Blixseth, when did you first see either one

21 o f t hes e do cum ent s?

22 A. I think this is the one I saw, because I don't

23 r eme mbe r s ee in g - - th e o ne I sa w h ad e ver yth ing o n

24 there.

25 Q. So you pointed to Exhibit 8?






1 A. Correct.

2 Q. And you said that's the one you saw, which is a

3 document -- purportedly dated December 12, 2007, from a

4 Ronald Sharpe, Assistant United States Attorney; is that

5 correct?

6 A. That's correct.

7 Q. And the other one, as your counsel points out,

8 has s ome r edactions o n it.

9 Did you do those redactions?


11 Q. Have you ever seen Exhibit 9, the one with the

12 r eda cti on s?

13 A. I don't think so.

14 Q. How many occasions have you had to discuss

15 either one of these documents with Dennis Montgomery?

16 A. On several occasions, because when you first

17 showed it to me I was surprised and then it kind of fell

18 i nto th e o th er th in gs th at I ha d g ott en c all s a bo ut .

19 Q. Ms. Blixseth, I'm not interested in the other

20 t hin gs y ou g ot c al ls a bo ut. I' m in te re st ed i n t his

21 document. Please restrict your answers to this

22 d ocu men t, m a'a m.

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?






1 A. No. It didn't become final until October of

2 '08.

3 Q. And you were in a vigorously contested divorce

4 p roc eed in g w it h M r. B lix set h; i s t hat f ai r t o s ay ?

5 A. It was on and off okay and not okay, yes.

6 Q. And sometime in late '07, according to your

7 testimony, you were given possession of a document that

8 indicated your ex-husband or then husband was the

9 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. I think I saw it

17 i n e arl y ' 08 , b ut I d on' t a ct ua lly re ca ll wh en I fi rst

18 saw it.

19 Q. In fact, Ms. Blixseth, you began emailing about

20 this in late January, early February '08; isn't that

21 c orr ect , ma 'am ?

22 A. I don't remember email -- I don't remember when

23 I st art ed e mai lin g a bo ut it , b ut I do n' t t hi nk I sa w i t

24 until early '08.

25 Q. Who did you email about this document in early






1 ' 08 a fte r M r. B lix set h a nd M r. B yr ne s ign ed t he

2 agreement to purchase the Yellowstone Club?

3 A. I believe the purchase -- I believe the

4 document to purchase the Yellowstone Club was signed in

5 the springtime of '07, is what I was told in family

6 court, so I don't know how long after that.

7 But when I became aware of this, then I was

8 a ski ng s ome qu est io ns ab out i t j us t l ik e I w as s ome

9 o the r t hi ng s t hat y ou do n't w an t m e t o s ta te .

10 Q. Ms. Blixseth, isn't it a fact that the letter

11 of intent to sell the Yellowstone Club for $510 million

12 w as s ig ne d o n J un e 2 8t h, '0 7, a nd t he p ur cha se a nd s al e

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 s ome in fo rm ati on w het her it w as tr ue o r n ot t ha t I w as

24 g ive n, s o - - I d on 't r ec all t he ex act d at es, th ou gh , b ut

25 it w as i n e arly '08, m id to e arly ' 08.






1 Q. The written contract was mid '08 in which

2 Mr. Byrne agreed to purchase a bulk sale of the

3 Yellowstone Club assets; isn't that true?

4 A. I can't answer that question.

5 Q. Shortly thereafter Exhibit 8 surfaced with you

6 and Mr. Montgomery; isn't that correct, ma'am?

7 A. There was no correlation to me on that, so I

8 can't recall.

9 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. I

13 t hin k t ha t I p ara ph ra sed wh at i t w as a bou t a nd i t w as

14 d uri ng t he s am e ti me f ra me.

15 And you keep telling me only reference this,

16 b ut t he re w as a ti me f ra me o f c ert ain t hi ngs co mi ng to

17 l igh t t ha t t hi s - - I f el t l ik e i f I ha d t his i nf orm ati on

18 a nd i t w as a cc ura te a nd I di dn' t s ay w hen th ese o th er

19 t hin gs h ad c om e t o li ght du ri ng th e s am e t im e f ra me ,

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 i nve sti ga ti on o n T i m o n t he d ea th o f D e ni se T ou he y a nd

24 the IRS.

25 Q. Ms. Blixseth, when you first saw Exhibit 8, how






1 m uch t im e e lap sed b et wee n t he t ime yo u s aw i t a nd t he

2 t ime y ou ca lle d R ob er t F ran ks a nd r ea d i t t o hi m, f rom

3 t he Wa ll St ree t Jo urn al?

4 A. I don't recall if I called Robert Frank and

5 read it to him.

6 Q. You may have, but you don't recall?

7 A. You ask me questions in such a way that -- that

8 I c an't r eally a nswer t hem.

9 Q. When did you first give or read Exhibit 8 to

10 t he m ed ia , Ms. B li xse th?

11 A. I've testified that I didn't give this letter

12 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 T hat 's s ome thi ng t hat -- I' m n ot s ure i f I d id t hat

22 s inc e h e ha d p ut - - p ut D enn is M on tgo me ry in to uc h w it h

23 John W ilke o n -- o n things.

24 I'm not sure if this was ever -- this was never

25 u sed by m e f or a ny thi ng i n r efe ren ce t o T im B li xs et h,






1 other than it was given -- it was given to me.

2 Q. Now your testimony earlier was that you have

3 n ot b een no tif ied b y a ny s ta te o r f ed er al ag enc y a s t o

4 whether you're a subject of a grand jury investigation;

5 is that correct?


7 Q. Do you know who -- have you spoken to any FBI

8 a gen ts a t a ny t ime re lat ive t o M r. Bl ix se th.

9 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. I don't recall the

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 investigations about about Tim when Mr. Rice called you?

25 MR. HOLAHAN: If she knows.






1 BY MR. FLYNN:

2 Q. Well, whatever he said to you.

3 MR. HOLAHAN: If you know.

4 THE WITNESS: He first emailed me and said he

5 had s ome questions and c ould I c all h im. I e mailed him

6 back saying, " What is this i n r eference t o? This i s a

7 scary thing to see and open up and says FBI."

8 When I did call him he said it was in reference

9 t o s om e i nv est iga ti on s g oin g o n ab out T im an d t ha t - -

10 t hat th e F BI - - t he y w er en' t i n h is re gio n a nd t hat th e

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 l imi t it t o yo ur q ues tio n.

16 Q. No, don't limit it.

17 A. I said that I didn't think that I had any

18 i nfo rma ti on . I w as n' t aw ar e of a ny th in g tha t I h ad

19 information or that I thought Tim had ever done anything

20 c rim ina ll y, so I d idn 't t hi nk I co uld b e o f h el p t o

21 them.

22 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 y ou a nd T im ha d b ee n c al lin g t he m a nd h e a ck now le dg ed

25 that you guys had been calling him on -- trying to say






1 there was information that they should be investigating

2 o n m e a nd t hat t he re w as n o i nv est iga ti on go ing o n o n

3 me.

4 Q. He told you that?

5 A. Yes, he did.

6 Q. At that time did he have possession -- what is

7 y our b es t m emo ry o f w hen e ar lie r t his y ea r t hat t oo k

8 place?

9 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 a nd s o I do n't r ea lly re cal l b ut i t w ou ld be s om eti me i n

13 spring, I think, of this year.

14 Q. Now you mentioned that he said there were other

15 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 m e t hat t he re w as o ne sp eci fi ca lly ou t o f Fl ori da

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 o bli gat io ns , d id y ou m ak e a ny e ffo rt i n a ny w ay t o






1 initiate state or federal investigations against

2 Mr. Blixseth?

3 A. Absolutely not. I haven't subsequently.

4 Q. During the summer of 2007 did you or your

5 lawyer contact Mr. Lemond and assist the Lemond parties

6 in initiating state or federal investigations --


8 Q. -- against Mr. Blixseth?


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 y ou as t o where he g ot i t?

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 - - t here w as n othing o n t op. I m ean I had n o

22 idea where this came from.

23 Q. Oh, you noticed at the time there was no fax

24 header on Exhibit 8?

25 A. He said, "It came on a fax machine," and when






1 he said it came on a fax machine, I noticed there was

2 n oth ing o n t op w he re n or mal ly t her e w o uld be nu mb er s o n

3 top of a fax machine.

4 Q. So then what did you say to him?

5 A. He said, "How did you get it on a fax machine?"

6 He just said, It came on a fax machine."

7 Q. Now at the time you knew that Mr. Montgomery --

8 the Trepp parties were claiming that he had fabricated

9 t he G ibb ons b ri be ry e mai ls.

10 A. I don't remember --

11 Q. Having that in mind --

12 A. Wait, you can't -- you made a statement.

13 MR. HOLAHAN: Let him.

14 BY MR. FLYNN:

15 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 i s t hat i t a ss ume s f ac ts no t i n ev ide nc e a nd I' ll l et

21 h er a ns we r i t i f s he c an s ep ara te w ha t i s t ru e a nd w ha t

22 i sn' t in y ou r que st io n.

23 MR. FLYNN: We'll get into it in spades.

24 Q. Ms. Blixseth, you knew Mr. Montgomery

25 throughout 2007 and 2008 was being challenged in the






1 eTreppid litigation on the basis that he had fabricated

2 t wo e mai ls; i sn 't t ha t co rr ec t?

3 A. I can't say 2007 to 2008. I don't remember

4 w hen t ha t al le gat io n was b ro ugh t up . W he n th at

5 allegation was brought up in the eTreppid I asked Dennis

6 if he fabricated them and he said no.

7 I don't recall asking him, I don't think I did,

8 b eca use I d on' t t hi nk it e ve n e nte red m y m in d t ha t h e

9 f abr ica te d t hi s.

10 Q. Now when the issue of his fabrication came up

11 between April and June 2007 when you hired Mr. Bennett,

12 w hen yo u h ir ed Mr . B en ne tt a nd p ai d M r. B enn ett f ro m

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. I don't remember.

17 MR. HOLAHAN: Wait a minute. Can you read that

18 question back, please.

19 MR. FLYNN: I'll withdraw it.

20 Q. I want to know whether you talked to Bennett

21 about whether or not Montgomery fabricated the emails.

22 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






1 attorney-client privilege.

2 BY MR. FLYNN:

3 Q. Was Bennett your lawyer?

4 A. Yes, he was.

5 Q. Did you, in fact, pay Bennett over a million

6 dollars in connection with the charges against

7 Mr. Montgomery?

8 A. You asked me earlier if I paid 300,000,

9 5 00, 000 ; no w yo u' re a ski ng m e a m il li on . I d on 't k now

10 how m uch. I d on't r emember h ow m uch w as p aid. I d on't

11 k now ho w m uc h t he r et ain er w as o r h ow m uc h w as p aid .

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 s tat e o f t he r eco rd i s t he o nly pe rso n y ou r eca ll

22 s pea kin g t o ab out i t i s M on tg om ery an d B yr ne ; i s th at

23 your testimony under oath, Ms.?

24 A. Conrad Burn?

25 Q. No, Mr. Byrne, Sam Byrne.






1 A. Sam. No, I don't think -- I don't think I

2 t est ifi ed t hat t he y we re t he o nl y peo pl e. I m ea n,

3 o bvi ous ly , t hi s g ot m y a tte nt io n a nd - - w hen I f irs t s aw

4 it and I w as concerned.

5 So I may have talked to -- I mean I know that

6 D enn is w as t he re w hen Cr ism an a nd R ho de s w er e t h ere fo r

7 some Blxware meetings, but I don't really recall who

8 e lse I t alk ed t o a bou t it . I t con cer ne d me, e sp eci all y

9 i n l ig ht of th e o th er in fo rm ati on.

10 Q. Did you call Mr. Blixseth?

11 A. I doubt I would have done that. We weren't

12 speaking a t the t ime.

13 Q. Did you have your lawyer call Mr. Blixseth's

14 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 t ext hi m t ha t y ou b el iev ed a nd y ou st il l b el iev e t ha t

18 t he l et te rs w er e ac cu rat e?

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 t his ye ar f rom th e F BI , d id y ou te ll h im a bo ut t hes e

22 letters, Ms. Blixseth?

23 A. I don't think so. I told -- when he first

24 s tar ted a sk ing me q ue sti ons I s aid , " If t his ha s t o do

25 with the Denise Touhey investigation or the IRS, I think






1 I've already answered those questions, that I don't

2 think he had anything to do with it and I don't have any

3 i nfo rma ti on th at h e d id, so I d on' t t hi nk th ere 's a ny

4 i nfo rma ti on ."

5 In fact, I don't think I talked about the

6 l ett ers , b ut I d id sp eci fic al ly sa y t o hi m t hat I 'm no t

7 aware of -- I'm aware of a lot of things that I don't

8 like how he's done or how he's treated me, but I'm not

9 aware of any criminal wrongdoings on his behalf.

10 Q. The question, aside from all the verbiage,

11 M s. B li xs et h, i s r eal s im pl e.

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 e x-h usb an d?

16 A. I don't believe I said I had possession,

17 b eca use I d on' t h av e i t a ny l on ger an d I d on 't t hin k

18 t hat th e t ar ge t l et te r w as b rou ght up .

19 Q. When you were discussing the matter with Rice

20 a s t o w he th er M r. B li xse th w as u nd er s ome ty pe o f a

21 federal criminal investigation, did you bring up or

22 d isc uss w it h h im t hat , " Oh, i s t hi s r el at ed t o a pr ior

23 investigation of Mr. Blixseth?"

24 A. No. I brought -- I asked if it was related to

25 things that I had heard about in the past and the only






1 t wo s pec ifi cs t ha t I h ad h ea rd - - t ha t I e xp res se d t o

2 h im t hat I h ea rd a bou t i n t he p ast w er e D eni se T ouh ey

3 and t he I RS. I d id n ot b ring u p a ny o ther s pecifics.

4 Q. Just so we have this clear on the record,

5 Denise Touhey and the IRS, who went to the FBI and

6 complained Mr. Blixseth had murdered Ms. Touhey?

7 A. I have no idea. The only person that told me

8 who he thought had gone to it is Tim Blixseth and that

9 was j ust recently. And h e t old me that G reg Lemond

10 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 o f w ho h ad gone t o t hem. I was surprised

13 to h ear that. And that w as just t his year I heard t hat.

14 Q. So during the fall of '07, based on your prior

15 testimony, did you know that Reveal and Lemond had gone

16 t o t he F BI a nd a cc use d M r. B lix set h o f co mmi tti ng

17 murder?

18 A. Absolutely not. I told you the first time I

19 h ear d a bo ut it wa s f ro m T im a nd I w as s ur pri sed w he n h e

20 t old me t ha t a nd e xpr ess ed m y s urp ris e a nd s aid I h ad

21 b een co nt ac ted ab ou t t ha t a nd I ha d a lw ay s s aid t ha t I

22 d idn 't b eli eve he h ad an yth in g t o d o w ith it .

23 Q. So when Mr. Rice contacted you earlier this

24 y ear in M ay , J une , d id y ou t alk to h im ab out t he al leg ed

25 murder -- strike that, Mr. Blixseth's alleged






1 involvement in the murder of Denise Touhey?

2 MR. HOLAHAN: She's already answered that. She

3 can answer it again.

4 THE WITNESS: I said if this has to do with the

5 t wo i nve sti gat ion s t ha t I w as a war e o f, t hat I d idn 't

6 b eli eve - - I n ev er be lie ved h e h ad an yt hi ng t o d o w ith

7 i t a nd I di dn' t h av e a ny i nf orm ati on t hat wo uld h el p

8 them if that's what they were investigating.

9 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 t ry t o p in i t d own h er e. As I u nd er st and y ou r te st imo ny

14 you became aware of the IRS and Touhey investigations in

15 t he f al l o f 2 00 7; i s t ha t c or re ct, ma 'a m?

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 c ourt a nd w hen - -

21 Q. I don't care what you associate with. Was it

22 in t he f all o f 2007 a s 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






1 me t o s ay I don't r ecall, I don't r ecall. I w as t rying

2 to recall.

3 MR. HOLAHAN: Mr. Flynn. Mr. Flynn, don't

4 interrupt my client until she's through answering your

5 questions.

6 MR. FLYNN: Thank you, Mr. Holahan. I'll ask

7 a not her que sti on no w?


9 BY MR. FLYNN:

10 Q. Ms. Blixseth, did you previously testify you

11 became aware of the Touhey and IRS investigations in the

12 fall o f 2007? Just y es o r no, m a'am.

13 A. If you're asking me the exact date, I don't

14 r eca ll th e e xa ct da te .

15 Q. No, I'm asking about the fall of 2007 based on

16 y our p ri or t es tim on y. D id y ou s o tes ti fy ?

17 A. I don't remember if I said a date. I just

18 r eme mbe r t ha t I w as n oti fie d o f t he m.

19 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 D eni se T ouh ey?

24 A. The first time I ever heard even about an

25 investigation I didn't hear about it. I saw it in the






1 paper. And I p icked u p t he p hone a nd called and said,

2 " Wha t's thi s a bou t? "

3 I thought it was horrible, thought it was

4 horrible for the memory of Denise, didn't believe it,

5 and d idn't k now i f it w as t rue.

6 I don't, thank God, believe everything is

7 written by the press and I didn't know if it was true

8 t her e wa s an i nv es tig ati on.

9 Q. Did you discuss that with Lemond or any of the

10 B sh are ho ld ers ?

11 A. I absolutely did not.

12 Q. That was during the due diligence period of

13 M r. B yr ne , t he fa ll o f 2 007 ; i s t ha t c orr ect ?

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 o f th e de at h of D en is e To uh ey .

18 Q. When did it come out in the paper,

19 Ms. Blixseth?

20 A. Sometime in that period, I don't really recall,

21 but t hat w as t he f irst I 'd h eard o f i t. I h adn't b een

22 a ppr oac he d b y a ny on e u nt il I sa w i t i n th e p ape r.

23 Q. When did you see it in the paper?

24 A. I don't recall the date.

25 Q. Roughly?






1 A. Sometime in '07.

2 Q. That Mr. Blixseth was being associated with the

3 a lle ged m ur der of D en ise To uh ey -- I' m s or ry --

4 A. No, that there was an investigation.

5 Q. Did you spawn that investigation?

6 A. I've answered that now about five times. I

7 absolutely had nothing to do with it. I didn't know who

8 did until Tim Blixseth told me just a few weeks ago and

9 he told me and it was Greg Lemond and John Reveal.

10 Q. We're going to get into what you do with the

11 media, Ms. Blixseth, believe me.

12 Did you report an alleged investigation of your

13 t hen h us ban d to t he m edi a?

14 A. I absolutely did not.

15 Q. IRS investigation, in the fall of '07 what did

16 you know about the IRS investigation, Ms. Blixseth?

17 A. I just knew that there was one and it concerned

18 m e b eca us e i f t he re w as a n i nve sti gat io n b y t he I RS 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?


23 Q. Who told you?


25 Q. Was it Lemond?






1 A. I'm sure it wasn't. I didn't speak to Lemond.

2 Q. Was it Lemond's lawyers?

3 A. I didn't speak to Lemond's lawyers.

4 Q. Was it Montgomery hacking into computers?

5 A. I'm not aware of Montgomery hacking into

6 computers.

7 Q. So as you sit here today you have no idea --

8 strike that.

9 Was there a grand jury investigation in

10 connection with the IRS investigation?

11 A. I believe -- when I heard that there was --

12 t her e w a s a n i nve st ig ati on w ith th e I R S, t ha t's w he n I

13 t alk ed t o E lly n a t L in er an d s ai d I 'd l ik e t o f in d o ut

14 i f I 'm u nde r i nve st ig ati on a s w ell .

15 Q. After those two investigations flopped, did you

16 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 investigation was basically shelved by the FBI?

20 A. I thought it was -- I didn't -- I didn't know

21 a nd I ca n't re mem be r w hy I t hou ght th is , b ut I t hou ght

22 t hat wa s s om et hin g t ha t w as o ve r w ith a nd wh en I ta lke d

23 t o G reg R ic e e arl ie r t hi s y ea r h e s ai d i t w as st ill an

24 open investigation, but that's not what they wanted to

25 talk to me about.






1 Q. What did they want to talk to you about?

2 A. He said there was several other investigations

3 going on and the primary one that they wanted to talk

4 about first was people out of Florida.

5 Q. People out of Florida.

6 Were you and your ex-husband Matthew Crocker

7 drug dealers?

8 MR. HOLAHAN: Object to the question as

9 argumentative.

10 THE WITNESS: My ex-husband?

11 MR. FLYNN: Yes.

12 MR. HOLAHAN: Object to the question as

13 argumentative and beyond the scope of this --

14 MR. FLYNN: I'll withdraw.

15 Q. When you ran Choo-Choo Willy's --

16 MR. HOLAHAN: Are we assuming during this line

17 of questioning that Mr. Blixseth did not, in fact,

18 murderer Ms. Touhey? Is that the assumption behind all

19 these questions?

20 BY MR. FLYNN:

21 Q. Ms. Blixseth, when you and your husband were

22 running Choo-Choo Willy's, did you deal drugs?


24 Q. Now what did you understand the IRS

25 investigation to be about?






1 A. I actually didn't know. I just knew that there

2 was something to do with -- I don't know. I just knew

3 t hat t he re w as a n i nv est iga ti on .

4 Q. Did --

5 A. She found out there was an investigation.

6 Q. Did it have to do with whether the Credit

7 Suisse loan was a dividend or a loan as alleged by the

8 Lemond parties?

9 A. My recall, it didn't have anything at all to do

10 with Credit Suisse. It had to do with our tax returns.

11 Q. In connection with whether or not the monies

12 received from Credit Suisse were a loan or dividend?

13 A. I didn't have any more information than what I

14 just said. I don't know.

15 Q. Do you know how the IRS concluded, as to

16 w het her i t w as a l oan o r d iv ide nd?


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.






1 (Exhibit 10 was marked for identification.)

2 MR. FLYNN: That's it right there (indicating).


4 BY MR. FLYNN:

5 Q. Now if you turn to --

6 MR. HOLAHAN: Hold it, Mr. Flynn.

7 BY MR. FLYNN:

8 Q. Turn to the 8th page down at the bottom,

9 M s. B lix set h. Is t ha t yo ur s ig nat ure , 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. And did you sign that guarantee in order

14 to get $13 million from Western Capital Partners?

15 A. I didn't get any money from Western Capital

16 Partners. It w as a p roject my s on was doing and he was

17 borrowing the money for the project.

18 Q. Yes. How much money, after the $13 million was

19 p aid , d id y our so n g iv e t o y ou f ro m t he l oan p ro cee ds?

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 a ny c he ck s t o y ou f ro m a ny a cco unt s h e ha d c ont ro l o f

25 a fte r J un e 1 5t h o f 20 07; is t ha t y our t es tim ony ?






1 A. In association with this loan?

2 Q. After the money went into the Story Mill's bank

3 a cco unt s, w as a ny m on ey p ai d t o yo u a ft er Ju ne 1 5, 2 00 7,

4 Ms. Blixseth?

5 A. From the proceeds of this loan?

6 Q. No, from bank accounts under control of your

7 son.

8 A. We had -- we had spec homes and we had other

9 t hin gs g oin g o n th ere , s o th ere co uld h av e b een m on ies

10 paid back to me from those kind of things, but I

11 r ece ive d n o m on ey f ro m t his l oa n.

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 o ver th e e ns ui ng t hre e m ont hs d id h e p ay y ou ?

16 MR. HOLAHAN: She's already asked and answered

17 t hat qu es ti on.

18 MR. FLYNN: No, she hasn't.

19 Q. How much money did you get three months after

20 t his lo an f r om yo ur s o n, Ma tt he w?

21 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 d id a t Y e ll ows ton e C lu b o r o the r t hin gs . It ha d n ot hi ng

25 to do with this loan.






1 Q. More than a million or less than a million,

2 Ms. Blixseth?

3 A. I'm not aware of getting any, but if I got some

4 it would have nothing to do with this loan.

5 Q. More than 2 million or less than 2 million?

6 A. I just said I'm not aware of getting anything

7 from this loan.

8 MR. HOLAHAN: That's fine.

9 BY MR. FLYNN:

10 Q. More than 3 million or less than 3 million?

11 MR. HOLAHAN: Mr. Flynn, she's not aware of

12 g ett ing any mo ney .

13 BY MR. FLYNN:

14 Q. 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 A. No, Tim and I filed for bankruptcy in the early

19 '80s --

20 Q. First, I want an answer, yes or no. Is it a

21 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?






1 A. That line -- this whole thing -- I didn't read

2 the w hole t hing. I d idn't h ave a lawyer o n m y behalf

3 read t his whole thing.

4 Western Capital had asked Matthew if I would

5 consider guaranteeing the loan. Matthew called me.

6 Q. Ms. Blixseth, is that a false statement?

7 A. I already answered that question.

8 Q. What's the answer?

9 A. The answer is that is a false statement.

10 That wasn't your question by the way.

11 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 o per ati on s t ha t I r an fo r s ev er al y ea rs .

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 f or Y el lo ws ton e C lu b a t t ha t p oi nt in t im e f or h ow m an y






1 years?

2 A. I can't remember exactly when we switched to

3 the title of that, but I had been operating the

4 operations of Yellowstone Club for quite a while.

5 Q. You knew the significance of signing loan

6 documents with a bank relating to the procurement of

7 $13 m illion, d id y ou n ot?

8 A. I would say yes.

9 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 d ili gen ce . Th ey h ad d on e an a pp ra isa l on i t.

15 There was plenty of collateral to support the

16 $13 million loan. They wanted additional just guarantee

17 for i t and I agreed t o do t hat. I d idn't d o what I

18 w oul d n or ma lly do i f i t w er e m y l oa n a nd I s ho ul d h ave .

19 Q. We're going to get into your loans,

20 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?






1 A. I wasn't going to get any money out of this

2 loan.

3 Q. The question is: Were you desperate for money,

4 Ms. Blixseth?

5 A. During all of '07 because I received no

6 temporary or long-term spousal support and Tim Blixseth

7 continually testified in court that there was no

8 c omm uni ty c ash fl ow , I w as h avi ng t o b orr ow t o l ive an d

9 s upp ort my com pan ie s.

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 s upp ort m ys elf du ri ng th e t im e t ha t I w as fr oze n o ut o f

14 e ver yth in g.

15 Q. By borrowing money?

16 A. I borrowed money based on the fact that I was

17 g ett ing a ss ets I c oul d p ay t he m on ey b ack .

18 Q. In '07 who else did you borrow money from?

19 A. In '07?

20 Q. Strike that.

21 Prior to July '07 who else did you borrow money

22 from?

23 A. I had an ongoing line of credit with Palm

24 D ese rt N ati ona l Ba nk. I h ad , I b el ie ve , bef ore t ha t

25 t ime a l i ne of c re dit at A me ric an B an k.






1 Q. How much were you in arrears? As of June 15,

2 '07, how much were you arrears in paying your creditors?

3 A. I don't know.

4 Q. How long had you been in arrears in paying your

5 c red ito rs w hen yo u g ot t his $ 13 mi lli on f or y ou r s on ?

6 A. I don't know.

7 Q. Was it over a million dollars?

8 A. I don't know.

9 Q. Was it over $2 million?

10 MR. HOLAHAN: She doesn't know, Counsel.

11 MR. FLYNN: Okay. We'll see, based on her

12 declarations, Mr. Holahan.

13 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 d ue"; i s that t rue?

20 MR. HOLAHAN: Where are you reading from?

21 MR. FLYNN: No. 2 -- strike that.

22 No. 3 on Exhibit 10.

23 Q. Is that true?

24 A. I don't know the date this was signed and,

25 a gai n, I to ld y ou I d idn 't r ead th is, s o I d on 't kn ow.






1 Q. Were you able to pay your debts as they came

2 due on June 15th of 2007?

3 A. I think I was intermittently able to based on

4 how I was making loans and how cash flow came in.

5 Q. Who referred you to Western Capital Partners to

6 get this loan?

7 A. I was never referred to it. It wasn't my loan.

8 It was Matthew's.

9 Q. How did you find out about the loan?

10 A. When Matthew called me and asked if I would be

11 w ill ing t o gua ran te e it.

12 Q. Did Jon Stack call you and speak to you about

13 this loan?


15 Q. He may have?

16 A. Jon Stack would call about a lot of different

17 people and loans.

18 Q. Did you discuss with Jon Stack that you needed

19 t he m on ey a nd y ou w er e d esp er at e f or m one y?

20 A. No, I did not. The Western Capital loan -- I

21 h ad l oa ne d M at the w m on ey . T he W es ter n C ap it al l oan

22 o rig ina ll y w he n t he y w er e g oi ng to do i t w as go in g t o

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. So the plan was for you to be paid back money






1 f rom t hi s l oan ; i s th at c orr ect , M s. B lix set h?

2 A. Originally, but not by the time it went to

3 f ina l pa per wor k.

4 Q. At the time the loan was entered into, did you

5 have discussions with anyone at Western Capital about

6 your divorce proceedings?

7 A. I think they asked me how it was going along.

8 T hey a sk ed m e a b ou t Y ell ows to ne Cl ub W o rl d. Th ey w e re

9 concerned about that if I was guaranteeing this.

10 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. There was a lot of people

17 there. It was at a restaurant. I don't recall.

18 Q. Did anyone ask you whether you were getting any

19 p art o f the l oa n pr oc eed s?


21 Q. Did anyone inquire from Western Capital what

22 accounts the monies were going into and what controls

23 w ere o ve r th os e ac cou nts ?

24 A. I had nothing to do with the sources and uses

25 o f t he l oan or a ny of th os e k in d o f d is cu ssi ons w it h






1 that, so I was not there and privy to those kind of

2 m eet ing s t ha t I as sum e t hey h ad wi th t his lo an.

3 Q. Then why did your divorce proceedings come up?

4 A. I think that they asked me -- I think that they

5 asked me since I was going to agree to guarantee it if

6 i t w ou ld ha ve a ny i mp act o n i t a nd t he y w ere c on cer ned

7 about the Yellowstone Club World, the new launching of

8 Y ell ows to ne C lu b Wo rl d.

9 Q. The next statement is four, "Borrowers and

10 Guarantors are not contemplating filing for relief under

11 t he U S B ank rup tcy C od e"; is t ha t t rue ?

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?






1 A. I believe that would be true.

2 Q. At the time did you and community owe state or

3 federal taxes, Ms. Blixseth?

4 A. I don't recall that we did.

5 Q. Nine, "Borrowers and Guarantors are not to

6 subject to restraining order of any type"; was that

7 true?

8 A. I believe that to be true.

9 Q. Ten, "Borrowers and Guarantors are not subject

10 to alimony or child support orders"; was that true?

11 A. To the best of my knowledge I didn't have any

12 child support or alimony obligations.

13 Q. Now Ms. Blixseth, is there any other document

14 that you have signed for anybody guaranteeing any loan?

15 MR. HOLAHAN: Ever? What time frame? Ever?

16 MR. FLYNN: Let's take it since the Credit

17 Suisse loan, September of 2005.

18 THE WITNESS: I don't recall except that maybe

19 i t m ay b e w ith A me ric an B an k i n re lat io ns hip to t he

20 construction loan, I can't remember who that was with,

21 f or t he b ui ldi ng o f L ot 1 76 , b ut I c an 't r ea lly r ec all .

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 d oll ars f ro m a tr an sa cti on y ou h ad in p la ce i n






1 connection with financing Blxware or Opspring?

2 A. I never tried to finance Blxware or Opspring.

3 MR. GLASSER: Mr. Flynn, just because I'm late

4 to the case, who are those two guys, Western Capital

5 guys?

6 MR. FLYNN: They're a Denver lender.

7 THE WITNESS: Who's a Denver lender?

8 BY MR. FLYNN:

9 Q. Let me try it this way.

10 THE WITNESS: Wait a minute. That's not

11 correct.

12 Nick Rhodes and Steve Crisman, I think that's

13 who you're asking about?

14 MR. FLYNN: No, we said Western Capital.

15 THE WITNESS: No, he didn't, he said Nick

16 Rhodes --

17 MR. GLASSER: No. I wanted to know who those

18 two people were.

19 MR. FLYNN: Oh. They're two codirectors of

20 Blxware and Opspring.

21 MR. GLASSER: Thank you.

22 BY MR. FLYNN:

23 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?






1 A. In general we may have had conversations based

2 o n t he f act th at I wa sn' t g et ti ng s up po sa l s upp or t a nd

3 t hin gs w ere dr agg in g o n i n t he c ou rts o f h ow I w as g oi ng

4 t o g o a bo ut co nt in uin g t o s up po rt t he b ur n r ate o f

5 Blxware, but I don't have any specific recollection.

6 Q. Did you tell him you were borrowing money,

7 Crisman?

8 A. I think in general everyone knew in our little

9 g rou p th at' s ho w I w as s ur vi vin g.

10 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 m ent ion ed w as a ft er J une '0 7, b ut I c ou ld be mi st ak en

15 exactly o n the d ates.

16 Q. Prior to June '07, what were you telling

17 C ris man a s t o w he re y ou w er e g et ti ng f und s t o f un d

18 B lxw are a nd O ps pr in g?


20 Q. Did you tell him you were borrowing money?

21 A. I think I've answered that. In general

22 e ver yon e k ne w t ha t' s h ow I w as s ur viv in g a t t he t im e,

23 b eca use T im wa sn' t g iv in g a ny c ash fl ow t o m e f ro m o ur

24 community cash flow, stating there was none and the way

25 I wa s s ur vi vin g w as t o b o rr ow m o ne y.






1 Q. Did Mr. Blixseth object to giving

2 M r. M ont gom ery , w ho i s a bou t t o go to p ri son , a h un dre d

3 thousand dollars a month community funds?

4 A. He had nothing to do with that.

5 Q. No. D id he object?

6 A. I haven't had any conversation with him about

7 that.

8 Q. Back in the summer of '07 did Mr. Blixseth

9 o bje ct t o p utt ing a ny mo ney i n O ps pri ng o r B lxw ar e

10 because i t w as a total c on?

11 A. No. In fact, I have a note saying, "Give me

12 t hre e d ay s' no tic e w he n y ou n ee d t he n ext 5 m il li on an d

13 I'll make s ure it gets d one."

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. That might have been in

18 '06.

19 Q. When you misrepresented what the technology was

20 to Mr. Blixseth?

21 A. Is that a question?

22 Q. Yeah. Did you misrepresent what the technology

23 was worth?

24 A. No, I did not. You did.

25 Q. We'll see.






1 Let's go to the third page of Exhibit 10.

2 MR. HOLAHAN: Who did he represent?

3 THE WITNESS: Dennis Montgomery. He's the one

4 w ho t old me th er e w er e n o ob jec tio ns o r a nyt hin g.

5 BY MR. FLYNN:

6 Q. Ms. Blixseth, do you know what representations

7 and warrantees are in loan agreements?

8 A. I think I have a general knowledge.

9 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 r est aur an t day s 25 y ea rs a go ?

15 A. We've been in business for a lot of years and

16 h ad - - T im h ad a l ot o f d iff ere nt t hin gs t ha t w e' ve do ne

17 over the years that had loan agreements, yes.

18 Q. You know what reps and warrantees are in loans

19 agreements, don't you?

20 A. I just answered that, that I have a general

21 k now led ge , y es .

22 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






1 improvements located thereon or any other collateral

2 pledged to secure the repayment of the loan collateral

3 a re t o t he b es t o f th e B or ro wer s' a nd G ua ran tor s'

4 knowledge accurate in all respects.

5 "Borrowers and Guarantors have not concealed or

6 withheld any material information concerning borrowers'

7 and guarantors' financial condition or the collateral."

8 Did you provide a financial statement to

9 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 Capital Partners?

13 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 b usi nes s pu rpo ses . N o po rt io n of t he l oa n wi ll b e u se d

18 for consumer, family or household purposes. Borrowers

19 w ill no t u se a ny p ort ion fo r p er so nal , f am il y o r

20 household purposes. Instead the proceeds will be used

21 exclusively for Borrowers'" -- purposes -- "for

22 Borrowers' business."

23 Did you read that?

24 A. I'm telling you I don't recall if I read any of

25 t his , b ut I wo uld s ay th at t hat wa s a dh er ed t o.






1 Q. Did the Story Mill project make any money in

2 2007 and 2008?

3 A. I wasn't involved in the operation or the how

4 the Story Mill project was going.

5 Q. So if any funds were paid in 2007 or 2008 by

6 your son Matthew from Story Mill bank accounts, where

7 else would that money have come from other than this

8 loan, Ms. Blixseth?

9 A. I can't answer questions about Story Mill and

10 their cash flow.

11 Q. Did they have any cash flow?

12 A. I can't answer questions about that. I don't

13 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






1 the lender is relying on these representations and that

2 it would not advance the contemplated loan," in italics,

3 "if any one of the representations were inaccurate or

4 misleading i n any w ay."

5 A. I'm sorry, which one are you reading?

6 Q. 61.

7 You knew, Ms. Blixseth, when banks or lenders

8 l oan m on ey t he y r el y o n y our st ate men ts i n l oan

9 a ppl ica ti on s.

10 You knew that at the time, did you not, Ms.?

11 A. They rely on the information you give them, of

12 course.

13 Q. At the time did you disclose to Western Capital

14 Partners that you were involved in any litigation?


16 MR. FLYNN: Okay. Put that aside. Let's go to

17 t he loa n ag ree men t.


19 BY MR. FLYNN:

20 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






1 representations and warrantees in the loan agreement and

2 i t r ea ds : " To i nd uce Le nde r t o e xe cu te t h is ag re em ent

3 and perform the obligations of Lender hereunder" --

4 A. Can I stop you just a second? I didn't bring

5 m y r ea di ng g la sse s i n a nd th is f on t i s k in d o f b lur ry.

6 Do you have any?

7 MR. HOLAHAN: Reading glasses?

8 THE WITNESS: No?

9 BY MR. FLYNN:

10 Q. -- "hereby represents and warrants the Lender

11 as follows."

12 Your counsel can follow along and you can

13 listen to the question, Ms. Blixseth.

14 A. Can you tell me where you're reading from,

15 because I c an k ind of see it.

16 Q. Page 5, No. 6, and I'm going to B, "No

17 litigation."

18 A. Okay.

19 Q. "Except as disclosed in writing to Lender prior

20 t o t he d ate he reo f, t her e i s no pe ndi ng l iti gat io n o r

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






1 priority of the lien of the deed of trust which might

2 affect the Borrower or any Guarantor to perform their

3 respective obligations."

4 MR. HOLAHAN: You're not reading correctly.

5 You're missing words.

6 BY MR. FLYNN:

7 Q. -- "to perform their respective obligations

8 pursuant to and as contemplated by the terms and

9 provisions of the agreement and the other loan

10 documents --

11 (Mr. Blixseth hands reading glasses to the

12 witness.)

13 THE WITNESS: Thank you.

14 BY MR. FLYNN:

15 Q. -- "or which could materially affect the

16 operations or financial condition of the property.

17 THE WITNESS: Better.

18 BY MR. FLYNN:

19 Q. -- "borrower or any guarantor."

20 Well, at the time, Ms. Blixseth, that wasn't

21 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 --






1 A. That wasn't my claim.

2 Q. -- that Montgomery allegedly possessed?

3 A. That wasn't my claim. That was eTreppid versus

4 Montgomery and Montgomery versus eTreppid.

5 Q. Montgomery was suing eTreppid. You knew that?

6 A. I was aware Montgomery was suing eTreppid.

7 Q. And you were paying for that?

8 A. Part of our agreement, you know that --

9 Q. Just yes or no, Ms. Blixseth. I don't need an

10 explanation.

11 Were you paying for it?

12 A. Can we get something clear? Sometimes you want

13 me to give an explanation and sometimes you don't.

14 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 l iti gat io n?

18 A. You're aware of that. I was paying it to you.

19 Q. And on June 15 were you aware of it?

20 A. It was still ongoing, but that wasn't my

21 l iti gat io n.

22 Q. It wasn't.

23 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






1 agreement.

2 So you knew there was litigation pending that

3 did materially affect your financial situation, did you

4 not?

5 A. I will answer the same -- I will answer the

6 q ues tio n th at' s w o rde d i n a d if fer ent w ay , t h at a t t ha t

7 t ime t ha t w as n ot m y l it ig at ion an d t ha t t ha t w as p art

8 of the agreement within the contract with Dennis

9 M ont gom er y t ha t I w as pa yin g y ou r l eg al f ees .

10 Q. Now you were paying the Liner legal fees as of

11 June ' 07, w ere y ou n ot?

12 A. I think that when you were -- when -- I can't

13 remember if Skadden came on before Liner or Liner came

14 o n b efo re S kad den t o t ak e s om e o f t he t hi ngs of f w ha t

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 t he j ud ge h ad j us t r el ea sed t he FB I r ep or ts a nd y ou an d

19 Mr. Kemp and myself and Mr. Montgomery met, I withdrew

20 f rom t he l it ig ati on , did I n ot?

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.?






1 A. You were so convinced the technology wasn't

2 good that you wanted the technology instead of having

3 your legal fees paid.

4 Q. Ms. Blixseth, when you signed this document did

5 y ou h ave an y u nd er sta ndi ng a s t o w het he r o r n ot t he

6 pending Trepp litigation materially adversely affected

7 your financial situation?

8 A. Not when I signed this.

9 Q. When did you confess a $26.5 million judgment

10 to Trepp?

11 A. The -- the agreement -- it's hard to answer

12 y our qu es ti on t he w ay yo u w or de d i t.

13 Q. When did you confess a $26.5 million judgment

14 to Trepp?


16 Q. Let's go --

17 MR. HOLAHAN: Do you have some, Madam Court

18 Reporter, paperclips?

19 Discussion off the record.

20 MR. FLYNN: Let's go to this document.


22 BY MR. FLYNN:

23 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?






1 MR. GLASSER: What exhibit are you on? I'm

2 sorry.

3 BY MR. FLYNN:

4 Q. What exhibit number is that, Ms. Blixseth?

5 A. It's 14.

6 MR. HOLAHAN: 14.


8 THE WITNESS: This looks like something that I

9 w oul d h av e c al led - - t ha t W es te rn w as r eq ues tin g a nd I

10 w oul d h av e c al led a nd as ked B il l t o d o.

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 o ut o f i t; i s t hat y ou r te st imo ny?

17 A. That's such a compound question. I can't

18 answer t hat y es o r no.

19 Q. When you had your divorce lawyers write this

20 l ett er w ith re gar d t o yo ur a sse ts i n e xce ss o f

21 $ 500 mi ll io n, d id y ou kn ow t hat at th at p oin t i n t im e o n

22 your financial statement you'd be now liable potentially

23 f or a $1 3 mi ll ion o bl iga tio n?

24 MR. HOLAHAN: I'm sorry, I don't understand







1 If you understand it --

2 THE WITNESS: I don't.

3 BY MR. FLYNN:

4 Q. As a guarantor of the $13 million loan, what

5 w as y our un der sta nd in g a s t o w he th er o r n ot s om e d ay y ou

6 m igh t b e o bl ig ate d t o p ay th e $ 13 m il li on ?

7 A. My understanding was based on the collateral

8 t hat M at the w w as p utt ing up f or th e $ 13 m ill ion , t he

9 S tor y M il l p ro jec t a nd t he a ppr ais al a t t he t im e a nd t he

10 f ore cas t o f th e f in al pl att in g o f t hi s, t hat al l t he

11 worst-case scenarios would have to happen before I would

12 b e ob li ga te d fo r th is l oa n.

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 p roj ect eve r m ake ?

17 A. I've answered that I was not involved with the

18 S tor y M il l p ro jec t.

19 Q. So you guaranteed $13 million and yet you had

20 n o k now le dg e a t t he t ime th at y ou g ua ra nt eed it - -

21 A. That's not what I said.

22 Q. -- of whether the Story Mill project was even

23 v iab le; i s tha t co rre ct?

24 A. That's not what I just said. That's what you

25 just said. That's not what I said.






1 Q. What knowledge did you have at the time of what

2 t he S tor y Mi ll p ro jec t wa s ab ou t?

3 A. I had knowledge that the collateral for this

4 loan was two spec houses at Yellowstone Club, including

5 their lots; that they were in second position behind

6 A mer ica n B an k - - w hic h w as, I t hin k, 1 0 o r 1 2 mi lli on, I

7 d on' t re mem ber -- o n a p ro je ct t ha t t h ey h ad ap pr ai sal s

8 that supported this loan, and the forecast looked bright

9 for getting the final platting for it, which definitely

10 s upp ort ed th is lo an .

11 So my opinion, not of the Story Mill project

12 p er s e, o f t he o ng oin g o per at io ns a nd c as h f low a nd

13 income and expense was -- was not part of it. It was --

14 which is the actual collateral basis for a $13 million

15 loan based on the collateral that Western Pacific was

16 taking.

17 Q. Then if that was the case and that was your

18 view at the time --

19 A. That was my view at the time.

20 Q. -- why did you ask your divorce lawyer to

21 certify what your assets were potentially worth?

22 A. I don't actually recall except that they --

23 t hey m ay h av e wan te d to k no w. L ik e yo u sa id , th ey a sk ed

24 about Yellowstone Club World and the divorce and how

25 that w as g oing. There h ad b een a lot i n t he p aper.






1 They may have asked to have somebody verify

2 that that's what they thought I was going to end up

3 with.

4 Q. Where is there anything in this document,

5 Exhibit 14, relative to Yellowstone Club World,

6 Ms. Blixseth?

7 A. I didn't say there was. I said that was a

8 question t hey a sked m e.

9 Q. So what exactly did they ask you? This was in

10 t he Boz em an me eti ng ?

11 A. Correct.

12 Q. What exactly did they ask you about Yellowstone

13 Club World?

14 A. If that was something that was going to

15 jeopardize the value of the Yellowstone Club, because --

16 I ca n't r em emb er t he g en tle ma n' s n a me a t t he ti me t hat

17 w as t he re , q ue sti on ed if th at w as g oi ng t o t ake o ff or

18 n ot a nd i t w as a n ew c on ce pt an d h e q ue st ion ed t hat , i f

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. They

23 were a ll n ew p eople t o me.

24 Q. How did they know about Yellowstone Club World?

25 A. There had been tons of press on it.






1 Q. So when you had your lawyer send this document,

2 did you understand that they were checking into your

3 a sse ts t o d ete rmi ne w het her o r n ot th e t hi ng s y ou s aid

4 about your financial background was true?

5 A. I understood them to know that a lot of things

6 c an h app en i n d ivo rce s a nd t hat th ey w ant ed t o v eri fy

7 that what -- and California being a community property

8 state and what they had seen and saw in Forbes and that

9 kind of stuff that I was going to get 50 percent of what

10 o ur s up po se d as se ts w ere .

11 Q. How long after the $13 million was paid did it

12 f all in to d efa ult ?


14 Q. When did Western Capital Partners start

15 c ont act in g y ou wi th r ega rd t o t he d ef au lt on th e l oa n

16 looking t o y ou f or m oney?

17 A. Well, I actually don't recall. I know that I

18 loaned money to make the interest payments sometime

19 a fte r t he l oan wa s m ad e, bu t I d on 't r eal ly r ec al l t he

20 dates.

21 Q. Let me see if I understand that testimony.

22 Sometime after the loan was made you began loaning

23 money. Who d id y ou l oan t he m oney t o?

24 A. Story Mill.

25 Q. To your son, Matthew --






1 A. To the Story Mill project.

2 Q. -- to pay the interest payments.

3 Was that within the first month, Ms. Blixseth?

4 A. I don't remember. I don't believe so.

5 Q. The second?

6 A. No, I don't recall when it started.

7 Q. The third month?

8 MR. HOLAHAN: Counselor, she said she doesn't

9 recall.

10 BY MR. FLYNN:

11 Q. How much -- were you paying all of the interest

12 payments?


14 Q. Was it an interest-only loan?

15 A. I believe so.

16 Q. How long after you started paying the interest

17 payments did you cease paying the interest payments?

18 A. I don't recall, but when I couldn't -- I

19 c oul dn' t a ff or d t o pa y t hem w it h m y c as h f lo w.

20 Q. Was it within six months?


22 Q. So you took -- your son took $13 million. So

23 we understand what happened here, you then began paying

24 t he i nt er es t p aym en ts on it , t he n y ou n o l on ger c ou ld

25 a ffo rd t o p ay t he m a nd t he l oan de fau lt ed ; i s t ha t y ou r






1 testimony?

2 A. I think that was your testimony, but --

3 Q. Is that yours?

4 A. No, but you -- if you ask me questions, I'll

5 try t o give y ou t estimony.

6 Q. Is that what happened? Can you answer that

7 question?

8 A. I don't believe that's the order in which

9 t hin gs h app ene d.

10 Q. What is the order in which things happened?

11 A. Well, first of all, the 13 million wasn't just

12 1 3 m ill io n t o w or k t he S tor y M il l p ro je ct or do o th er

13 t hin gs w ith . T he re w as o th er t hin gs t hat h ad t o b e p ai d

14 off for the purchase of the contiguous hundred acres.

15 So most of that was -- and to finish the

16 project for getting the platting together and some of

17 t hos e t h ing s a n d s o me of th os e e xp ens es r an h ig he r a nd

18 longer than they had anticipated.

19 Q. Did you start borrowing money from other

20 l end ers w he n y o u, a s g ua ran to r, we re i n d e fa ult o n t he

21 W est ern C ap ita l lo an?

22 A. I don't recall if that -- if there was other

23 l end ing d on e af te r th at.

24 Q. Isn't it true that the Western Capital loan,

25 according to their lawsuit, was in default at least as






1 of December '07? Do you know that?

2 A. I know that we were on the phone and I was

3 doing conference calls with them trying to work out how

4 we were going to be able to handle things, but I don't

5 remember the date.

6 Q. As of December '07 had you borrowed money from

7 First Bank & Trust?

8 A. Of December '07?

9 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 (Speakerphone emits loud static.)

17 BY MR. FLYNN:

18 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?


23 Q. Did you give them any, those banks, any

24 financial statements disclosing the Western Capital

25 loan?






1 A. I don't recall if they were on them or not.

2 Q. Isn't it true, Ms. Blixseth, that you did not

3 n oti fy e ith er A me ri ca n B ank o r F ir st B ank & T ru st t hat

4 y ou w ere in de fa ul t o f t he W est ern Ca pi ta l l oan a s a

5 guarantor when you began taking millions of dollars from

6 them? Isn't that true?

7 A. I just have to say I don't recall. I don't

8 recall the dates.

9 Q. Okay. Let's get into the loan. Do you

10 remember what the loan modification agreement was

11 with -- you may have i t o ver there.

12 No, here it is.

13 We're a little bit out of order here. Let's

14 take that first.


16 BY MR. FLYNN:

17 Q. Do you remember entering into this loan

18 m odi fic at io n a gre em en t a ye ar l ate r i n Ju ne o f - -

19 MR. GLASSER: Is this Exhibit 16?

20 BY MR. FLYNN:

21 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






1 ( ind ica ti ng ).

2 MR. HOLAHAN: Yeah, it is.

3 BY MR. FLYNN:

4 Q. In June of '08 do you remember entering into

5 t his loa n a gre eme nt ?

6 A. Hang on just a second. My lawyer is still

7 trying to --

8 Okay. Now I'm ready.

9 Q. Do you remember entering into this document?

10 A. Barely. June of '08 was when there was a whole

11 l ot o f t hin gs g oi ng o n, t ry in g t o s et tl e w it h T im a nd

12 Yellowstone Club things and stuff that were, I felt, my

13 t hin gs. Th is w as , ag ain , I s ti ll f el t as M at th ew 's .

14 Q. Did you sign this document?

15 A. Sure I did, but why don't you tell me what

16 page.

17 Q. If you're sure you did, I believe you testified

18 i n yo ur p ri or d ep os it ion - -

19 A. Yeah, I'm sure I did.

20 I did. It's on page 8.

21 Q. Let's go down to Release of Collateral under

22 this agreement in June '08. At the time you signed this

23 document had you just borrowed $13 million from First

24 B ank & T rus t an d Wa ch ovi a?

25 A. No.






1 Q. At the time you signed this document had you

2 borrowed $8 million from Wachovia?

3 A. At the time?

4 Q. Yeah. Roughly at this time frame had you

5 borrowed $8 million from Wachovia?

6 A. No.

7 Q. The answer is no?

8 A. No.

9 Q. Between March and June '08 did you borrow

10 $ 8 m ill io n f ro m W ac ho via ba nk ?

11 A. Not $8 million, no.

12 Q. Okay. And did you execute a loan agreement in

13 b oth Ma rc h a nd Ju ne ' 08 w it h W ac ho via B an k f irs t f or

14 $ 5 mi ll io n, t he n fo r $3 m il li on ?

15 A. There were two separate loans and the time

16 f ram e f or t he f ir st o ne w as n ot th e t im e f ra me y ou j us t

17 said and I believe the 3 million was.

18 Q. Let's go down to the Release of Collateral. We

19 h ave a ll t ho se d oc ume nts . W e'l l ge t in to t he m.

20 MR. HOLAHAN: Hold on one second here. I'm not

21 finding your signature here.

22 THE WITNESS: Yeah, I found it. It was on like

23 e igh t o r so met hin g.

24 BY MR. FLYNN:

25 Q. Let's go down to the document -- first page,






1 Ms. Blixseth.

2 MR. HOLAHAN: Hold on, Mr. Flynn.

3 THE WITNESS: N o? L et me go back.

4 MR. HOLAHAN: These pages are out of order.

5 THE WITNESS: Yeah. The pages are out of

6 order, but I d id find it.

7 MR. FLYNN: It's on page 8, Mr. Holahan.

8 MR. HOLAHAN: I don't have that. That's not in

9 my copy.

10 MR. FLYNN: I believe it is.

11 THE WITNESS: 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 Q. Ms. Blixseth, let's go down to No. 1, Release

16 o f C oll at er al.

17 A. What page?

18 Q. First page.

19 MR. HOLAHAN: I don't have it.

20 BY MR. FLYNN:

21 Q. "Lender hereby agrees to release the security

22 interest in Edra D. Blixseth's ownership interest in and

23 to Blxware, LLC."

24 Do you see that, Ms.?

25 A. Tell me where -- I'm sorry, no.






1 Q. No. 1, Release of Collateral.

2 A. I gotcha.

3 Q. Why did you have them release the collateral

4 i nvo lvi ng B lxw are ?

5 A. Oh, I remember this. This is when we first --

6 t his i s w he n w e fi rst di sc ov ere d t h at , I b el iev e al mos t

7 a ye ar b efo re, t ha t t her e h ad b een a b lan ket UC C f il ed

8 o n e ve ry thi ng t ha t w e w er e n ot a wa re o f .

9 So when they -- so when we were getting ready

10 to do the -- when we were getting ready to do the

11 W ach ovi a l oa n, I b eli eve , i t wa s d isc ov er ed - - a nd I

12 believe Liner was involved at the time, because Liner is

13 t he o ne t ha t b rou gh t W ac hov ia t o m e - - a nd t hey

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 N o. 2 , t he n ex t t o la st s ent enc e r ead s, " Als o t ha t

20 certain loan affidavit, dated June 15, 2007," that's the

21 o ne w e w ent ov er, " wh ich is p ar t o f th e l oan d oc ume nts ,

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






1 warrantees with respect to the additional collateral."

2 So did you know, Ms. Blixseth, that you were

3 reaffirming all of those representations and warrantees

4 t hat w e had p re vio usl y re ad ?

5 A. Yeah. You know, again, this is during a time

6 w her e we we re t ryi ng t o g e t t hi ngs fi na li zed be tw ee n - -

7 Q. The question is simple: Did you know?

8 A. The question is not as simple, maybe I'm

9 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: I don't want dialogue, Mr. Holahan.

16 MR. HOLAHAN: You're going to get an objection.

17 MR. FLYNN: I'll withdraw the question. Next

18 question.

19 Q. At the time you signed these documents did you

20 read them?

21 A. I don't recall if I read them or I had Liner

22 read them for me.

23 Q. So you had your lawyer read them; is that

24 correct?

25 A. I don't recall if I read them, because I






1 b eli eve w he n I t al ked to - - w he n W ach ov ia br oug ht t o t he

2 attention of Liner, who was handling the Wachovia loan

3 for me, that the UCC was filed by Western Capital I was

4 surprised. I had t hem look i nto it.

5 It was during the same time that this was being

6 r ene got ia te d o r r ea ff irm ed o r w hat eve r a nd I -- I

7 b eli eve t ha t i t w as L ine r t ha t t al ked t o t he m a bo ut -- I

8 t hin k i t w as J ef f A da ms, I c an' t r eme mb er -- ab ou t

9 releasing that.

10 Q. Ms. Blixseth, when you signed this document,

11 y ou h ad a dv ice of c ou nse l f ro m L in er; i s t ha t y ou r

12 t est imo ny ?

13 A. No. My testimony is that I don't remember if

14 t hey a ct ual ly r ea d th is. I r em emb er t hat t he y we re

15 involved, because they were involved with Wachovia and

16 t hey we re i nvo lve d w it h w he n w e fo und o ut ab out t he UC C

17 a nd t ha t w e ne ede d t o ha ve t hat re mov ed o n B lxw ar e.

18 Q. 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: ETreppid and Montgomery.

24 THE WITNESS: W hat was the date?

25 ///






1 BY MR. FLYNN:

2 Q. June '08.

3 A. I think I was already brought into that at that

4 time.

5 Q. Did you disclose to Western Capital Partners in

6 J une ' 08 wh en t hey re wro te t his lo an t hat yo u w er e a

7 defendant in the Montgomery litigation?

8 A. I had no communication with Western when this

9 was being done.

10 Q. That was strictly done by Liner; is that your

11 t est imo ny ?

12 A. It was strictly done by people telling me what

13 w as g oi ng o n a nd m e s ayi ng, " Ch eck it o ut ," a nd - - y ea h.

14 Q. And Liner --

15 A. I was in the middle of things I thought were

16 m ore im po rt ant an d t ha t w as g et tin g t he b ala nce o f - -

17 Q. Ms. Blixseth, please listen to the question. I

18 do not want all of this verbiage.

19 A. Okay.

20 Q. The question is at the time were you

21 r epr ese nt ed by Li ne r i n J un e ' 08 i n t he e Tre ppi d

22 Montgomery litigation?

23 A. And my answer was I believe I was already added

24 to the litigation at the time.

25 Q. The question is were you represented by Liner?






1 A. If I was added to the litigation at this time,

2 it would be Liner I was represented by.

3 Q. Now Liner knew you were involved as a defendant

4 i n li tig ati on; i sn 't t ha t tr ue?

5 A. If they were my lawyers, I hope so.

6 Q. And Liner knew that the litigation involved

7 Blxware and the software technology that had been

8 pledged to Western Capital; isn't that true?

9 A. The Western Capital pledge was a blanket UCC.

10 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 i nvo lve d i n th e l it ig ati on i n w hic h y ou w ere a

15 d efe nda nt ? Di d t he y k no w t ha t, Ms .?

16 A. I can't speak for Liner. Liner was

17 r epr ese nt in g m e.

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: Now get into Exhibit 15.


25 ///






1 BY MR. FLYNN:

2 Q. Go to the last page, the next to last page, the

3 Declaration of Edra Blixseth.

4 A. Before I go to the last page, can I read what

5 this is?

6 Q. All I'm interested in is the next to last page,

7 y our d ec lar ati on.

8 A. I'd like to know what the declaration is for.

9 If you give me 30 seconds, I can look at the front and

10 tell what it's for before I go to the page.

11 Okay.

12 Q. Now this declaration is dated July 27, '07,

13 r oug hly a m ont h a ft er yo u g ot t he 1 3 m ill ion -- o r S to ry

14 Mill got the $13 million from Western Capital Partners

15 a nd y ou g ua ran tee d y ou w ere a bl e t o p ay y our bi ll s a s

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 mi ll io n. E ven a ft er u si ng a ll o f t he p ro cee ds f rom

20 t he s al e o f my r ea l e sta te p arc el, th es e d eb ts a re

21 primarily due to the ordinary expenses of Porcupine

22 Creek and they are increasing by hundreds of thousands

23 o f d oll ar s p er mo nt h. "

24 As of July 27 when you signed this,

25 M s. B li xs et h, h ow l on g h ad y ou b ee n i n ar rea rs w ith






1 creditors?


3 Q. Were you in arrears with creditors as of

4 J une 1 5, '0 7, w hen yo ur s on g ot th e $ 13 m ill ion f ro m

5 W est ern C ap ita l?


7 Q. When your son got the $13 million from Western

8 Capital, did you have any conversations with him about

9 h ow m u ch of th e l oa n p ro ce ed s y ou w ou ld g e t?

10 MR. HOLAHAN: Asked and answered. She's

11 a lre ady t es tif ied s he di dn' t g et a ny o f t he l oa n

12 proceeds.

13 MR. FLYNN: Are you instructing her?

14 MR. HOLAHAN: No, she can answer. I'm just

15 o bje cti ng .

16 BY MR. FLYNN:

17 Q. Did you have any conversations with your son,

18 Matthew, during June, July '07, about getting money from

19 Story M ill o r from h im?

20 A. I knew with how the loan was going to now come

21 a bou t f ro m W es ter n t o St ory M il l t hat w ha t w as

22 originally anticipated that I'd get paid back some of

23 m one y I 'd b een lo an in g f or S tor y M ill w as no t g oi ng to

24 be able to happen and I would not get any money from it.

25 Q. When you wrote this declaration were you






1 cognizant and signed it under oath, were you cognizant

2 of the fact you had just represented as a guarantor to

3 Western Capital Partners that you could pay your bills

4 as they matured?

5 A. I've answered that. I've said I don't recall

6 exactly where I was at the time this was signed.

7 Q. Let's move on. We've got a lot of ground to

8 cover.

9 Put these over there, Tim.


11 BY MR. FLYNN:

12 Q. Do you know what a preliminary injunction is,

13 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?






1 MR. GLASSER: Are you on an exhibit, Mr. Flynn?

2 MR. FLYNN: It's 17. It starts Order in the

3 Second Judicial District.

4 MR. GLASSER: Okay.

5 THE WITNESS: Are you asking me what date was I

6 aware of this?

7 BY MR. FLYNN:

8 Q. Let's start there. What date were you aware of

9 this preliminary injunction?

10 A. I don't recall, but I remember when I met with

11 y ou a nd D en nis be fo re I - - w hen Mi cha el S and ova l - -

12 Michael Sandoval brought you guys to me, I remember

13 a ski ng i f t h e e Tr ep pi d l i ti ga ti on w as g oi ng t o s t op us

14 from being able to move forward on commercial viability

15 o f t he t ech nol ogy .

16 Q. So are you saying that you were aware of the

17 preliminary injunction as of that date?

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

19 there was none.

20 Q. When were you first given notice of the

21 preliminary injunction, Ms. Blixseth?

22 A. Probably about a year later. I found out

23 t hat -- a ct ual ly, m ay be s oo ne r t ha n t ha t, bu t w e go t

24 things moving and started getting things together.

25 I was also told at the time that there was






1 g oin g t o be a c ont rac t t ha t - - c om ing a lo ng w it h D en ni s.

2 I n f a ct, yo u'r e th e o n e t h at ex pla ine d th e c o nt ra ct an d

3 h ow - Tre ppi d s cre we d i t u p a nd t ha t w as g oin g t o b e ab le

4 t o c om e a lo ng w ith De nni s a t th e t ime o f t he a gr eem ent .

5 MR. FLYNN: Move to strike.

6 Who first --

7 MR. HOLAHAN: Are you striking your move to

8 strike or are you moving to strike?

9 MR. FLYNN: Who first informed you --

10 MR. HOLAHAN: Wait a minute.

11 MR. FLYNN: Mr. Holahan, I'm withdrawing all

12 t hos e q ue st ion s.

13 Q. Who first informed you of this preliminary

14 i nju nct io n?

15 A. I'm confused. What questions are you

16 withdrawing?

17 Q. Who first informed you of the preliminary

18 i nju nct io n?

19 A. I don't recall who first informed me. I recall

20 b ein g s ur pr ise d b y it , s inc e I w as to ld t her e w as n' t o ne

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 i nju nct io n i n p la ce ?

25 A. '07?






1 Q. '07.

2 A. Probably.

3 Q. A year and a half later, Ms. Blixseth.

4 A. I think I was by then.

5 Q. You were aware there was a preliminary

6 i nju nct io n i n p la ce ?

7 A. I was aware of that.

8 Q. Okay. Let's move on.

9 At some point in time did you come to

10 understand that that preliminary injunction involved all

11 of Montgomery's purported technology?

12 A. I discovered that all of what was under the

13 lawsuit with eTreppid.

14 MR. FLYNN: Thank you.

15 And here's an order dated August 2, '07.


17 MR. GLASSER: What exhibit are we on, do you

18 know?

19 MR. FLYNN: Exhibit 18.

20 MR. GLASSER: And at the end of this depo are

21 y ou g oi ng t o g ive t he co urt r ep ort er t hes e?

22 MR. FLYNN: Yeah, she will take possession.

23 Q. Here's an order dated August 2, '07, by Judge

24 Pro affirming the preliminary injunction when you were

25 r epr ese nt ed by th e L in er fi rm .






1 Did you know as of August 2, '07, that there

2 was a preliminary injunction in effect on Montgomery's

3 technology?

4 A. Clearly I did.

5 Q. And so as of June '07, did the Liner firm --

6 b etw een J un e a nd A ugu st 2 , ' 07, di d t he L ine r f ir m

7 inform Western Capital Partners that there was, in fact,

8 a preliminary injunction on the Blxware technology

9 c oll ate ra li zed t o the m?

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 A. Well, the way you worded that, I didn't put

22 B lxw are u p f or W es ter n Ca pi ta l. T hey f il ed a U CC .

23 Q. No, any other lenders. Please listen to the

24 question.

25 A. I'm trying very hard.






1 Q. Did you borrow any money from any other lender

2 to which you pledged Blxware as collateral?

3 A. But you're saying any other as if I'd already

4 p led ged t o o th ers . T hat 's t he r ea son I 'm h av in g a h ar d

5 time answering your question.

6 Q. Did you pledge Blxware to any lender, period,

7 during the period of the preliminary injunction?

8 A. I pledged to the second Wachovia, which is what

9 we were referring to on the 3 million and the 5-.

10 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: W e'll get into that.

15 Let's deal with Exhibit 19, one of the FBI

16 reports indicating the technology was fraudulent.


18 BY MR. FLYNN:

19 Q. Have you seen that FBI report, Ms. Blixseth?

20 A. I'm confused with this, because when this --

21 w hen yo u' re ta lki ng a bou t t hi s i s a ft er t he - -

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






1 was part of --

2 MR. HOLAHAN: 19 or 18?

3 THE WITNESS: 19.

4 MR. FLYNN: 19, I'm sorry.

5 THE WITNESS: That this report was part of

6 something after an illegal raid by the FBI on Montgomery

7 o n w hi ch yo u r ep re sen ted hi m a nd t his w as pa rt o f t he

8 r epo rt t o t ry t o s ay t ha t t he t ech nol og y w as wo rt hl ess

9 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. I

13 just know this was part of what was in court.

14 Q. When did you first learn that the FBI was

15 saying in written reports that the technology was

16 f rau dul en t?

17 A. I believe I learned it from you stating that

18 t hat 's w hat yo u g uy s w er e g oi ng to us e i n d ef en se o f

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. They were released on April 9,

24 2006, by Judge Pro.







1 BY MR. FLYNN:

2 Q. When did you get this part of the FBI report,

3 Ms. Blixseth?

4 A. I really don't know. I don't know if I ever

5 did.

6 Q. Was it on April 12th or 13th, 2009 -- strike

7 t hat , 20 07, a t P or cup ine C re ek?

8 A. I don't recall. I recall you going over the

9 c ase a nd th ing s t ha t t he y h ad f ile d i n c ou rt th at w ere

10 going to substantiate the information that was given to

11 t hem to g et th e F BI s ear ch w arr ant wa sn 't cr edi bl e a nd I

12 recall that, but I don't recall seeing documents.

13 Q. Were the FBI reports given to you and Mr. Kemp

14 i n Ap ri l of 2 00 7, M s. B li xs et h?


16 Q. Did the Liner firm give you the FBI reports

17 t hat ha ve b een ma rk ed Ex hib it 1 9 a nd 2 0?

18 A. Not to the best of my knowledge.

19 Q. Okay. Let's go to the declaration of FBI agent

20 Mike West.

21 A. 21.


23 MR. FLYNN: This will be Exhibit 21.

24 Q. Ask you just simply yes or no, have you seen

25 t his do cu me nt?






1 A. I think I have seen this one.

2 Q. And when did you see it?

3 A. I think was given to me when during discussions

4 o f h ow y ou w er e g oi ng to h an dle th e a ll eg ed l eg al r aid

5 a nd m ake it an i ll ega l r ai d o f D en nis M on tgo mer y' s - -

6 Q. And now in July --

7 MR. HOLAHAN: Were you through with that

8 answer?

9 THE WITNESS: Just a run-on.

10 BY MR. FLYNN:

11 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. With your whole question in place just the way

16 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 i nto of w ha t w e th oug ht w as t ec hno log y t ha t t he D OD wa s

24 going t o want t o be u sing.

25 Q. And what were the obstacles?






1 MR. HOLAHAN: Are you -- are you free to

2 testify about this?

3 THE WITNESS: That part I can. That part's

4 c omm on k now led ge.

5 MR. HOLAHAN: Uh-huh.

6 BY MR. FLYNN:

7 Q. Ms. Blixseth, what were the obstacles?

8 A. Of some within the people that had worked with

9 Warren Trepp were saying that the technology was not

10 valid and the people that had been using the technology

11 f or t es ts a nd o th er t hin gs w ere sa yin g i t wa s v al id .

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: What line, Counsel?

16 MR. FLYNN: Page 2, lines 19 to 21.

17 Q. -- "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 A. We showed them -- we showed them what we had

25 b een -- t he da ta t hat we h ad be en p roc ess ing .






1 Q. Did that purport to show that Montgomery was

2 intercepting al-Qaida communications on Al-Jazeera

3 transmissions?

4 A. That I can't answer.

5 Q. Ms. Blixseth, isn't it a fact that you have

6 told numerous people that there was a $100 million black

7 budget allocated from Montgomery's noise filtering

8 technology to filter out al-Qaida communications on

9 Al-Jazeera transmissions?

10 You've told that to numerous people, have you

11 not?

12 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 S and ova l a nd D enn is t he v er y f ir st ti me I me t y ou .

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 but I k now it was in '06.

25 Q. So when you went to see Cheney was it an effort






1 t o t ry t o g et t he h un dre d m il li on d ol la r c on tra ct ?

2 A. It was an effort to try to see what the

3 blockage was in order to see how we could go about

4 t alk ing t o t he m a bo ut th e t ec hn olo gy w e h ad.

5 Q. To sell it to them?

6 A. No, to talk to them about it.

7 Q. Did you want to get the hundred million

8 d oll ars , Ms . B lix se th ?

9 A. If the technology was something that they

10 wanted t o use a nd i t w as s omething w e c ould d o. I

11 w asn 't t ryi ng t o i nve st t he m on ey o r h ave th e b ur n r at e

12 it was to not try to get money back out of it.

13 Q. Were you paying a hundred thousand dollars a

14 m ont h t o Mo ntg ome ry i n o rde r t o tr y t o ge t t he h und red -

15 million-dollar contract, Ms. Blixseth?

16 A. I was paying a hundred thousand dollars a month

17 f or h im t o b e t he c hi ef s cie nti st f or B lx war e a nd

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 ///






1 BY MR. FLYNN:

2 Q. Now Cheney rejected you; is that correct?


4 Q. What did Cheney's office say?

5 A. They were going to investigate and check into

6 w hat t he r oa db loc ks w ere .

7 Q. And what then happened?

8 A. They did some investigations and found that

9 they were getting discrep- -- different discrepancies in

10 t he r ep or ts an d w e ul tim ate ly d id n ot p ut a c on tr ac t

11 together through the Cheney office.

12 Q. And then you went to Robert Franks at the Wall

13 S tre et J our nal ?

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 a ddi tio na l amo unt I g ot w as 3 -.






1 Q. Did you pledge the Blxware security to first

2 g et $ 5 m ill ion b ef ore yo u g ot t he $ 3 m ill ion ?

3 A. I didn't -- I don't believe so but --

4 Q. What exhibit do you have there in front of you,

5 Ms. Blixseth?

6 A. 22.

7 Q. 22.


9 BY MR. FLYNN:

10 Q. Let me ask you a couple of questions: As of

11 M arc h 6 , 20 06, wh en y ou g ot t hi s $ 5 mi lli on d em an d l oa n,

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 you in default with Western Capital Partners?

16 A. We may have been in technical default, but we

17 w ere wo rk in g w ith t he m o n t ry in g t o g et t hin gs - - a t

18 that time they were wanting to be cooperative and trying

19 t o g et t hin gs, so w e g ot t hi ngs to get he r a nd Ma tt he w w as

20 w ork c lo sel y wi th W es ter n.

21 So I can't answer if we were -- if they had

22 f ile d a d ef aul t o r if we w er e i n t ec hn ica l d efa ul t.

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






1 had paid Western Capital Partners?

2 A. I can't recall.

3 Q. As of March 6, 2008, were you in default with

4 American Bank?

5 A. I believe so.

6 Q. As of March 6, 2008, were you in default with

7 First Bank & Trust?


9 Q. When you got the $5 million on or about

10 M arc h 6 , di d y ou d isc los e t o Wa cho via B an k t hat y ou we re

11 in default or technical default with either First Bank &

12 Trust, American Bank or Western Capital Partners?

13 A. I don't recall, but the use of the funds from

14 W ach ovi a, t hey kn ew w ere to g et so me t hin gs - -

15 Q. Please, the answer is I don't recall? Is that

16 y our t es tim ony ? Y ou d on 't k now w he th er y ou w er e in

17 default when you took $5 million from Wachovia Bank?

18 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 t he a dd-ons. The s imple q uestion: Do y ou k now

23 whether you were in default as of August 2006? It's yes

24 or n o. You e ither k now o r you d on't k now.

25 MR. HOLAHAN: If you don't let her answer the






1 q ues tio ns y ou a sk , w e' re go in g t o s to p.

2 MR. FLYNN: Yeah. You do whatever you're going

3 to d o a nd I 'll do w hat I 'm g oing t o d o.


5 Q. Ms. Blixseth, as of March 6, 2008, were you in

6 constant email communication with Leon Royer from

7 A mer ica n Ba nk w it h re gar d t o tr yin g t o cu re t he d ef aul t

8 t hat h ad be en g oin g o n f or m ont hs w it h A me ri can B an k?

9 A. I can't tell you the exact dates. There were

10 t hin gs t hat -- I c an' t t ell y ou th e e xa ct da tes .

11 Q. Now as of this time, early March '08, is that

12 r oug hly t he sa me p eri od o f t ime th at y ou f ir st f oun d t he

13 f ake ta rg et le tte rs ?

14 A. I'm not aware of target letters being fake or

15 not f ake. I t old you when I think I f irst g ot t hem.

16 MR. HOLAHAN: That's all right.

17 BY MR. FLYNN:

18 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?


22 Q. As of March 21, '08, did you send Gary Peters

23 t o S am B yrn e's of fi ce to ma ke a se par at e d ea l o n t he

24 Yellowstone Club?

25 A. That was not why Gary Peters went to Sam






1 Byrne's office.

2 Q. Do you have numerous email communications with

3 r esp ect t o w hy G ar y P ete rs w ent to Sa m B yr ne 's o ffi ce?

4 A. There were a lot of emails going back and forth

5 between G ary P eters a nd m e.

6 Q. Was one them relating to your effort to get the

7 club i n p lace o f M r. B lixseth?


9 Q. As of March 21, '08, were you subject to an

10 injunction by the family court about interfering with

11 t he s al e o f t he Ye llo wst one C lu b?

12 A. I don't recall if there was an injunction or

13 not. I r ecall t hat t he j udge s aid - - t ell m e t he d ate

14 again.

15 Q. 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. I

19 r eme mbe r t ha t t he j ud ge s ai d t o - - th er e c an on ly b e o ne

20 o f u s ne got iat ing w it h t hat a nd th at w oul d b e T im s inc e

21 he h ad b een d oing t hat.

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,






1 b eca use i t w as n't - - w e w ere do ing th in gs be sid es a t t he

2 same time.

3 MR. HOLAHAN: You can say you don't understand.

4 THE WITNESS: Yeah, I'm not sure how to answer

5 that question.

6 BY MR. FLYNN:

7 Q. Let's go through the loan document. In the

8 f irs t p ar ag rap h i t re fer enc es a co rre ct c opy of a

9 certain license agreement between borrower and

10 g uar ant or .

11 MR. HOLAHAN: Which document are you looking at

12 now?

13 THE WITNESS: 22.


15 Q. Did you issue -- who owned the technology as of

16 M arc h 6 , 20 08, th at w as p le dg ed as co ll at era l t o

17 W ach ovi a Ba nk f or t hi s $5 m il li on? W ho o wne d it ,

18 Ms. Blixseth?

19 A. I don't recall if it was me, personally, or it

20 was Blxware.

21 Q. Did you enter into a license agreement giving

22 i t t o B lx wa re, li ce ns ing it t o B lx war e?

23 A. License it for use?

24 Q. Yes.

25 A. I believe so.






1 Q. Let's go over to page 3 of Exhibit 22,

2 Representations and Warrantees. You know what they are,

3 d on' t yo u, Ms. B li xse th?

4 A. My answer is the same as you've asked me now

5 five t imes. I t hink I 'm g enerally a ware o f w hat

6 representations and warrantees are.

7 Q. This reads, "To induce the bank to enter into

8 this letter and make the loan hereunder, the Borrower

9 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 a uth ori ty o r a g en cy n ow p en di ng or to t he kn owl ed ge 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 Now that was false, wasn't it, Ms. Blixseth?

22 A. If it -- if it says that they weren't aware of

23 t he l it ig at ion wh en t her e w as o the r w ay s t o u se t he

24 technology, then what's part of -- that we were working

25 on at Bellevue, which is part of -- or excuse me,






1 different than eTreppid.

2 Do you want me to wait so you can hear my

3 answer?

4 Wachovia was brought to me by Liner, so Liner

5 w as t he l aw fi rm r epr ese nti ng m e i n t he e Tre ppi d

6 litigation.

7 Q. So there was litigation pending relating to the

8 technology; is that correct, Ms. Blixseth?

9 A. To some of the technology, but not to all of

10 the technology that Blxware was developing.

11 Q. So this statement is false. There was

12 litigation pending, wasn't there, Ms. Blixseth?

13 A. I would say that there was litigation still

14 pending.

15 Q. And your law firm, Liner, was representing you

16 and Montgomery in the litigation that was pending; isn't

17 t hat t ru e, M s. B li xse th?

18 A. That is true.

19 Q. Did you read this document before you signed

20 it?


22 Q. Now did you know that the litigation in Nevada

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?






1 A. With the technology that eTreppid and

2 M ont gom er y w er e s ui ng ov er, I d id k no w t ha t b y t hen .

3 Q. What did you do with the $5 million?

4 A. That's what I was trying to answer a few

5 minutes a go. I paid -- I g ot things current. I got

6 interest c urrent. I p aid - - I paid t hings o ff.

7 Q. Did you pay Western Capital Partners?

8 A. They may have been -- they may have gotten some

9 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 h ave so me s tab ili ty u nti l w e go t t he o the r s tuf f

17 resolved with the marital.

18 Q. Isn't it true that you didn't pay anybody but

19 g ave $1 .5 m ill ion t o T on y R ob bi ns o f t he $ 5 m il li on ?

20 A. That's not true.

21 Q. Did you give $1.5 million to Tony Robbins?


23 Q. Did you give $1.5 million to any entity other

24 than Blxware?

25 A. No I not.






1 Q. Where did the $1.5 million go?

2 A. I don't know what 1.5 you're talking about.

3 Q. Where did the $5 million go? Give me your best

4 memory in general.

5 MR. HOLAHAN: She already answered that

6 q ues tio n, c oun sel .

7 THE WITNESS: I can't.

8 MR. HOLAHAN: She already answered that

9 q ues tio n t o th e b es t o f h er r ec oll ect io n.

10 BY MR. FLYNN:

11 Q. Can you give me any idea whether you paid any

12 kind of an approximate amount to Western Capital, a

13 dollar? 10,000? A hundred thousand?

14 A. I already answered that. I believe some of

15 t hei r i nt er est wa s p ai d w he n I g ot th is , b ut I' m n ot

16 positive.

17 Q. Same with American Bank?

18 MR. HOLAHAN: Asked and answered, Counsel.

19 MR. FLYNN: Let's move on.

20 Q. Is this your signature at the end,

21 Ms. Blixseth?

22 A. Looks like it.

23 MR. GLASSER: What exhibit are you on,

24 Mr. Flynn?

25 MR. FLYNN: Same exhibit.






1 MR. HOLAHAN: 22.

2 MR. GLASSER: 22.

3 BY MR. FLYNN:

4 Q. So it's your testimony that Liner represented

5 y ou in th is tr an sa cti on?

6 MR. HOLAHAN: No, she did not say that.

7 THE WITNESS: Yes, I did. They represented me.

8 T hey b ro ugh t W ach ov ia to me a nd th at' s h ow I me t

9 Wachovia.

10 BY MR. FLYNN:

11 Q. Thank you. Thank you.

12 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 A. I had a meeting with those three at the Liner

18 firm.

19 Q. Thank you.

20 What is your best memory of what was said at

21 that meeting?

22 MR. HOLAHAN: Objection. Attorney-client

23 p riv ile ge .

24 MR. FLYNN: N o. Mr. Chandran is a

25 representative of -- he's a representative of Wachovia






1 Bank, Mr. Holahan.

2 MR. HOLAHAN: That true?

3 THE WITNESS: Yeah.

4 BY MR. FLYNN:

5 Q. What was said at that meeting, Ms. Blixseth?

6 A. It was an introduction. I don't really recall.

7 It w as a n introduction.

8 Q. Did you advise Mr. Chandran at that time about

9 t he l iti gat ion i n Nev ada .

10 A. Not to my best recollection.

11 Q. Did Mr. Yankelevitz advise Mr. Chandran about

12 t he l it ig at ion i n N ev ada ?


14 Q. Was any kind of kickback paid to Mr. Chandran?


16 Q. By you or Mr. Scalia?

17 A. I can tell you I did not pay any kickback to

18 a nyb ody a nd I c an 't s pea k f or J ack , b ut I as sum e t ha t' 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 t ime o f the m eeting?

24 A. And what was the date of the meeting?

25 Q. Within the two weeks before March 6th, 2008?






1 A. No, I did not.

2 Q. Did Mr. Yankelevitz represent to Mr. Chandran

3 t hat t he re w as a b lac k b u dge t c o nt rac t ow ned by B lx war e

4 involving Montgomery's technology?

5 A. Not in front of me.

6 Q. Did anyone represent to Wachovia Bank that

7 B lxw are h ad a c ont rac t i n pl ace wi th t he f ed era l

8 government in connection with the Blxware technology?

9 A. Not that I'm aware of.

10 Q. What did you tell Mr. Chandran during this

11 meeting?

12 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 e xpl ain ed k ind of t he hi sto ry o f w hen h e c am e o n bo ard ,

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 t o e xpl ai n w as wh y t he b urn r at e w ent o n s o l ong be for e

22 w e c oul d t ry t o t ak e i t t o c omm erc ial a nd ha ve c ash

23 flow.

24 Q. So your memory now is you believe that someone

25 disclosed to Mr. Chandran the injunction?






1 A. I'm just saying may have. In going through why

2 b y t hi s d at e w e s ti ll ha dn 't ta ken an yt hi ng t o t he

3 marketplace, that may have been talked about.

4 Q. As of March '08 did you even have a product?

5 A. Not that we could take to the marketplace.

6 Q. Were any representations made to you -- made by

7 y ou t o M r. C ha nd ra n i n t he m eet ing wi th r ega rd t o h avi ng

8 a pr od uc t t hat y ou co uld t ak e t o t he m ark etp lac e?

9 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 t ech nol og y w as ab ou t t o b e s old to ei th er Ra yth eo n o r

14 the federal government and, basically, the $5 million

15 c an g et r ep aid as s oo n a s th ose co ntr ac ts ar e p ai d?

16 Did you make any kind of representations like

17 that?


19 Q. Did you make any kinds of representations like

20 t hat i n a ny d oc um en t to a ny bo dy ?

21 A. Not that I'm aware of. We had meetings with

22 Raytheon. We sent people to go meet with them, so that

23 could have been disclosed that there were meetings or

24 o ngo ing t al ks.

25 Q. Did you prepare an executive resume in which






1 those representations in general were made to loads of

2 people?

3 A. Not that I'm ware of.

4 MR. FLYNN: Let me just finish Wachovia and

5 then w e'll g o for l unch.

6 MR. HOLAHAN: We're not going to stay through?

7 MR. FLYNN: You want to go straight through?

8 MR. HOLAHAN: Do you?

9 MR. FLYNN: Sure.

10 MR. HOARD: Do I get a vote?

11 MR. BLIXSETH: We can get you takeout.

12 MR. HOLAHAN: W hat is the document?

13 THE WITNESS: Demand promissory note.

14 MR. FLYNN: Yeah, let's put that one aside.

15 Yeah, would you mark this, please, 23A, please,

16 S tep han ie .

17 (Exhibit 23A was marked for identification.)

18 BY MR. FLYNN:

19 Q. We'll put it aside, Collateral License

20 A gre eme nt .

21 Let me just ask you, is this your signature on

22 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.






1 Q. Maybe the last page is the notary?

2 A. No, it's mine.

3 Q. No, it's your signature too.

4 A. Yeah.

5 MR. FLYNN: That's confirming the license

6 a gre eme nt . Le t's g o t o t he l ic ens e ag ree men t.


8 BY MR. FLYNN:

9 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 M s. B li xs et h: Is t hi s l ice ns in g a gre em en t, d oe s i t

16 basically reflect your understanding that you owned all

17 the software technology that Montgomery had?

18 A. Yes.

19 Q. Thank you.

20 MR. BLIXSETH: If anybody is hungry, we'll get

21 s ome bod y t o ru n i n so me s an dw ic hes if y ou te ll m e w hat

22 y ou' re h ung ry f or .

23 MR. HOLAHAN: We can take a break.

24 MR. FLYNN: Yeah, we'll take a break.

25 THE WITNESS: You're throwing these at me so






1 fast, I want t o b e able to s ee t hem.

2 BY MR. FLYNN:

3 Q. You can put the license agreement aside.

4 That's going to be for another day.

5 A. But there's no signatures. I'm trying to look

6 to s ee w ho p resented t his.

7 Who presented this?

8 Q. These are Wachovia loan documents that are on

9 file with the court.

10 A. Okay.

11 Q. Matter of fact, you can see the docket entries

12 at t he t op o f the d ocument?

13 A. Okay.

14 Q. This is the 3 million on June 23, '08,

15 Ms. Blixseth, so you're now getting another 3 million.

16 A. That's what I was recalling when you were

17 asking about the 8- and I said it was 5- and 3-.

18 Q. Right.

19 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 A. I believe so, because I think that's when

23 Matthew was trying to renegotiate the --

24 Q. Did you disclose to Western Capital -- to

25 Wachovia that you were in default with Western Capital






1 Partners?


3 Q. Did you disclose to Wachovia at this time that

4 y ou w e re in de fa ul t w ith F ir st B an k & T ru st?

5 A. I don't recall. I don't recall if I was then

6 with them.

7 Q. Did you disclose to Wachovia that you were in

8 d efa ult w it h Am er ic an B an k?

9 A. Yeah, I don't recall.

10 Q. Okay. Now on this $3 million, what did you do

11 w ith th at 3 mi lli on , M s. Bl ix se th?

12 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 Q. Where are all the records relating to where all

17 this money went?

18 A. You probably have them, because they would have

19 b een o n Jor y's c om put er.

20 Q. Ms. Blixseth, where are the records relating to

21 w her e al l th is m on ey w en t?

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?" I






1 said they're probably on Jory's computer.

2 BY MR. FLYNN:

3 Q. Thank you very much.

4 Now, Ms. Blixseth, did you tell Jory Russell on

5 o r a bo ut Ju ne 2 4th or th er ea fte r t o d el et e o r d es tr oy

6 documents off his computers?

7 A. I told Jory Russell to not only not destroy

8 a nyt hin g, b ut a ny th in g t h at h e h ad in h is po sse ss io n t o

9 t urn o ve r a nd a nyt hin g t hat - - a ny qu es ti on h e w as

10 a ske d, t o an sw er t he t ru th.

11 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 m oni es w ent ar e n ot a nd i f t hey we re o n t he R uss ell

21 computers, they have been destroyed.

22 MR. HOLAHAN: Are you representing that as an

23 e xpe rt w itn ess ?

24 MR. FLYNN: I'm just putting that on in the

25 record a t this p oint.






1 MR. HOLAHAN: Do you have any papers

2 d ocu men ti ng th at?

3 MR. FLYNN: Yeah, we'll get into it,

4 Mr. Holahan.

5 Q. Let's get into page 3 of this document.

6 A. Which document is this?

7 Q. Same document, the $3 million you got on

8 June 23rd. Let me ask you this: From the little

9 documentation we've been able to put together it appears

10 t hat ev er y t im e y ou g ot l ar ge s ums of m on ey y ou s to ppe d

11 p ayi ng y our bi lls ; i s t ha t t rue or fa ls e?

12 A. That would almost be reverse of what I would do

13 when I g ot s ums of money. I would try to catch u p a nd

14 p ay e ve ry th ing .

15 Q. We'll see.

16 Representations and warrantees --

17 A. Tell me what page.

18 Q. -- page 3.

19 "To induce the bank to enter into this

20 agreement and make the new loan hereunder, the Borrower

21 r epr ese nt s t he wa rr an ts t o t he b an k t ha t, A,

22 litigation" -- it's the same litigation clause that

23 there's no litigation pending.

24 Well, in fact, at that time you were involved

25 in evidentiary hearings on contempt orders against






1 Montgomery that you were paying for in connection with

2 litigation, isn't that true, Ms. Blixseth, in June '08?

3 A. That Blxware was paying for?

4 Q. That you, Edra Blixseth, the money was coming

5 from you, was it not?

6 A. The money was being paid by Blxware.

7 Q. To pay --

8 A. That was part of the burn rate that we --

9 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. We'll see.

17 In fact, you were subpoenaed to come in and

18 testify for those contempt proceedings, were you not?

19 A. I'm not aware that I was. I didn't testify.

20 Q. Let's go to the last page.

21 Is that your signature for this 3 million?

22 A. I believe so.

23 Q. When you took this $3 million from Wachovia

24 Bank, did you have the means to repay it?

25 A. I believe I did.






1 Q. And why do you believe that you did?

2 A. I believed every time I took out a loan that I

3 w as g oin g t o g et t hin gs f ina lly se ttl ed w ith Ti m a nd I

4 would have the assets and the cash flow to be able to

5 c ons oli da te th e a ss et s t hat I h ad t ha t w er e f re e a nd

6 clear and be able to take care of all of these loans and

7 get o n a positive c ash f low.


9 Let's look at Exhibit 28, Pledge Agreement.


11 BY MR. FLYNN:

12 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 y ou're a p arty.

16 Did you know that on or about June 23rd?

17 MR. HOLAHAN: Could you please -- I'm sorry,

18 C oun sel , sh e's a p art y to w ha t?

19 MR. FLYNN: She was a defendant at this point

20 i n t he l i ti gat ion , M r. H o la ha n. I 'm s o rr y y ou' re n o t

21 a war e o f th e f act s, s ir, bu t t ha t' s n ot m y p rob le m.

22 MR. HOLAHAN: Was she added after the

23 injunction? Because she's not on the injunction.

24 THE WITNESS: Y eah, I was added.

25 MR. FLYNN: The injunction is back in






1 February '06 --

2 MR. HOLAHAN: Right.

3 MR. FLYNN: -- the order in the federal court

4 c onf irm in g it i s Au gu st 2 00 7.


6 MR. FLYNN: We're now into 2008. Please follow

7 along, Mr. Holahan.

8 THE WITNESS: But it wasn't Blxware, it was

9 Dennis Montgomery and eTreppid.

10 BY MR. FLYNN:

11 Q. What were you pledging here that was then the

12 subject of contempt hearings in federal court and the

13 i nju nct io n to g et t hi s $3 m il li on? W ha t wer e yo u

14 pledging?

15 A. The -- what we were going to be doing with the

16 t ech nol og y, so me o f w hic h h ad n oth ing t o d o w it h t he

17 eTreppid technology.

18 Q. What part of it didn't have anything to do with

19 eTreppid technology?

20 A. We were working a lot of different things in

21 B ell evu e a nd s ome t hi ngs se pa ra te a nd w e h op ed t o g et

22 the eTreppid thing resolved, but, again, I'm assuming

23 that since Liner brought Wachovia to me and Liner looked

24 a t t he t hin gs t ha t t he y w er e a wa re of w ha t w as g oin g o n.

25 Q. Let's cut through this. Is that why you






1 confessed $26.5 million in judgments two months later to

2 the Trepp parties if the technology didn't belong to

3 Trepp?

4 A. First of all, I don't think two months later is

5 w hen t he ju dgm ent w as en ter ed , b ut se co nd of al l - -

6 Q. I'm not talking about when the judgment was

7 entered. I'm talking --

8 A. That's what you just said. You said when you

9 entered into --

10 Q. -- a settlement?

11 A. That's not what you said.

12 Q. A confession of judgment.

13 The agreement to confess the judgment was in

14 September '08; isn't that true, Ms. Blixseth?

15 A. That was the settlement agreement between

16 eTreppid and Montgomery --

17 Q. In which you agreed to confess judgments if you

18 d idn 't p a y t he m $ 26 .5 mi lli on ?

19 A. I don't know if that was part of what the final

20 agreement w as. I don't k now if that w as i n t here.

21 Q. Let's look at some emails -- and then we'll

22 b rea k f or l unc h - - b et we en y ou a nd Mr . R oy er fr om

23 American Bank when you were getting all this money.

24 MR. HOLAHAN: Let's see this.

25 ///






1 BY MR. FLYNN:

2 Q. Do you remember these emails, Ms. Blixseth?

3 A. I haven't had time to look at them yet.

4 MR. GLASSER: What exhibit are you on now?

5 MR. FLYNN: Is that Exhibit 24?

6 THE WITNESS: Yes. No, 29, I think.

7 MR. HOLAHAN: No, 29.

8 THE WITNESS: It's hard to fell it's a -4 or

9 -9.

10 MR. FLYNN: What was the last one?

11 MR. HOLAHAN: It's 29. The pledge agreement is

12 28. You skipped two.

13 MR. FLYNN: Okay.

14 MR. GLASSER: 29, all right.

15 MR. FLYNN: 29.

16 MR. GLASSER: Pledge agreement is 29.

17 MR. HOLAHAN: Did you mean to skip two?

18 MR. FLYNN: Yeah, I intended to skip.

19 MR. HOLAHAN: 26 and 27.

20 MR. FLYNN: But just so we're accurate, what

21 d id t he c ou rt r ep or te r p ut o n t hat ex hi bi t?

22 MR. HOARD: 30 is an email.

23 THE WITNESS: I think it's 29. It looks like

24 24, I said, but I t hink i t's 29.

25 MR. GLASSER: 29 in the set you gave us is --






1 MR. HOARD: It's 30.

2 MR. GLASSER: Well, 29, in the set is the

3 p led ge a gre eme nt.

4 MR. HOLAHAN: Oh, oh-oh. Pledge agreement is

5 2 8 t ha t t he co ur t r ep ort er m a rk ed.

6 MR. GLASSER: It's 29 in the --

7 MR. FLYNN: I'll fix that at the break. For

8 t he t i me be ing w e' ll c al l i t E xh ib it 3 0 .


10 MR. BLIXSETH: Are you leaving 24 and 25 out?

11 MR. FLYNN: Yeah, I'm not going over them right

12 now.

13 I want to go over these emails before we break

14 f or l un ch , Ms. B li xse th.

15 MR. GLASSER: So the emails are 30.

16 MR. FLYNN: And we'll fix it at lunch, Brian.

17 W e'l l ca ll t he m Ex hib it 3 0.


19 BY MR. FLYNN:

20 Q. Okay. Ms. Blixseth, we first --

21 A. Are these in chronological order?

22 Q. It's generally an email train, so let's start

23 from t he b ack. Let's s ee w hat t he l ast e mail i s.

24 A. You actually have them in order first to last,

25 it's right.






1 Q. Okay.

2 A. 4/14.

3 Q. 4/14, okay. We've got them in chronological

4 o rde r g oi ng fo rwa rd , f or th e r ec or d.

5 First one is from a Leon Royer and let me ask

6 y ou t his f ir st : A fte r ha vi ng q uic kly l oo ked a t t he se

7 e mai ls - - t his i s w ha t w e h av e b ec aus e t he y w er e s en t t o

8 P ete rs a nd w e' ve r etr iev ed s ome -- ho w l on g h ad y ou be en

9 emailing Royer?

10 And by the way, for the record we've subpoenaed

11 a ll t he A me ric an B a nk re cor ds .

12 How long had you been emailing Royer about the

13 l oan be in g i n d ef au lt be for e A pr il 14 th , o f ' 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 How much had you received as of April 14th,

20 2 008 , fr om A me ric an B ank ?

21 A. American Bank had a line of credit to me of

22 2 mi lli on t hat ha d a - - w hen Ma tth ew w as t ry ing t o c lo se

23 o ut t he S to ry M il l, t hey we re a t t hei r l im it an d L eo n

24 h ad s ug ge st ed t ha t t he y l oa n m e th e $ 5 mi lli on f or t he

25 trailer park.






1 So the $5 million didn't go to me, it went to

2 pay o ff t he t railer p ark. That w as a Story M ill

3 o bli gat io n bac k to m e. S o th e tot al w ith A me ri ca n Ban k

4 is 7 million of which 2 million was my personal and

5 5 m illion w as S tory M ill.

6 Q. As of April 14th?

7 A. I believe so.

8 Q. When was the 5 million given to your son?

9 A. I don't believe it was given to him. I believe

10 i t w as g ive n t o p ay o ff t o p urc has e t he t rai ler p ar k a nd

11 I don't remember when that was. It must have been '07.

12 Q. To purchase or to pay off the trailer park,

13 Ms. Blixseth?

14 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 was in '07.

22 Q. Was it in November and December of '07?

23 MR. HOLAHAN: If you don't recall, you don't

24 recall.

25 THE WITNESS: Y eah, I don't recall.






1 BY MR. FLYNN:

2 Q. Okay. When did you -- as of April 14, '08, how

3 l ong h ad yo u b ee n i n d ef au lt wi th A me ri ca n B ank o n t he

4 7 million?


6 Q. Now Mr. Royer writes on April 14, to you --

7 y ou' re L ear G2; c or rec t?

8 A. Correct.

9 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 e mai l a dd re ss.

19 Q. "Good morning, Edra. We look forward to

20 r ece ipt o f t he pa yo ff s o n A pr il 21 at t he le ast ."

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






1 day before, April 13, this is from you to Royer and you

2 s ay - - R oye r w ri te s, " Wh o w il l b e s en di ng th e f un ds ?"

3 You respond, "Sorry, Leon. I thought I made it

4 clear, b ut I must n ot h ave. I w ill b e s ending t he f unds

5 out o f my a ccount, E dra."

6 What funds?

7 A. I think that this was one of the phoney Gary

8 P ete rs' l oa ns, wi re s t ha t n e ver ca me t o f r ui tio n wh en I

9 t hou ght t ha t th ey w er e go in g to .

10 Q. As of April 14th you had 5 million from

11 W ach ovi a. W e hav en 't g ot t o t he F irs t Ba nk & T ru st l oa n

12 yet.

13 How much did you get in March of '08 from First

14 Bank & Trust?

15 A. I don't recall. Without the things in front of

16 m e, I do n't re cal l t he d ate s t o an swe r q ue st ion s l ik e

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 i t s tar te d o ut be in g s o I do n't re cal l w ha t t he d at es

21 were for those.

22 Q. As of March -- as of April 14th, you had gotten

23 5 mi lli on f rom Wa ch ov ia, yo u h ad g ott en 8 mi lli on , a s I

24 u nde rst an d i t, fr om F i rs t B an k. W e'l l g o t hr ou gh t h e

25 d ocu men ts .






1 Did you pay Royer anything?


3 Q. Did you tell Royer the funds would be coming

4 o ut o f y our ac co un t, b ut t he y'r e c omi ng f rom a t hir d

5 person you were also borrowing money from?

6 A. He knew how I was getting money to pay him was

7 through a different loan, the loan person, yes.

8 Q. What did you tell him?

9 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 f rom so me on e e lse w ho di dn' t k no w a bo ut h is l oa n t o pa y

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 read, I cannot answer that question.

24 Q. Let's go to the next one.

25 And the next one appears to be the duplicate of






1 the first one, maybe part of a chain.

2 Third page, from LearG2 to

3 [email protected].

4 Is that Gary Peters?

5 A. Yes, it is.

6 Q. "Gary, this is why I was hoping to get that

7 b rid ge p ut t hr oug h A SA P, ev en i f i t i s o nl y p ar ti cl e."

8 A. That means "partial," I think.

9 Q. "This is the bank that Tim is getting lots of

10 i nfo rma ti on f ro m. Th ink I t old y ou a bo ut t he m, w an t to

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 What did you mean by "before everything

15 changed"?

16 A. I have no idea. There was so many changes. I

17 w oul d h av e n o i de a w hi ch on e t hi s w as i n r ef ere nc e t o.

18 Q. "Now they're wanting to help Tim with putting

19 pressure on me."

20 Let me break in there. Who told you that

21 A mer ica n B an k w an te d t o p ut p re ssu re o n y ou?

22 A. I just knew by the way that they were doing

23 t hin gs. Ti m ha d wo rk ed w it h Le on R oy er a nd B ru ce

24 E ric kso n a l ot of t im es i n a lo t o f di ffe ren t s et ti ngs

25 to get information that put pressure on other people, so






1 I just assumed it was the same MO there.

2 Q. All right. Let me see if I understand this

3 c orr ect ly . Yo u'r e in de fau lt on $7 mi lli on. Y ou 'r e

4 a ttr ibu ti ng it to p ut -- t o T im , b eca us e h e' s h av in g t he

5 b ank p ut pr ess ure o n y ou e ve n t hou gh y ou' re i n d efa ult

6 on 7 million.

7 Is that what you're saying?

8 A. No, that's what you said. You want me to say

9 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 t hin gs d one di ffe re nt ly. T he y c an ei th er be he lp fu l o r

15 not helpful.

16 With Tim behind the scenes -- and this Leon

17 Royer is not the only one. He called banks he doesn't

18 d eal wi th , s o I kn ew w ha t h e w as d oi ng to pu t p re ss ure

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. American Bank, Leon

23 Royer told you --

24 A. No, I didn't say that. You said how were these

25 others.






1 Q. How did you know that Tim was doing something

2 w ith A me ric an B an k to p ut p re ss ure o n y ou ? J us t ex pla in

3 that to me.

4 A. Well, I had been with him for 25, 26 years and

5 the MO of what I had seen him do before with other

6 p eop le w oul d h ave m e b el iev e t ha t h e w as d oi ng t he s am e

7 thing now to me.

8 Q. So did Leon Royer say anything to you about Tim

9 using the b ank to p ressure y ou?

10 A. No, but their attitude and their behavior and

11 w hat th ey w ere wi ll in g t o d o c ha ng ed.

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 wa s c om in g t o t he e nd a nd g oi ng t o g et t hi ng s s et tle d.

17 T hat 's k ind o f w ha t we a ll a ssu med .

18 And now that that these things were coming due,

19 r ath er t han gi vin g m e ti me o r b uyi ng m e t ime or f ig uri ng

20 o ut a no th er wa y t o d o th ing s, t hey we re p utt ing a l ot o f

21 pressure on me.

22 Q. So their attitude is what you detected;

23 correct?

24 A. That's somewhat of what I detected, yes.

25 Q. Did Leon Royer know you had just borrowed $5






1 m ill ion f ro m Wa ch ov ia B an k?

2 A. He knew I was borrowing money to survive, so he

3 may have.

4 Q. Were you signing documents giving them access

5 to y our c redit r eports?

6 A. I don't recall doing that, but I may have if

7 they asked for it.

8 Q. Were you giving them cash-flow analyses?

9 A. I don't know if I gave any to American Bank or

10 not.

11 Q. Were you giving them financial statements,

12 Ms. Blixseth?

13 A. I believe that they would ask for updated

14 financial statements.

15 Q. Now were you reporting on your financial

16 statements your Western Capital $13 million loan?

17 A. I believe I was not.

18 Q. Were you fudging the financial statements from

19 l oan to l oa n a nd f rom ti me p eri od t o t ime pe rio d t o t ry

20 to get more money?

21 A. No. In fact, you used the word "fudging."

22 W hen th in gs wo uld c ha nge , w he n t he as se t - - a s a n

23 example, something you gave me a few documents ago,

24 showed that we valued Porcupine Creek at 200 million,

25 t hat 's b eca use th at 's th e a mo un t t hat T im an d I w er e






1 p utt ing o n i t a nd h e w as p ut tin g 2 00 m ill ion on D es ert

2 Ranch as well.

3 Those things changed as the market changed and

4 as time went on so --

5 Q. In reference to some of the testimony you just

6 gave, I'd like t o know --

7 A. You weren't listen to my answer. You were

8 reading w hat T im w rote.

9 Q. I heard you. I heard you.

10 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 p ut p ressure o n you.

14 Please identify any individual who told you

15 anything.

16 A. Are you talking about this email?

17 Q. No. I'm talking about your testimony of a few

18 moments ago.

19 A. Alan Rye told me that Tim would call him. He

20 h ad n o b u si nes s w it h A la n R ye . He wa sn 't do ing b us ine ss

21 with Alan Rye anymore; that he was asking questions

22 a bou t m y de ali ngs .

23 Kevin McGuire from Palm Desert National Bank

24 w oul d t el l m e t ha t T im w as c all ing an d g iv in g t he m

25 information or trying to get information.






1 Q. What did Mr. Rye say to you that Tim Blixseth

2 had said to him and when?

3 A. Well, one of the things was that he called and

4 a ske d m e i f Ji m D ol an wa s g oi ng to b e m ak ing t he pa yme nt

5 on the BFI note and I said I assumed so, because I

6 talked to Jim and asked if he was going to be needing an

7 extension a nd h e said n o.

8 And he said, "Well, Tim is telling me that

9 Jim's n ot g oing t o m ake t he p ayment." 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 a ski ng f or a n e xt en si on. I 'm p lan nin g on m ak in g a

13 payment."

14 Q. When was that, Ms. Blixseth?

15 A. That would be sometime in '08, so the latter

16 p art of ' 08 be cau se t he p ay me nt wa s d ue i n J anu ar y o f

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 i n ' 08, M r. Bl ixs et h, wh o h as t wo c hi ld re n i n B FI t hat

22 was securing the loan to First Bank & Trust --

23 A. Those were adult children. It wasn't in a

24 trust.

25 Q. -- wanted to know whether -- how much was the






1 payment for?

2 A. $5 million.

3 Q. -- whether a $5 million payment was going to

4 c ome i n t o B FI , un der sta ndi ng t hat hi s tw o c h il dr en ar e

5 beneficiaries under that instrument.

6 Is it your testimony that in that some way

7 shows that Mr. Blixseth was putting financial pressure

8 on y ou t hrough First B ank & T rust?

9 A. Alan told me that -- that, first of all, he

10 s hou ldn 't h ave t al ked t o T im a bo ut i t. B eau a nd M or ga n

11 are a dults. Tim h ad n o reason t o call h im. If B eau a nd

12 M org an h ad a q ues ti on th ey c oul d h ave c al led hi m.

13 Second of all, he said that it was clear Tim

14 h ad s ai d, " I d on' t t hi nk th at t hat no te i s g oin g t o b e

15 worth anything. Jim Dolan is having financial pressure.

16 I do n't t hi nk t ha t t he s ecu ri ty fo r S pa ni sh P ea ks i s

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 Q. Okay. Well, we will talk to Mr. Dolan and

21 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?






1 A. Kevin just told me that he got calls from Tim

2 intermittently asking what I was doing and saying that I

3 was going to end up with nothing and be careful of

4 l oan ing m on ey t o m e a nd t hos e k ind of t hi ngs .

5 Q. Now please explain to me how as of the date you

6 t ook $ 35 mi lli on f rom By rne , Au gus t 1 4 th, 20 08, a nd yo u

7 were showing $900 million in your net worth, please

8 explain to me as fully as you can how you went from

9 $ 900 m il lio n w hen y ou go t t he 3 5- m il li on , o wne d

10 Porcupine Creek, owned the Yellowstone Club, and ended

11 u p i n ba nkr upt cy s ome si x, s eve n m ont hs l ate r w it h a

12 n ega tiv e ne t w ort h.

13 Please explain that to me, Ms. Blixseth.

14 MR. HOLAHAN: You're asking for a very long

15 answer. If you're willing t o l et h er answer --

16 MR. FLYNN: I'm willing to let her answer.

17 Q. Please explain how you went from an 8- to

18 $900 million net worth on your financial statements on

19 A ugu st 1 5th , w hic h w e' re go in g t o g et i nt o, a nd h ow yo u

20 e nde d u p br oke an d c he at ing a ll th ese p eo ple ou t o f al l

21 this money.

22 How did that happen, Ms. Blixseth?

23 MR. HOLAHAN: Object to your --

24 MR. FLYNN: I'll withdraw "cheating."

25 Q. Not paying all these people all this money and






1 B yrn e en ds u p w ith y ou r ma jo r as se ts. Pl eas e ex pla in

2 how that happened. Go ahead.

3 A. I don't even know how to begin to start.

4 MR. HOLAHAN: I think you should parse that

5 q ues tio n a l it tle b it b et te r.

6 BY MR. FLYNN:

7 Q. Can't answer it?

8 A. It's --

9 MR. HOLAHAN: Do you want to know how she went

10 f rom $9 00 m ill ion t o h av ing n o m on ey a fe w m ont hs l ate r.

11 MR. FLYNN: Yeah, and Byrne ends up in control

12 of everything. I w ant to know that.

13 Q. How did that happen with Tim Blixseth telling

14 K evi n M cG ui re s he 's g oin g t o en d u p w it h n ot hin g.

15 Please explain to me how that happened, Ms. Blixseth.

16 A. It's so broad it's hard to answer, but I'll try

17 to answer.

18 Tim Blixseth not only called banks, he

19 called - - h e -- W arren T repp. He g ot i nvolved i n

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 f orward. We e nded u p n ot b eing a ble t o h ave t he

25 m one y t o ma ke t he f ir st p ay me nt , s o t ha t f el l a pa rt .






1 That money coming in had a lot to do with what

2 I w as c ounting o n c oming i n. A l ot o f what I was t old

3 to be certain things ended up not being what I was told

4 them to believe.

5 Based on my financial statements that you say I

6 c hea ted p eo ple ou t o f, I u se d w hat Ti m B li xs eth t ur ned

7 over o n t he b ooks a nd r ecords o f v alues. I u sed w hat

8 w as t a lk ed a bo ut i n t h e f ami ly c ou rt.

9 MR. HOLAHAN: Are you going to continue to

10 w his per t o y ou r c li en t i n f ro nt of my c li ent as s he 's

11 a nsw eri ng ?

12 THE WITNESS: And smile and laugh.

13 MR. FLYNN: Do you have anything else to add?

14 MR. HOLAHAN: No. She's not through, but are

15 y ou goi ng to co nt in ue ?

16 MR. FLYNN: Mr. Holahan, please.

17 Q. Do you have anything else to add?

18 MR. HOLAHAN: Mr. Flynn --

19 MR. FLYNN: I'm not responding, Mr. Holahan.


21 MR. FLYNN: I'm not responding.


23 MR. FLYNN: Mr. Holahan --


25 MR. FLYNN: Mr. Holahan --






1 MR. HOLAHAN: Are you going to continue --

2 MR. BLIXSETH: Sit down, Jack.

3 MR. FLYNN: Hold on. The record will reflect

4 t hat M r. Ho lah an j ust le ane d a cr os s t he t abl e a nd - -

5 This is tape recorded; is that correct,

6 Stephanie? So the noise of that slap in my face on my

7 documents --

8 MR. HOLAHAN: I'm trying to get your attention.

9 I 'm m aki ng a n o b je cti on a nd y ou wo n't s to p t a lk in g.

10 MR. FLYNN: Mr. Holahan, please cease and

11 desist.

12 MR. HOLAHAN: N o, you stop talking.

13 MR. FLYNN: You interrupted the witness in the

14 middle of an answer.

15 Q. Ms. Blixseth, do you have anything further to

16 add to your answer?

17 MR. HOLAHAN: Yes, she does, but she won't do

18 it n ow. We're g oing t o break f or l unch.

19 MR. FLYNN: And Mr. Holahan, you ever do that

20 to me again, sir, I will see you outside --


22 MR. FLYNN: -- at the end the deposition. Do

23 y ou u nd er st and ?

24 MR. HOLAHAN: Yes.

25 MR. FLYNN: You don't professionally misbehave






1 like t hat, M r. H olahan.

2 MR. HOLAHAN: Well --

3 THE WITNESS: Thank you for the glasses.

4 MR. BLIXSETH: You might need them.

5 MR. FLYNN: We're just at the beginning. We're

6 at the tip of the iceberg, Mr. Holahan.

7 THE REPORTER: Go off?

8 MR. HOLAHAN: We're halfway through the day.

9 MR. FLYNN: We're at the tip of the iceberg,

10 tip of the iceberg.

11 THE WITNESS: Why does Mike Flynn stare me

12 down, throw something towards my direction and say, "Tip

13 of the iceberg?"

14 MR. FLYNN: It wasn't. It was thrown on my

15 papers.

16 THE WITNESS: Were you not staring me down as

17 you s aid i t? Can't h ave i t b oth w ays, M ike.

18 MR. FLYNN: Let's take a break.

19 (Luncheon recess.)

20 BY MR. FLYNN:

21 Q. Ms. Blixseth, at the end of the -- before the

22 l unc h b re ak , e nd o f t he m or ni ng se ssi on , w e w er e

23 discussing how you went from 900 million roughly to zero

24 a nd I be lie ve y ou r t es ti mon y w as s abo ta ge of

25 Mr. Blixseth and Mr. Blixseth giving you false numbers;






1 is that correct?

2 A. That was part of it.

3 Q. What else?

4 A. Certain things not falling into place, certain

5 t hin gs t hat we re t old to b e v al ues th at e nde d u p n ot

6 being the values or having -- having difficulties in

7 being able to get those values out.

8 Q. Who told you about certain values that didn't

9 end up being values?

10 A. Part of it was what was turned over from the

11 t hin gs t hat I g ot f ro m t he M SA o n t ria l b ala nce s a nd

12 t hat ki nd o f t hin g t ha t d id n' t b al anc e.

13 Q. What trial balances did you get from the MSA

14 t hat di dn 't ba lan ce ?

15 A. The BGI records.

16 Q. Okay. What in the BGI records didn't balance?

17 A. Specifically, I can't say, just some of the BGI

18 r eco rds o f t he t hi ngs t ha t we re t ur ne d ov er. T he re w as

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 a rre ars m uc h mo re t ha n th at .

24 Q. And you didn't know that?

25 A. I was aware of -- there was conflicting things






1 going on, because in family court, as another example,

2 when I tried to object to the golf course lots with

3 C ros sHa rb or be ing s ol d, i t w a s s ta ted t ha t t h er e wa s n o

4 c omm iss io ns .

5 And then subsequent to that there was an Eric

6 L add c om mis sio n t ha t I h ad b eco me a wa re o f, s o t her e

7 w ere s om e t hin gs, l it tle bi ts a nd p ie ce s, th at I wa s

8 a war e o f a nd o th er th ing s t ha t I w asn 't a war e o f.

9 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 C red it S uis se l oa n w as a se cu re d l oan a nd no w i t' s a n

15 u nse cur ed lo an . T hat 's pre tt y h ug e.

16 So I can't --

17 Q. As of the date of the MSA was it secured or

18 u nse cur ed ?

19 A. I believe it was still secured as of that date.

20 Q. Okay. Are you saying that because at some

21 p oin t l at er on it b ec ame un se cu red th at l ed t o y our lo ss

22 of $ 900 m illion i n s ome w ay?

23 A. The totality of a whole lot of events led to

24 that.

25 Q. Okay. Can you identify any other events in






1 that totality?

2 A. Not right now off the top of my head, no.

3 Q. Have you had any meetings with the liquidating

4 trustee?

5 A. I've never met the liquidating trustee.

6 Q. Any meetings with their lawyers?

7 A. Until today, no.

8 Q. Have you provided any documents or information

9 t hro ugh y ou rse lf o r a th ird p ar ty a bo ut t he M SA o r a ny

10 of the transactions involving the MSA?

11 A. I don't think the MSA is a party to that, so

12 I'm not aware.

13 Q. No.

14 Have you, through a third party such as a

15 l awy er o r M r. R us se ll or Ms . Y ar bo rou gh o r a ny t hir d

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. Let's finish with E xhibit 30 and I h ave a

21 c oup le of qu es tio ns .

22 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?






1 A. I'm sorry, I'm just getting to where --

2 Q. At the end of that paragraph, about wanting to

3 keep things transparent between you and Peters?

4 A. Yes, I see that.

5 Q. As of April 15 in your prior relationship with

6 Peters had you kept everything transparent between the

7 two of you?

8 A. To the best of my knowledge. You know, whether

9 he was really real at this time or not, he was trying to

10 g et b ri dg e l oa ns a nd l oa ns t o t ake ou t s om e o f t hes e

11 t hin gs a n d t ak e t he p r es sur e o ff .

12 When you asked me on the very first page with

13 L eon , th at' s wh at I w as r ef er ri ng t o. I d id n't k no w

14 which that loan was.

15 Q. Was part of that transparency to leak stuff to

16 the press and blame Tim for the leaks?


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?






1 You had nothing to do with that?

2 A. Not only did I not have anything to do with

3 that, that is not a true statement. That's been said by

4 Tim i n c ourt b efore. I t old h im w hen w e w ere t alking

5 that that's chasing shadows, because that didn't happen.

6 I th in k y ou 're r ef err ing to M at t B row n a nd t hat

7 absolutely didn't happen.

8 Q. Okay. We'll see.

9 Did you call Gary Peters phoney?

10 A. Did I call him a phoney? Give me a time frame.

11 Q. At any time. Do you consider Gary Peters to be

12 a phoney?

13 A. I do now consider him to be a phoney, yes. I

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 C lub - - w he n yo u fi le d th at m ot ion ?

20 MR. BLIXSETH: Sam Byrne.

21 MR. FLYNN: I mean Sam Byrne.

22 Q. 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 a t t hat p oint i n t ime?






1 A. No, I did not. I didn't believe he was a

2 phoney at the mediation just before that either.

3 Q. When you filed that motion to intervene, were

4 y ou c oun tin g o n ge tti ng $ 50 m il lio n f r om G ar y P e ter s i n

5 o rde r t o t ak e o ver th e Y el lo wst one Cl ub ?

6 A. To interject -- to interject the needed cash

7 flow and cash for what was needed to be done at

8 Y ell ows to ne Cl ub, yes .

9 Q. Do you have any comprehension -- forgetting

10 M r. B yr ne 's te sti mo ny fo r t he m ome nt u nde r o ath - - o f

11 w hat ha pp en ed t o t he v al ue o f t he Y el lo ws ton e C lu b o n o r

12 a fte r A p ril 4t h w h en y ou fi le d t ha t 2 0 0-p age Mo ti on to

13 I nte rve ne in Le mo nd ?

14 A. I'm not clear on your question.

15 Q. Yeah.

16 Do you know the adverse impact on the

17 Y ell ows to ne Cl ub i n t he m ed ia w hen yo u f il ed th at

18 motion?

19 A. There had already been such bad press between

20 the Lemond litigation and the divorce that that probably

21 a dde d t o i t, b ut t her e h ad b een no nst op f or - - s inc e - -

22 since just shortly after January of '07 negative press

23 about Yellowstone Club.

24 Q. Did you believe on or about April 4th when you

25 f ile d t ha t m ot ion , w hi ch we 'l l g et in to - - w hic h,






1 parenthetically, Byrne says destroyed the Yellowstone

2 C lub i n e ss enc e - - w he n y ou f il ed t ha t m ot io n, y ou d id

3 so on the basis that Peters was going to come up with

4 5 0 m il li on i n c ash im med iat el y a nd 50 0 m il li on t o b uy

5 the c lub; i s that c orrect?

6 A. There were -- it was a two-prong step. We

7 don't k now a bout t he 5 00 m illion. That w as a

8 p oss ibi li ty th at h e h a d b ro ug ht up .

9 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 t hin g, w as t he o ri gin al 5 0.

13 Q. Now do you recall, and we've got the document

14 h ere , t ha t B yr ne t erm ina ted t he lo an o n M arc h 2 6?

15 A. Terminated the loan?

16 Q. Terminated the purchase of the Yellowstone Club

17 on M arch 2 6, ' 08. Do y ou r ecall t hat?

18 A. I don't recall the date. I recall a

19 c onv ers at io n t hat I h ad w it h T im , t ha t h e wa s t al ki ng t o

20 B yrn e a nd t ell ing h im th at i f h e d idn 't s how th at t hey

21 had the funds there to close that he was going to

22 force --

23 Q. All I need right now is whether you recall the

24 date.

25 A. But I don't recall the date.






1 Q. March 26.

2 Do you know two days later on March 28 you and

3 your lawyers had a 200-page document prepared with your

4 declarations and Peter's declarations to intervene on

5 the Lemond case?

6 A. I don't remember it being that close.

7 There was a time frame from the question you

8 j ust a sk ed m e, t ho ugh , w hic h i s t he r ea so n I wa nt ed to

9 s tat e wh at I w as s tat ing . T her e wa s a t im e dif fe re nti al

10 from when everything came down to actually culminating

11 a nd C ro ss Ha rbo r s ay in g t hat t he y w ere n ot go ing t o g o

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 w ere n ot d oing i t.

15 Q. Now let me see if we can focus in on the dates

16 a nd w e' ve g ot t he d oc ume nts , s o w e' ll g et in to i t, b ut 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 A. I don't recall that happening at the same time,

24 no.

25 Q. Okay. Do you recall Peters going to Sam






1 Byrne's office at your behest as your representative?

2 A. I -- Gary Peters did go and meet with Sam. Sam

3 h ad s aid -- I h ad i nt rod uc ed Ga ry t o S am a t Y ell ows ton e.

4 Q. I don't need any more --

5 A. -- but I do. I can't answer it that way then.

6 Q. Fine then you can't answer that.

7 A. Then take my answer away, because I can't

8 a nsw er th e q ue sti on .

9 Q. Then five days later the deal cratered. Do you

10 r eme mbe r t ha t? F iv e d ay s a ft er Pe ter s i s i n t he of fic e,

11 the deal craters.

12 A. Well, Gary -- I don't remember if it was five

13 d ays . G ary ha d c on ve rsa tio ns w ith Ti m B li xs eth a nd Bo b

14 Sumptner after meeting with Sam Byrne.

15 Q. You don't remember, fine. That's all I need

16 for now.

17 Do you remember between March 21, roughly, this

18 t ime fr am e, an d w he n t he de al i s c rat er in g y ou

19 n ego tia ti ng wi th G ary Pe ter s t o co me u p w ith

20 $500 million t o b uy t he c lub?

21 A. Gary came to me and said he might have somebody

22 that is interested and I said, "If there's somebody

23 i nte res te d a nd it 's a re al d eal , p ut i t i n w rit in g a nd

24 we'll see."

25 Q. Two days after the deal craters -- and we'll






1 g et i nto th e e xh ib its -- t wo da ys l at er y ou' ve g ot a

2 200-page motion based on Peters putting 500 million in.

3 Do you remember that?

4 A. No. I remember the 50 million.

5 Q. The 50 million was the bridge and the

6 5 00 m ill ion w as t he p urc has e.

7 You don't remember that?

8 A. The purchase was never something that was an

9 actual o ffer t hat w as p ut i n.

10 Q. Now at the time were you telling people,

11 m emb ers o f t he cl ub , a nd se nd in g e mai ls w hen yo u w er e i n

12 d efa ult o n a ll th es e l oa ns t hat we we nt t hro ugh t ha t y ou

13 h ad t he m on ey t o p urc has e th e cl ub ?

14 A. I think that I said that I was able to come up

15 with the money to purchase t he c lub. I d idn't s ay I had

16 t he m on ey t o p urc ha se t he c lu b.

17 Q. And how many banks were you in default with

18 w hen yo u w er e t el li ng pe opl e a t th e c lu b t ha t y ou h ad

19 t he m on ey t o p urc ha se t he c lu b?

20 A. That's apples to oranges.

21 Q. Okay. Let's go to the next page. We have to

22 m ove q ui ckl y he re . L et' s go t o t he n ex t pag e in e ma il s.

23 And you write on this page dated May 5th,

24 "That's their MO. He wrote back after my answer to him

25 to c ontact h im this a fternoon. I w ill do what I can t o






1 stall."

2 Stall what? Stall paying him?

3 A. I don't know based on what I'm reading. I have

4 no idea.

5 Q. You don't know what you meant?

6 A. Based on what you have in front of me, I don't

7 know what that meant.

8 Q. Were you trying to stall from paying American

9 Bank?

10 A. Based on what you have in front of me, I can't

11 tell w hat t his m eans.

12 Q. Regardless of what's in front of you, based on

13 t his ti me f ram e, e arl y M ay ' 08, we re y ou t ry ing t o s ta ll

14 f rom p ay ing A me ri ca n Ban k?

15 A. What I wrote was that I should be able to

16 t ran sfe r m on ey ba se d o n w ha t G ar y w as s ay ing an d t he n I

17 wasn't g oing t o h ave t he money. I might b e t rying t o

18 b uy s om e t im e h op in g t he mo ne y w as co mi ng in fo r t ha t,

19 but t hat's a guess o n my p art.

20 Q. Then you say, "I'd rather it come out next week

21 a fte r M on da y," an d y ou p u t, i n c ap s, " A FT ER. " W hat 's

22 t hat a ll a bo ut , Ms . Bl ix set h?


24 Q. What did you want to come out in the media

25 after Monday?






1 A. I have no idea. I don't even know if that

2 means media.

3 Q. Let's read down further on a prior email.

4 T hat 's a t 1 2:3 2 t hi s o ne i s 1 2: 30, tw o m in ut es b efo re,

5 t o yo u. "E dra , I u nd ers tan d cl ear ly t he b an ker i s

6 almost threatening you which is illegal with the press

7 issue. Keep me posted on the wire. I'm still working

8 on t he b ridge t o f ind comfort."

9 What's that all about, Ms. Blixseth, that

10 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 f ili ng a la wsu it a gai nst yo u f or d efa ul t o n t he l oa n a nd

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 b efo re o r a fte r I d on 't k no w h ow t o a ns we r.

21 Q. So you don't remember, is the answer to my

22 question, whether it was because they were threatening

23 t o s ue y o u. B eca us e P et ers i s s ay ing , " Th at 's a th rea t,

24 w hic h is i ll eg al w ith t he p re ss i ss ue ." Y ou d on 't

25 r eme mbe r wh at t ha t wa s ab ou t?






1 A. Not exactly.

2 Q. Okay. Let's go on.

3 Then you just -- you write an email to Peters

4 the same day and you say, "Gary, this is what I am

5 dealing with. He knows t his kind o f p ress w ill hurt m e

6 in c ourt n ext w eek. 'Edra's o ffering t o p ut i n

7 5 0 m il li on, bu t i s in de fa ul t o f 7 m il lio n w ith A me ric an

8 Bank.'" You put that in quotes.

9 "I made a deal with them last week before I

10 k new th at t he b ri dg e l oa n w as i n t rou bl e t o 2 mi lli on i n

11 interest current and the 5 million in 30 days. I knew

12 that would give me time to put my LOC together on PC."

13 Now this part in quotes, "Edra is offering to

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 o nly th en s urm ise t ha t w hat I a m s ayi ng t o G ary i s t ha t

20 L eon is t hr eat eni ng f or t ha t t o c om e o ut t ha t I 'm

21 defaulting on loans with American Bank at the same time

22 t hat I' m s ay in g I c an pu t 5 0 in to Y ell ows ton e C lu b.

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






1 m one y t o b uy t he Y ell ows ton e C lu b a nd y ou ye t w er e i n

2 default on this loan.

3 A. That was --

4 Q. You don't see, Ms. Blixseth, some contradiction

5 or h ypocrisy i n d oing t hat? Do y ou s ee a ny - - a ny l ack

6 of responsibility on your part in representing in court

7 t hat y ou go t $ 50 0 m il lio n t o bu y t he Y ell ows ton e C lu b

8 a nd y ou' re i n d efa ult of o ve r $ 2 m ill io n a nd th e b an k

9 saying we're going to sue you for it?

10 A. Tell me when you're done speaking your

11 s tat eme nt .

12 Q. I'm done.

13 A. Okay.

14 Q. Do you see any contradiction or hypocrisy?

15 A. You're making a statement. What's your

16 question? Do I see any hypocrisy?

17 Q. Yeah.

18 A. Okay. Now I'd like time to answer. It's

19 a ppl es t o o ran ges . I f I d id n't h av e th e Yel low st on e

20 C lub to h av e f or s ome one to e it her lo ok a t a p ur cha se o r

21 l ook at p ut tin g m on ey in to i t - - t hat w as n't pu tt in g

22 m one y i nt o E dr a B li xs eth or t ak ing ca re o f E dra

23 Blixseth's personal issues, it was taking care of the

24 Yellowstone Club's person issues that had assets that

25 they c ould d eal w ith.






1 That wasn't money that was going to me to solve

2 m y p er so nal is sue s. I f I co uld so lve Y el low sto ne C lub 's

3 issues, then long-term that would help solve my issues

4 as Yellowstone Club would be stabilized then and have

5 value.

6 So no, I don't see hypocrisy in it. I see that

7 I'm working my damnedest to try to make an asset have a

8 v alu e r at he r t han n ot ha ve a va lue be ca us e i t

9 d esp era te ly ne ede d m on ey . N obo dy w ou ld g i ve me t ha t

10 a mou nt o f m one y, d ire ctl y to m e.

11 Q. You didn't own Yellowstone Club at the time you

12 were making the --

13 A. It was a community property asset. I owned

14 half of the asset.

15 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"?


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. Absolutely not. That's not what I filed and I

23 didn't make those representations to anyone. No.

24 Q. We'll see.

25 Did you write up an executive summary in which






1 before you even got the club you said, "Once I'm in

2 control of the club, I can do this, that and the other

3 thing"?

4 A. I don't remember that, but there was a

5 h ypo the si s g oi ng o n o f n ot k now ing ho w t he a sse ts w ere

6 going t o e nd u p b eing d ivided.

7 Q. Let's go to the next -- then Royer runs through

8 t he a mou nts yo u o we h im t hat yo u'v e b ee n p ro mis in g t o

9 pay h im f or s ome p eriod o f t ime. We'll f ind o ut f rom

10 his r ecords when w e g et t hem.

11 And then Royer writes, "During the period that

12 w e w ere w or kin g o n Bl ue S ky , w e st opp ed t he l eg al a cti on

13 concerning the collection of your personal debt."

14 Did he stop legal action against you,

15 Ms. Blixseth?

16 A. I'm just reading this. I don't think there was

17 ever a l egal a ction s tarted. Am I on the wrong page?

18 Ah, sorry. It was on the wrong page.

19 Q. Did he tell you that --

20 A. Can I get time to get caught up here? Because

21 I w as o n the w rong p age.

22 Q. I'll read it into the record.

23 A. I just --

24 Q. You can keep reading. "During that time," this

25 i s R oye r t al ki ng, " I r ea d a n ew s a rti cl e w hi ch s aid






1 'Edra's attorney, Deborah Klar, insists that Edra and

2 B FI w ere th e b es t a ns wer t o t he se ttl em en t c ase ,

3 because,'" in bold and underlined, "'she has immediate

4 a cce ss t o m one y to p ay t he s ett lem ent . N ot o nl y th at,

5 K lar s ai d E dra h as ac ces s t o en oug h c ap it al t o d eal wi th

6 a looming $375 million from the investment bank Credit

7 Suisse.'"

8 "Imagine my surprise to learn that such a

9 s tat eme nt h ad b ee n m ad e i n c our t, y et w e c an not o bt ain

10 our past-due payments. Today we are restarting that

11 process."

12 Now having read that and put that in the

13 record, I take it from your prior testimony that doesn't

14 i ndi cat e t o y ou d ec ei t o r d ec ep tio n - -

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 m one y, d id y ou ? Y ou h ad p ro mis es f ro m Ga ry P et er s;

24 isn't that true?

25 A. I thought I had money based on --






1 Q. Thank you.

2 A. Are you going to read into the record my

3 response which clearly nullifies what you just said my

4 intent was?

5 Q. I'll let your lawyer do it. I believe it adds

6 to the deception.

7 You write, "Leon, as I am sure you are aware,

8 t her e i s a d if fe re nce in h av ing ac ces s t o f un ds f or an

9 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 Is that what you're doing?

15 A. No. I didn't have control over it in order to

16 solve my personal issues with American Bank.

17 Q. "If I am successful in the new case" -- that's

18 t he i nt er ve nti on i n L emo nd - - " I h ave t he se f un ds

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 documents supporting that I had the funds.

25 Q. But did you have the funds?






1 A. I believed I had the funds available if that

2 went through.

3 Q. No. Ms. Blixseth, it's a simple question.

4 Did you, Edra Blixseth, have the funds?

5 A. It's the same answer as did -- CrossHarbor says

6 t hat t he y c an c los e a nd h ave th e f und s a va il abl e, b ut

7 didn't have them in the account to be able to show Tim

8 that t hey h ad t he a ccount. It's t he s ame t hing.

9 I believed I had the funds if that were to go

10 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 B lix set h, p e rs ona ll y. " Y ou k ee p s ayi ng t h at I w a s

14 d ece ivi ng b y s ayi ng I ha d a ll t his mo ne y b ut th at I

15 wasn't taking care of my personal obligations.

16 I responded to what you read into the record by

17 t ell ing h im th at w as n ot fo r m e to u se pe rso nal ly .

18 Q. Did you deceive Wachovia Bank when you didn't

19 inform them there was litigation pending, Ms. Blixseth?

20 A. No.

21 Q. Did you deceive Western Capital Partners in

22 J une of ' 08 wh en y ou d id n't i nf orm th em t her e w as

23 litigation pending?

24 A. I think I've answered this how many times now?

25 MR. HOLAHAN: Many.






1 MR. FLYNN: Let's mark this next one, Order to

2 Show Cause.


4 BY MR. FLYNN:

5 Q. And we can go very quickly on this. You don't

6 have to r ead t he w hole d ocument. I w ould -- simply

7 going to read into the record a short part.

8 This is the federal court in Nevada relating to

9 the Trepp litigation and the technology that you were

10 paying Montgomery a hundred thousand dollars a month on.

11 A. I was paying Montgomery a hundred thousand a

12 m ont h a nd b efo re t hat , i f y ou r eme mbe r, I wa s p ay in g y ou

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 t he c ou rt w as i ss ui ng an or de r t o s ho w c au se fo r t he

18 f ail ure o f y ou an d M on tg ome ry t o t urn o ve r t he s our ce

19 code for the technology Montgomery claimed he owned?

20 A. Does it say me?

21 Q. You were a party. It only says Montgomery and

22 D ebo rah K la r, b ut y ou we re a pa rty , w er e y ou no t?

23 A. I was brought into this. I saw this and this

24 never says Edra. I didn't have the source code to turn

25 over.






1 Q. So to this day has the source code ever been

2 turned over?

3 A. You've asked me that three times and my answer

4 is the same.

5 Q. I'll withdraw it.

6 Does the source code even exist, Ms. Blixseth?

7 A. I have every reason to believe it exists.

8 Q. What reason do you have to believe that it

9 exists?

10 A. Because Dennis Montgomery is able to make

11 things work when asked to make work by different people.

12 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 t wic e w it h y ou , h e' s w al ked o ut of th e m ee ti ngs a nd

17 left.

18 You know, Ms. Blixseth, do you not, there's no

19 t ech nol og y.

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 t o t hem. I can't tell i f

24 y ou' re a ski ng m e q ues tio ns o r - -

25 Q. We're going to move on, because they're all






1 going t o come t ogether.

2 A. Okay.

3 Q. With regard to this Order to Show Cause, did

4 M ont gom er y c om e t o y ou o r s en d y ou em ai ls an d s ay ,

5 "There's going to be contempt hearings requiring me to

6 p rod uce t he so urc e c od e a nd I 'm no t g oi ng to do i t" ?

7 Did he say those kinds of things to you either

8 in p erson o r in t he e mail?

9 A. He said to me that he didn't want to turn over

10 t he s ou rc e c od e b ec au se h e f elt th at t hen th e - - ei the r

11 the government or somebody else would have the source

12 c ode an d b e ab le t o c irc umv en t h im or u s g et tin g p ai d.

13 H e di d ma ke t ho se c om men ts.

14 MR. FLYNN: Okay. Next Exhibit 32.


16 BY MR. FLYNN:

17 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 1 8th, a fter - -

21 A. What year, sorry?

22 Q. 2000- --

23 A. I see it. Okay.

24 Q. -- 2008.

25 A. '-8.






1 Q. Same time that -- same time that you were

2 t aki ng t he $ 35 m il lio n f rom S am By rne - - i ss ued a n o rd er

3 i mpo sin g $2 500 a d ay i n p e na lti es u nt il t he s ou rc e c od e

4 was produced?

5 A. Was this against Liner or Dennis? Sorry, I

6 can't figure --

7 Q. If you go to the last -- second page from the

8 back, "Therefore, it is ordered that a monetary contempt

9 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 Did you know that penalty was being imposed,

14 Ms. Blixseth?

15 A. I think I did hear about that and there was a

16 l ot o f s tuf f g oin g b ac k a nd f or th a bo ut D enn is h avi ng

17 problems gathering what they were asking for with the

18 D OJ r es tr ic tio ns o n w hat co ul d b e t ur ne d o ve r b ut - -

19 MR. HOLAHAN: DOD?

20 THE WITNESS: No, the DOJ at the time.


22 THE WITNESS: But I don't -- and I remember

23 t his ha pp en ing , b ut I do n't r em emb er t he a mo unt a nd I

24 don't remember the exact dates.

25 ///






1 BY MR. FLYNN:

2 Q. This was happening right around the time you

3 g ot t he $ 35 m il lio n fr om B yr ne. D id y ou t el l Mo ntg ome ry

4 you w ould p ay t he $ 2500 a day?

5 A. No, I did not.

6 Q. Did he tell you he didn't have the money to pay

7 the $2500 a day and wanted you to pay it?

8 A. He may have said he didn't have the money to

9 p ay i t, b ut th e 3 5 m il li on w as a ll e ar mar ked fo r

10 everything for Yellowstone Club.

11 Q. Now did Montgomery threaten you during this

12 period o f t ime t o p ay t he 2 500?

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 a ny c om pu te r h ack in g y ou ha d d on e?


19 Q. He had done for you?


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 o ff - - h ack ed i nt o t he b ank a cc oun ts i n t he C ay ma n






1 Islands in addition to Mr. Blixseth's computers and had

2 not reported on his marital disclosure statements?

3 Did Montgomery tell you that?


5 Q. Did you tell your lawyers who then wrote a

6 letter that Mr. Blixseth was concealing Cayman Island

7 accounts?

8 A. No. I asked about the Cayman Islands from a

9 B ank o f A me ric a a cc ou nt a nd I s aid I t hin k i t p ro ba bly

10 has s omething t o d o w ith the boats. And I think that

11 Dan Jaffe wrote Kolodny a letter asking about that.

12 Tim and I talked about this just a few weeks

13 ago when we were speaking that he totally over-reacted

14 t o th at . I n ev er a cc use d hi m of h avi ng a cco unt s th ere .

15 Q. Did you tell Steve Crisman that Tim Blixseth

16 had concealed $7 million in Cayman Islands accounts --


18 Q. -- within weeks prior to your lawyers writing

19 the l etter o n June 1 5, ' 07?


21 Q. Absolutely not?


23 Q. So then Crisman would be lying and you would be

24 telling the truth, Ms. Blixseth?

25 A. If he said that, he would be lying.






1 Q. Did you send any emails to anybody relative to

2 Tim Blixseth concealing monies in Cayman Islands

3 accounts and being trapped in court concealing those

4 accounts?

5 A. I did not write an email like that.

6 MR. FLYNN: Okay. Let's give her this next

7 one, Confession of Judgment.


9 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. Do you recall executing this document,

19 Ms. Blixseth?

20 A. Let me look at it.

21 Is this the settlement agreement?

22 Q. This is the judgment that was agreed to in the

23 settlement agreement, but you didn't pay the settlement

24 a gre eme nt .

25 Let me ask you this: Why did you agree pay






1 Trepp $5 million for Montgomery defaming Trepp about

2 bribing G ibbons? Why d id y ou a gree t o pay t he

3 5 million?

4 A. It wasn't me, personally. It was the company,

5 but I may h ave s igned, p ersonally. But t here w as a --

6 there was a huge issue with Warren Trepp's wife that

7 wanted -- and Warren, himself, told me that since there

8 were shareholders in eTreppid, he wanted something that

9 was specifically going to go to them and he didn't have

10 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 Q. So she wanted something for what -- what had

16 been in the press?

17 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. It

20 was back and forth.

21 Q. Let cut through a lot of 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 --






1 A. With you the one present in the room and me not

2 present.

3 Q. When I told Montgomery not to do it.

4 A. That's so not true. You can't testify and do

5 that.

6 Q. Ms. Blixseth?

7 MR. HOLAHAN: A re you breaching your

8 attorney-client privilege?

9 MR. FLYNN: You don't understand the facts,

10 Dennis.

11 MR. HOLAHAN: Are you breaching your --

12 MR. FLYNN: You don't understand the facts.

13 MR. HOLAHAN: Did you just state that you

14 were --

15 MR. FLYNN: You don't understand the facts.

16 There's a 54-page sanction order on Montgomery --

17 MR. HOLAHAN: Hold on one second.

18 MR. FLYNN: -- and his lawyers.

19 MR. HOLAHAN: Hold on one second. Did you

20 represent Dennis Montgomery at the time?

21 MR. FLYNN: You don't understand the facts and

22 I 'm n ot g oi ng t o l et y ou d el ay t he d ep osi tio n.

23 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?






1 A. I saw the interview afterwards. You were in

2 the r oom when t he i nterview was --

3 Q. Ms. Blixseth, was it filmed at Porcupine Creek?

4 MR. GLASSER: Excuse me. Can you not interrupt

5 h er a nd h er no t i nt er rup t y ou , l ik e t o ge t t hro ug h t hi s.

6 MR. FLYNN: Move to strike.

7 MR. HOLAHAN: No, sorry.

8 MR. FLYNN: Please, Dennis, I want a simple

9 a nsw er to th is q ue sti on.

10 Q. Was it filmed at Porcupine Creek?

11 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 If you continue to do that, we're going to

16 adjourn.

17 MR. FLYNN: You do whatever you're going to do.

18 I'm going to move o n.

19 MR. HOLAHAN: No, you're not until I finish.

20 MR. FLYNN: You're delaying and wasting time,

21 Dennis.

22 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






1 time. We're just wasting time.

2 MR. HOLAHAN: If you continue to raise your

3 voice and be abusive to my client, we're going to get a

4 m agi str at e. W e'r e g oi ng to l ea ve a nd g et a m ag is tr ate

5 a nd t hen we 'll c on tin ue t ha t w ay , s o p lea se d on 't - -

6 MR. FLYNN: I submit we're going to do that

7 a nyw ay, b ut we 're g oi ng t o m ove fo rwa rd .

8 MR. HOLAHAN: Please, please, don't do that

9 anymore.

10 MR. FLYNN: Please don't waste time.

11 Q. Ms. Blixseth, was the interview filmed at your

12 h ome , P or cu pin e C re ek , i n t he f irs t w ee k i n

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. You were the one present to witness it.

19 Q. Thank you.

20 Who contacted Lisa Myers and have her fly to

21 California to interview Dennis Montgomery?

22 A. First of all, you referred to her repeatedly as

23 m y f rie nd , s o I 'm g oi ng t o c orr ect th at i f I 'm a nsw eri ng

24 questions a bout h er. I h ave n ever m et h er.

25 Tim Blixseth called a gentleman from NBC who






1 t hen c al led Li sa M yer s a nd c ont act ed u s.

2 Q. So it was Tim Blixseth who did it; is that your

3 testimony?

4 A. It was Tim Blixseth who initiated the call who

5 would be the best person to have this come out if that

6 was going to come out.

7 Q. That weekend did you get in a fight with Tim

8 B lix set h b ec au se y ou t ol d h im y ou d id n' t w an t h im t o

9 h ave a ny pa rt o f w hat wa s g oi ng on w it h t he t ech nol ogy

10 a nd M on tg om ery ?

11 A. No, I got in a fight with him because I told

12 h im h e s hou ldn 't b e u sin g n am es li ke J ack Ke mp a nd o th er

13 people that weren't involved in what this was doing and

14 he w as u sing t heir n ames.

15 MR. FLYNN: Let's go to the next one,

16 E xhi bit 2 4. T his i s t he $ 20 -mi lli on j udg men t.

17 MR. GLASSER: 34?

18 MR. FLYNN: 34. Thank you.


20 BY MR. FLYNN:

21 Q. This is the $20-million judgment.

22 Did you agree to pay -- to confess a judgment

23 t o T rep p t o pa y h im $ 20 m ill ion fo r t he s oft war e t ha t

24 Montgomery had taken from eTreppid?

25 A. I can't answer that in that way.






1 Q. Did you agree to pay him $20 million?

2 A. We agreed to have him participate in the upside

3 i f t he re wa s u ps id e w ith w ha t w e w ere d oi ng w it h t he

4 technology.

5 Q. Did you agree to confess a judgment for

6 $20 m illion i n f avor o f T repp?

7 A. I guess I'm not clear when you say "confess a

8 judgment."

9 Q. Is it your signature on this document

10 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 s ign atu re ?

14 A. It appears to be my signature.

15 Q. Thank you.

16 Did you pay Trepp?

17 A. But it doesn't say Confession of Judgment.

18 Oh, yeah, it does. I'm sorry, I didn't see

19 that.

20 MR. FLYNN: Let's go to the next one, Exhibit

21 35, Amended Expedited Writ of Execution on Personal

22 Property.


24 BY MR. FLYNN:

25 Q. Did the Trepp parties come and collect all the






1 personal property at Blxware?

2 A. Blxware where?

3 Q. Well, in Bellevue, Washington.

4 A. I was told that the marshals came and that it's

5 s til l be ing h el d by t he m ars hal s.

6 Q. Does Dennis Montgomery, right across the street

7 here, have Blxware technology -- strike that, have

8 Blxware computer equipment?

9 A. I don't know. I don't know where right across

10 the s treet. Tim t old me he had him followed and knew

11 w her e D en ni s h ad m ove d t o, b ut I 'v e n ev er be en t her e o r

12 never d riven p ast i t o r --

13 Q. Assuming Dennis Montgomery has an office full

14 of computer equipment, do you know where it comes from?

15 A. I hate assuming, but I would think it's

16 Blxware.

17 MR. HOLAHAN: Is that a guess?

18 THE WITNESS: If it's the equipment he took

19 f rom th e o th er of fi ce , i t w ou ld be Bl xw ar e.

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?






1 A. I can't name the equipment. There was all of

2 B lxw are 's , o th er t han wh at w as a t B el le vu e w as a t t hat

3 office.

4 Q. Computers and screens and rays and --

5 A. Correct.

6 Q. Was that being used to ostensibly or

7 purportedly noise-filter Al-Jazeera communications?

8 A. That was being used to process certain data and

9 to continue to work on making the technology better.

10 Q. So what was -- so describe it to me. Was it a

11 r oom fu ll o f c omp ut er s a nd s cre ens an d t ha t t yp e o f

12 thing?

13 A. Yes.

14 Q. And was he purportedly downloading Al-Jazeera

15 video transmissions and filtering them?

16 A. You know, I don't know.

17 MR. HOLAHAN: If you don't know, you don't

18 know.

19 THE WITNESS: I think you can get that

20 information from other sources.

21 BY MR. FLYNN:

22 Q. After paying Montgomery over $5 million, are

23 y ou t el li ng me yo u d on 't kn ow w hat he w as do ing ?

24 A. I never said I paid Montgomery over $5 million.

25 Q. How much did you pay him?






1 A. I repeatedly told you the signing bonus that

2 I'm aware of was a million or million and a half and he

3 got a hundred thousand a month and --

4 Q. So what is your best statement of how much you

5 g ave M on tgo mer y? I t hap pen s to b e 5 .3 m il li on, b ut w ha t

6 i s y ou r b es t e st im ate , M s. B lix set h?

7 A. I'm not aware of him getting 5.3 million out of

8 the company.

9 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 o ver on 1 11 be lon gi ng to Bl xw ar e, w he re i s i t n ow ?

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 f rom t he o ffice o n 111?

23 A. I said I don't know the value.

24 Q. Okay. Well, right now I'm wanting to know

25 where it went.






1 A. Yeah. I don't know. I'm assuming it went to

2 t he n ew l oc ati on t hat De nni s l ea se d, b ut I d on' t k no w.

3 Q. Who took the equipment out, if you know?

4 A. I believe Dennis did.

5 Q. How do you know that?

6 A. I just said I believed it. I believe we were

7 m ovi ng o ut o f t hat of fic e a nd I be lie ve D enn is m ove d t he

8 e qui pme nt t her e.

9 Q. Do you have any emails or text messages from

10 Montgomery that he was moving the equipment over right

11 a cro ss t he s tr eet o n C oo k S tr ee t h ere ?

12 A. We recently got from him, because the trustee

13 a ske d, s tor age un it s. S o w e r ec en tly g ot ad dre ss es fo r

14 s tor age u ni ts, bu t I s ti ll d on' t k now t he ad dre ss o f

15 w her e t he e q ui pme nt w a s m ov ed t o .

16 Q. This is an email that you wrote to Dennis,

17 R hod es an d R us sel l.


19 MR. BLIXSETH: What's the number?

20 MR. FLYNN: This is exhibit -- what, 35?

21 THE WITNESS: 36, mine says.

22 MR. FLYNN: 36. Okay.

23 THE WITNESS: I think I wrote it to Dennis and

24 I c op ie d Ru sse ll a nd N ic k.

25 ///






1 BY MR. FLYNN:

2 Q. All right. This is dated August 27, '08?

3 MR. HOLAHAN: Sorry.

4 THE WITNESS: Hang on a second.

5 MR. HOLAHAN: Yeah, go ahead.


7 BY MR. FLYNN:

8 Q. And you say, "I met with Nick and Jory

9 yesterday in LA. We're going over numbers and ways to

10 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 What did you mean by getting "that done,"

18 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. We

25 need the source code (not about court, about our






1 b usi nes s) , s o w e c an h av e i t i n th e p ro pe r, s af e p la ce

2 t o b e ev alu ate d a nd t hen t he y c an m on et iz e o ur w ork ."

3 Did you know at the time there was a court

4 order to have the technology produced in court subject

5 to a 2500-dollar-a-day penalty?

6 A. I knew that there were some things Dennis was

7 b ein g a sk ed to t ur n o ver t ha t h e h adn 't t urn ed o ver

8 because he said it was -- it was so many files and so

9 many t hings t o t ry t o g o t hrough.

10 He was trying to find another way to do it, but

11 I st ill d on 't k no w i f th at m ean s i t's t he so urc e c od e.

12 Q. So what "proper, safe place" did you want the

13 s our ce c ode to go t o w he n i t w as s up po sed to b e p ro duc ed

14 in court?

15 A. That's two different questions. I'm talking

16 a bou t h er e t ry ing t o g o f or wa rd wi th D enn is s o t hat we

17 weren't at -- at his mercy if something fell off a

18 bridge or something happened that we had nothing with

19 a ll t he m on ey w e' d i nv es ted s o t ha t w e w er e g oi ng t o t ry

20 t o f ind a t hir d p ar ty , m uch l ik e a n es cro w c omp an y, th at

21 would safeguard having the source code be turned over

22 and s o w e c ould go forward w ith it.

23 As I said, Dennis was the key and still is,

24 right now, to this.

25 Q. Did the source code ever get turned over?






1 A. No, it did not.

2 Q. Do you know why it never got turned over?

3 A. We just couldn't -- just couldn't get to

4 getting Dennis to turn i t o ver.

5 Q. After three years did it not get -- three years

6 a nd, I t hin k, $ 22 m il lio n y ou 'v e g ot o n y our fi na nc ial

7 statement, did you ever ask yourself whether it didn't

8 g et t urn ed o ve r b ec au se i t d oes n't ex is t?

9 A. No. I asked myself if it didn't get turned

10 o ver be ca us e D e nn is - - b e ca us e o f a ll t he ot her t hi ngs

11 that had happened that eTreppid and other things was

12 p ara noi d a bo ut , i f it go t t ur ne d o ver t he n h e d id n' t

13 h ave co nt ro l a n d w o ul d b e c ar ve d o u t o f t he s it ua ti on.

14 MR. FLYNN: Let me show you Exhibit 37.


16 THE WITNESS: So you only wanted the first page

17 of this one?

18 BY MR. FLYNN:

19 Q. We don't have time. It'll be on another day.

20 Exhibit 37 is an email from you to Michael

21 S and ova l a nd D enn is M ont gom er y d at ed J uly 11 , 2 00 6. W as

22 t his be fo re or af te r y ou we nt t o s ee T rep p - - s tr ik e

23 that, Vice President Cheney?

24 A. Give me time to read it because --

25 MR. GLASSER: Are you on Exhibit 37?






1 MR. FLYNN: Yeah.

2 MR. HOLAHAN: How many pages is it?

3 MR. FLYNN: There are two emails and there are

4 Wall Street Journal articles.

5 MR. HOLAHAN: Articles, plural?

6 MR. FLYNN: Articles. There are three articles

7 a ll w rit ten by J oh n W ilk e w ho w ork ed w ith Ms . B li xs eth

8 a nd M r . M on tgo mer y f or t w o m ont hs.

9 THE WITNESS: That was just a statement.

10 BY MR. FLYNN:

11 Q. That statement made on the record.

12 A. I talked to John Wilke a few times; Dennis was

13 w ork ing w it h Jo hn W il ke.

14 (Mr. Blixseth and Mr. Flynn confer.)

15 THE WITNESS: "That's beautiful," he says,

16 "That's beautiful."

17 I can't tell from reading this if it was before

18 o r a fte r th at mee ti ng .

19 BY MR. FLYNN:

20 Q. You write, "We haven't pulled all the cards out

21 yet." What c ards a re y ou r eferring t o?

22 A. I'm not sure, but what we were trying to do is

23 g et t o p lac es w he re w e w ere - - t he p eo ple th at w ere

24 questioning the technology and Dennis to be able to have

25 t hin gs t o s how th at t he t ec hn ol ogy wo rk ed an d w e ca n






1 move forward.

2 Q. You say, "I have a plan that I've sort of

3 talked to with Michael." Was that a plan to go to the

4 media?

5 A. No.

6 Q. What was the plan?

7 A. The plan was to -- I don't really remember

8 based on this, but the plan was to try to use some

9 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 Q. So it wasn't a plan to go to the Wall Street

13 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? How d id t hat c ome t o pass?

18 A. 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.






1 I think Tim talked to John Wilke quite a few

2 times before I actually e ver did. And that's w ho w e

3 t urn ed t hin gs o ve r t o s ay , " Thi s i s w ha t D en nis i s

4 saying. Let's f ind o ut i f i t's t he t ruth o r n ot."

5 Q. Did you sign a declaration under oath saying

6 T im B lix set h h ad v irt ual ly l itt le t o d o w ith th e

7 technology companies and you didn't want him involved,

8 words to that effect?

9 A. Yes, because he was trying to be involved once

10 I wa s g oi ng to g et th e t ec hn olo gy c om pa ni es a nd h e

11 w as - - t hat wo uld b e l ik e m e be ing i nv olv ed i n W est ern

12 P aci fic T im ber wh en t hat wa sn 't go ing t o b e m y a sse t.

13 Q. Did you say over the previous period of time

14 t hat Ti m B li xs eth h ad ne ver b ee n i nvo lv ed in th e

15 technology company?

16 A. He had never been involved in an active role in

17 what the technology companies were doing.

18 Q. Okay. Ms. Blixseth --

19 A. Are we done with these two?

20 MR. FLYNN: Yeah, for the time being.

21 Let me show you a financial statement 10/30 --

22 1 0/1 3/0 7, E xhi bit 5 1.


24 BY MR. FLYNN:

25 Q. Did you give that bank statement to --






1 financial statement, I'm sorry, to Alan Rye to get

2 approximately 7 million from First Bank & Trust?

3 A. I don't know if that was for 7 at the time.

4 MR. HOLAHAN: Are you skipping everything in

5 between?

6 MR. FLYNN: Well, the executive summary I'll

7 probably go back to. Apparently it hasn't been marked

8 yet.

9 Q. So Ms. Blixseth did you report the Western

10 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. I

15 always considered it Matthew's and so --

16 Q. So not reporting a $13 million liability was a

17 mistake; was that your testimony?

18 MR. HOLAHAN: Mr. Flynn, she said what she

19 said.

20 MR. FLYNN: Thanks.

21 Q. Did you discuss the nonreporting of the

22 13 million on your 10/13 financial statement with Jory

23 Russell?

24 A. No, I don't believe I did. Jory didn't really

25 have anything to do with Western other than every once






1 i n a w hi le w he n w e pa id t he f in anc ial s ta tem ent s.

2 Q. Is that financial statement otherwise accurate

3 o the r t ha n t he n on rep ort ing o f t he 13 m il lio n?

4 A. At the time I believed it to be accurate

5 because I was basing the -- as an example, the B shares

6 a nd t he A s har es o f Y ell ow st one Cl ub a t a ce rta in v alu e.

7 There's a mistake on here that we later

8 corrected as soon as I was asked about it and that's a

9 c ash s ur ren der va lu e o f l if e in sur anc e th at w as - - t ha t

10 was corrected because that's not how the life insurance

11 was. It w as j ust a life i nsurance p olicy.

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 a nd t he n p ut a t h al f, bu t w er e t ho se v alu es e ve r r ea ll y

20 those values I now question. I didn't at the time.

21 Q. I'm going to skip the -- yeah. We're going to

22 g et i nt o t he Y e ll ow st one Cl ub .

23 You had your half share of the Yellowstone Club

24 at 300 million?

25 A. Tell me where that is?






1 Q. Let me take a look at it.

2 Right here (indicating), Yellowstone Club,

3 300 million. That's a net amount?

4 A. I don't know if that's a net amount or we were

5 l ook ing a t f ai r m ar ke t v alu e a t t he t i me.

6 MR. HOLAHAN: Oh, I see.

7 BY MR. FLYNN:

8 Q. Is that your half of the community property, so

9 300- and 300- is 600 million and then you add in the

10 Yellowstone Club for 375 million and you're roughly

11 a rou nd a b il li on d oll ars ?

12 A. Yeah, and that was based on the 1.3- from

13 the -- the audit that Credit Suisse had done with -- I

14 c an' t t hi nk of th e n am e o f t hem ri ght n ow -- p ut th eir

15 value on it.

16 MR. HOLAHAN: Cushman Wakefield.

17 THE WITNESS: Cushman Wakefield.

18 BY MR. FLYNN:

19 Q. So the Cushman Wakefield total net value

20 methodology of appraisal on the Yellowstone Club led you

21 t o r epo rt y our ha lf i nte res t a t 30 0 m il li on; is t ha t

22 correct?

23 A. At the time that was the information I was

24 given.

25 Q. And who gave that you information?






1 A. Somebody from Tim's office.

2 Q. But as chief operating officer you knew, I take

3 it, for a period of at least two years before that that

4 $ 375 m il lio n h ad b een lo ane d b as ed on a $ 1.2 bi ll io n

5 appraisal based on total net value; is that correct?

6 A. Repeat your question.

7 Q. Yeah.

8 When did you find out -- when was the first

9 d ate t ha t y ou f oun d o ut t hat th e t ota l n et v alu e

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 f rom th e b oo ks an d r ec or ds t hat I b el ie ve th ey b ase d i t

18 o n th e Cu sh man W ak efi eld .

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?






1 A. Correct.

2 Q. Is that one of the things that you attribute to

3 T im B lix set h as s ab ot agi ng y ou?

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

5 t hat 's t he i nf orm at io n I u se d.

6 Q. So as of October of 2007, did you believe that

7 the Yellowstone Club was worth roughly $1.2 billion?

8 A. I believed from what Tim had told me and from

9 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 I don't think of a sale to, let's say, a quick

13 sale that those numbers would have been accurate.

14 Q. Well, you thought 510 million on the sale to

15 Byrne w as t oo l ow, did y ou n ot? And y ou s igned three

16 declarations to the effect that 510 million was too low,

17 did you not?

18 A. I did.

19 Q. Thank you.

20 Now when you signed those declarations in July

21 and August that the 510 million was too low --

22 MR. HOLAHAN: What year?

23 BY MR. FLYNN:

24 Q. -- of 2007, I take it you believed, as you said

25 in your declarations, that the true value was






1 1 .2 b ill ion ; is t ha t cor rec t?

2 A. I believe that was the true value that had been

3 s tat ed o n a lo ng -t erm bu ild -o ut .

4 Q. And you sought an injunction to prevent

5 Mr. Blixseth from selling it for 510 million because you

6 believed it was worth $1.2 billion; is that correct?

7 A. I don't believe that the injunction was cited

8 for just that. It was to gather information. I had

9 b een t he CO O a nd b een in vo lv ed i n t he d ay -to -da y

10 operations and I was completely frozen out of

11 information and I wanted information.

12 MR. FLYNN: Put that aside. We'll put these

13 two a side. Perhaps w e'll c ome b ack t o y our

14 representations.

15 Q. Do you remember preparing an Edra Blixseth

16 executive summary?

17 A. No, I don't. I think Jory prepared that.

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. That's it there, Ms. Blixseth. We'll just mark

22 it and we'll move o n.

23 A. It says 41.


25 MR. GLASSER: What's the number, please?






1 MR. FLYNN: 41.


3 MR. HOLAHAN: Oh, man.

4 THE WITNESS: Do you have it?

5 MR. HOLAHAN: Well, I was going to look at --

6 what d oes it look like. I'll find it.

7 BY MR. FLYNN:

8 Q. Have you read this document before? We don't

9 have the time to go into it now, but I'll represent to

10 y ou, M s. B li xs eth , th at - -

11 MR. HOLAHAN: Are you going to characterize the

12 document Mr. --

13 BY MR. FLYNN:

14 Q. Just scan the document and I'll just simply ask

15 you if read it or participated in its preparation.

16 A. I would assume that I was --

17 MR. GLASSER: Mind if we open the door? It's

18 way hot.

19 THE WITNESS: I know, I'm hot.

20 MR. BLIXSETH: Might help if we open the door.

21 MR. GLASSER: Let's open the door. There's no

22 one else here.

23 THE WITNESS: Yeah, I didn't prepare this or

24 was i nvolved, b ut did I s ee it? At some p oint I believe

25 I did.






1 MR. HOLAHAN: I'm sorry, Mr. Flynn, did you say

2 w hat d at e th is w as p re pa red ?

3 MR. FLYNN: There's no date on it, but you can

4 d ate i t t hr oug h t he e mai ls a nd y ou ca n d at e i t t hro ugh

5 o the r d oc um ent ati on a s y ou w ill se e.

6 MR. HOLAHAN: What is the exhibit number on

7 that?

8 THE WITNESS: 41.

9 MR. FLYNN: I believe it was right after she

10 m ade th e d ea l w it h M r. B lix se th to se tt le th e m ar it al

11 a nd s ho rt ly be for e s he g ot t he 3 5 m il li on fr om - -

12 MR. HOLAHAN: July of '08 you're talking about?

13 MR. FLYNN: Well, the deal with Mr. Blixseth

14 was J une 26, I think, of '08.

15 MR. HOLAHAN: But everything was signed on

16 July 4 th, w as i t; r ight?

17 MR. FLYNN: Yeah, right in that time frame.

18 THE WITNESS: It must have been done before

19 that because --

20 BY MR. FLYNN:

21 Q. Yes? Why?

22 A. Oh, no, I read it wrong. I read 3.5 million as

23 35 million. Sorry.

24 MR. FLYNN: Let's move on, since we don't have

25 t ime . W e'l l m ove o n t hr oug h th ese ex hi bi ts. L et 's go






1 to -- okay.

2 Let me show you a financial statement. Yeah.

3 Let me see that.

4 7/15/08, Exhibit 55.


6 BY MR. FLYNN:

7 Q. Did you give that to Sam Byrne?

8 THE WITNESS: 55.

9 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 t o - - pr ior to r ec eiv ing th e $ 35 m ill io n f ro m h im ?

17 A. Did I receive what? I'm sorry.

18 Q. Did you sign a letter agreement with Sam Byrne

19 b efo re y ou g ot th e $ 35 m ill io n f ro m h im ?

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? I think it was

25 kind of simultaneous when we signed the letter and






1 agreement t o f orm and all that. It k ind o f - - all a t

2 the same time.

3 Q. What was the letter?

4 A. The letter was explaining what we were going to

5 do. I can't remember. If you have it, it would be

6 e asi er f or m e t o l ook at i t a nd an sw er qu est ion s.

7 Q. You've never produced the letter agreement,

8 M s. B lix set h, i n a ny p ro cee di ng th at w e c an f in d.

9 A. Then maybe we didn't have a letter before that.

10 E ver yth in g was a t t he s am e ti me . W e di d eve ryt hi ng a t

11 Liner's office and CrossHarbor came down there. That's

12 w hy I as ked yo u w as t her e e ve r a l et te r d one b ef ore an d

13 what's i t in r eference t o. I'm n ot a ware.

14 Q. Did you make any deal with Sam Byrne in any

15 f orm of w or ds t o g et m on ey p urs uan t t o a l et ter

16 agreement after he got control of the Yellowstone Club?


18 Q. This letter agreement that I'm referencing is

19 referenced in documents here. Have you concealed it

20 from the bankruptcy court?


22 Q. When was the last time you saw the letter

23 a gre eme nt ?

24 A. I don't know if there is a letter agreement. I

25 s aid th at w hen yo u f ir st as ke d m e t he q ue sti on.






1 Q. You said you believed that the letter agreement

2 w as s ign ed o n e xec uti on o f t he l oa n?

3 A. I was thinking of the agreement to form. When

4 the money was loaned, simultaneously the money was

5 loaned we signed the documents that were the agreement

6 t o f or m w hi ch h ad a gr eem ent s f or P has e 1 a nd wa s p ar t o f

7 t he w hol e ne go tia ti on s.

8 Q. When you say "part of the whole negotiations,"

9 s o i s th at t he l et ter ag re em ent or is t ha t t he a gre eme nt

10 to form?

11 A. I don't know what you're talking about. That's

12 w hy w he n y ou a ske d m e th e l et te r a gre em en t, I a sk ed yo u

13 in reference to what, because I don't know exactly what

14 y ou' re t alk ing a bo ut.

15 Q. Okay. Did you attend a meeting in which the

16 letter agreement was discussed?

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

18 MR. FLYNN: Okay. We're going to deviate out

19 o f o rde r a l it tle b it he re, S te pha nie .

20 We're going to the end, gentlemen, starting

21 w ith an e ma il d at ed T ues day , J ul y 8 th , f ro m E dr a t o --

22 THE WITNESS: Is this done?

23 MR. FLYNN: No. Just leave that.

24 It's way at the end.

25 Stephanie, would you please mark --






1 Why don't we take a ten-minute break while that

2 gets marked?

3 MR. HOLAHAN: What's the date on it? Sorry.

4 MR. FLYNN: It's an email -- see how thick the

5 file is here?


7 MR. FLYNN: These are the last documents in

8 the --

9 MR. HOLAHAN: W hat's the first date?

10 MR. FLYNN: July 8, 2006.

11 MR. HOLAHAN: July 8, 2006.

12 MR. GLASSER: Do you know which number it

13 s tar ts w ith , M ike ?

14 MR. FLYNN: Well, right behind it.

15 MR. GLASSER: This the one that starts with the

16 July 8 , 2008, 8 :24 a .m.?

17 MR. FLYNN: Yes. We're going to start there.

18 MR. GLASSER: All right. That is Exhibit 111.

19 MR. FLYNN: Oh, you mean File 111.

20 MR. GLASSER: Yeah. On the website it's

21 Exhibit 111.

22 MR. FLYNN: Start marking that as Exhibit 111,

23 thank you.

24 (Recess taken.)







1 BY MR. FLYNN:

2 Q. Ms. Blixseth, let me show you what has been

3 marked as Exhibit 56, financial statement, dated

4 8/15/08.

5 Now this was the day after you got the

6 $ 35 m ill ion fr om M r. B yr ne; c or rec t?


8 MR. HOLAHAN: Is that in the pile somewhere?

9 MR. FLYNN: Yeah. Yeah.

10 MR. GLASSER: It's Exhibit 56.

11 MR. HOARD: It looks like -- just about like

12 55.

13 MR. FLYNN: Here's another copy for you, Mr. --

14 THE WITNESS: Well, I know it's after, because

15 it's got the 35 million on there.

16 BY MR. FLYNN:

17 Q. Well, your marital dissolution went through on

18 August 1 3, d id i t not?

19 A. I don't remember the date.

20 Q. Did your -- and the next day you got the 35

21 million; you don't remember that?

22 A. Well, this is August. You just said -- the

23 dissolution of the marriage was not until October.

24 Q. Well, the closing of the transaction --

25 A. The MSA.






1 Q. -- the dissolution of the marriage, was on

2 August 1 3th, w as i t not?

3 A. I don't remember, but I know it was close to

4 this because i t's now listed on this. I n otice that h e

5 did have -- on this one he does have MNI bank and

6 Western Capital Partners.

7 Q. What's MNI Bank?

8 A. That's partly -- who Western Capital Partners

9 sold o ff p art o f the l oan t o.

10 Q. And what's the amount?

11 A. 3 million.

12 Q. So that's not the 13 million, is it,

13 Ms. Blixseth?

14 A. No. I believe that was the part that got

15 changed around with the -- right before -- right before

16 a ll t hi s w as h app en in g i s w he n a ll th at w as g oi ng o n, s o

17 I do n't r em emb er t he e xa ct d eta ils .

18 Q. Now as of the closing on August 13, you signed

19 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 s ign ed f or u s, pe rs on all y, a nd t he n t o BG I a nd t hen BG I






1 t o t he Y ell ows ton e C lu b, wh ic h w as go in g t o b e w ork ed

2 o ff - - Y e ll ows ton e Cl ub w as a lw ays -- t he Cr edi t Su iss e

3 loan was always going to be paid off by the lot sales

4 f rom t he Ye llo wst on e C lu b a nd t he m on ey t hat we t oo k a s

5 a loan was going to be taken care of as time went along

6 and we had chances to write things off and that kind of

7 thing because of other business dealings to be gone down

8 from a loan to -- whether it's forgiven or not paid

9 back, whatever.

10 Q. Did you prepare Exhibit 56 to induce someone to

11 give you money?

12 A. I don't remember why this was prepared, because

13 I ha d j us t g ot ten - - u nl ess i t w as p re par ed f or A rc her ,

14 which was at the time we thought going to take out --

15 C ros sHa rb or 's l oa n w as o nly g oi ng t o b e a 30 - o r 45 -da y

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 w hat t his i s f or. I d on't r emember.

21 Q. Ms. Blixseth, you admit you signed a note

22 p ers ona ll y f or $1 81 m ill ion a nd yo u d id n ot p ut i t i n

23 your personal financial statement; is that true, yes or

24 no?

25 MR. HOLAHAN: She already answered the






1 question.

2 MR. FLYNN: She did not. She gave me a

3 l ong -wi nd ed a ns we r. W e' ve g ot t ha t on t he r eco rd .

4 MR. HOLAHAN: She said it's not on here.

5 BY MR. FLYNN:

6 Q. Did you sign a note for $181 million,

7 personally?

8 A. Yeah, I took Tim's place on the note.

9 Q. I don't want to know whose place you took or

10 a nyt hin g el se. D id y ou s ig n a n ot e tw o da ys b ef ore t hi s

11 financial statement for $181 million personally, just

12 yes or no?

13 A. That was part of the MSA. I answered that,

14 yes.

15 Q. Did you tell someone not to put the 181 million

16 on the financial statement?


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?






1 A. I don't believe it is.

2 Q. Why didn't you? Why did you not put it on?

3 A. Because, again, I didn't take that as something

4 that was going to h ave t o b e paid b ack. I t hought i t

5 w as s ome thi ng t ha t w as g oin g t o b e wo rk ed ou t.

6 Q. Now you got on --

7 A. I need to ask my lawyer something. Can I take

8 a break for a s econd?

9 MR. FLYNN: Yeah.

10 (Witness and counsel confer.)


12 BY MR. FLYNN:

13 Q. Now Ms. Blixseth, you also signed a note,

14 personally, for $40 million involving the Tamarindo

15 t ran sac ti on , w hy d id y ou no t p ut t hat n ot e o n y ou r

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. He said, "Work it out however you

20 w ant ," t hat co uld b e w or ked o ut th e s am e w ay as t he

21 notes to BGI.

22 Q. So because Tim said that to you, you did not

23 f eel th at y ou w er e p er so nal ly o bli gat ed t o p ut i t o n

24 your financial statement that you were giving to

25 potential lenders; is that correct?






1 A. Yeah. I didn't feel like that was something

2 that w as g oing t o a ctually h ave t o be p aid b ack. I

3 thought it was something worked out through our taxes.

4 Q. So you, Edra Blixseth, thought you would never

5 have to pay it?


7 Q. Why did you not put it on your bankruptcy

8 schedules?

9 A. For the same reason, I guess. For the

10 bankruptcy schedules we used these and the books, the

11 a ddi tio na l b oo ks a nd r ec ord s, t hat we h ad ha d t im e t o g o

12 t hro ugh a nd th at' s t he n umb er s t ha t w e us ed.

13 Q. Now on this statement you have a net worth of

14 849,485,412. Did that accurately reflect your financial

15 net w orth a t the t ime?

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 w e t alk ed a bou t i n th e f ami ly c our t o f va lue s, w hat Ti m

20 and I had gone back and forth on sheets that we had put

21 on v alues t hat h e h ad g iven t o m e.

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. Cash, 492,000.

25 A. Cash would have been just cash in my account.






1 Q. Story Mill, 19,500,000. Did Tim give you that?

2 A. No. That would have been -- that would have

3 b een b as ed o n t he b oo ks, s or ry, th at w oul d h ave b ee n

4 based o n the b ooks t hat - -

5 Q. XPatterns, $8 million, did Tim give you that?

6 A. That would have been based on books we had

7 control of.

8 Q. 2.8 million Monarch Investments, did Tim give

9 you that?

10 A. Monarch Investments was something -- I've got

11 to t hink o ut l oud f or a second.

12 Q. No. Please don't think out loud. Just give me

13 an answer.

14 A. Well, give me a minute then.

15 Monarch Investments was something Tim started

16 and the only asset in it was the building that was in

17 M ona rch , s o I b el ie ve th at c ame fr om r eco rds th at w e g ot

18 from Tim.

19 Q. Who had the records for Monarch as of 8/15/08?

20 I t s ays E dr a B lix se th ow ns 1 00 p er cen t.

21 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. They came in kind of slowly,

24 b ut P at ri ck R at te w ou ld h av e ha d th em . T hey w er e at t he

25 BGI office.






1 Q. Is there anything inaccurate about the

2 $ 2.8 m il lio n th at y ou k no w of t oda y?

3 A. Probably not that one.

4 Q. Monarch Furniture & Design, that was you all

5 a lon g, 2 .87 9 m ill io n. I s T im r esp ons ib le fo r p ut ti ng

6 that down too?

7 A. No, he's not.

8 Q. Monarch Go Build, that's your son, 637,000.

9 Does he have anything to do with that?

10 MR. HOLAHAN: "He" meaning Tim?

11 MR. FLYNN: Tim.

12 THE WITNESS: 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 G o B uil d a nd M ona rc h G o B ui ld , b ut I d on' t t hin k a t t he

16 time he did.

17 BY MR. FLYNN:

18 Q. So did the 637,000, have anything to do with

19 Tim Blixseth giving you that number?

20 A. No, I think that would have come from Theta out

21 of t he o ffice o n t he s pec homes.

22 Q. Blxware 13,262,000 as an asset, Wachovia

23 8 mi lli on ; d id Ti m h av e a ny th in g d o w it h t ha t n um be r?

24 A. No.

25 Q. Blixseth Family Investments, 29,705,000, First






1 B ank , 8 m il lio n, d id T im h av e a nyt hin g t o d o wi th t hat

2 number?

3 A. Only by virtue of keeping himself involved

4 b eca use o f B ea u a nd M org an' s s ha re s.

5 Q. Where did you get the number? Did Tim Blixseth

6 have a nything t o do w ith i t?

7 A. I got the number -- somewhat. I got the number

8 b ase d on wh at t he r ec eiv abl e wa s f r om S pa nis h P e aks fo r

9 the note and then -- let me finish, please -- also

10 B lix set h F am il y I nv es tme nt i s o ne B s ha re an d f iv e A

11 shares, so we based the value of the B shares and the A

12 s har es b ase d o n t he v alu e t ha t T im sa id t hey we re .

13 Q. How long had Tim been out of BFI as of

14 A ugu st 1 5, 2 00 8? W hi ch m in i se ttl eme nt w as t ha t,

15 Ms. Blixseth?

16 A. 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 s hares w ithin B FI.

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 2 9 m ill io n d ow n; i s t h at co rr ec t?


23 Q. Let's go to the Yellowstone Club, 500 million,

24 C red it S uis se 3 00 m il lio n.

25 How did you arrive at the 500 million?






1 A. I think that that didn't change from the same

2 w ay w e a rri ved a t i t b ef or e e ar lie r o n th e f ina nc ia l

3 statement.

4 Q. And as of June 28th, '07, was that roughly the

5 a mou nt t hat Mr . B li xs eth wa s t ry in g t o se ll t he c lu b t o

6 S am B yrn e fo r, $ 50 0 mi ll ion ?

7 A. I don't remember the original amount. There

8 was some early closings that happened and some other

9 things because of due diligence and stuff that changed,

10 b ut I th ink th at t he o ri gin al a mou nt i n t he b eg in ni ng

11 for a sale was 500-something-thousand and this is based

12 o n a l on g-t erm b ui ld- out .

13 Q. Is the 500 million -- so that's a Credit Suisse

14 number? Is t hat b ased o n t he t otal n et v alue?

15 A. It's the same answer that I gave you on the

16 o the r q ue st ion .

17 Q. Okay. As of August 15, 207 million for -- for

18 Porcupine Creek. Is that your number, Ms. Blixseth?

19 A. That's based on an appraisal that we had done

20 in November of the prior year and we had it updated in

21 s pri ng a nd t he n a ga in in fa ll t hat st il l s ho wed t he

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 --






1 Q. So far he hasn't had anything to do with any of

2 these.

3 A. No. He had something to do with BFI on the A

4 and B shares and what the values were on that.

5 Q. But that was a year before and you had had the

6 b ook s a nd r eco rds f or a y ear , M s. B li xs et h.

7 A. I had the books and records for a year, but I

8 didn't have what the values were for Yellowstone Club

9 and based on what the A and B share were.

10 Q. So what on the 29 million on Blixseth Family

11 Investments did Mr. Blixseth mislead you on?

12 A. I believe if we have notes back here it might

13 s ay t he a mo unt th at w e p ut f or c on tri bu ti ng t o t he A a nd

14 B shares.

15 Q. I just want to know how he misled you on the

16 29 million.

17 A. The A and the B share values that placed on

18 w hat th e A a nd B s har es w ere wo rth w it hin BF I w er e h is

19 n umb ers a nd I d on 't k now t he a mo un t. I t doe sn' t sh ow a n

20 itemized list behind this.

21 Q. So over the prior year had you done anything to

22 c orr ect his nu mbe rs ?

23 A. I couldn't do anything to correct his numbers.

24 I h ad b een f rozen o ut u ntil t he M SA w as c losed. I

25 d idn 't h ave ac ces s t o th e b oo ks an d r ec or ds.






1 Q. As you sit here today do you know anything

2 inaccurate about the 29 million allegedly attributable

3 to Mr. Blixseth?

4 A. Well, I know that the -- the note receivable is

5 the a mount t hat it is on face v alue. I k now that h e h as

6 p ut i nto a l ot o f p eo ple 's m ind qu est io n i f t ha t n ot e

7 r ece iva bl e h as an y v al ue at a ll or if S pa nis h P ea ks ha s

8 any value at all.

9 The A and the B share that were owned in BFI

10 that were Yellowstone Club's have now no value and

11 p rob abl y di dn' t th en.

12 Q. Let's go to Farcheville, 63,900,000. Where did

13 you get that number?

14 A. That was based on an offer that came in for

15 F arc hev il le fo r 4 5 mi lli on e uro at th e t im e.

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 have to do w ith Mr. B lixseth?

20 A. That was the value that we had placed on it

21 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.






1 Q. So both of you placed that value on it?

2 A. I would say that's correct.

3 Q. 40 million for the Yellowstone Club compound.

4 Who p ut t hat v alue o n there?

5 A. Tim told me that he had a contract with

6 C ros sHa rb or th at I ha d t o ta ke i f I to ok Y el low st on e

7 Club. I had t o t ake t he family compound b ack, b ut t hat

8 h e h ad a co ntr ac t w it h C ro ss Har bor to b ui ld t ha t o ut a nd

9 t hat I w oul d h av e t o a ss um e t ha t c ont ra ct an d t ha t w as

10 the value.

11 Q. So you agreed to that?

12 A. That's the value he gave me, so that's the

13 value I put down.

14 Q. So you knew that -- you knew these loans were

15 a gai nst i t, 1 3 m il lio n, 1 3. 5 an d 22 m il li on? Y ou k new

16 t hos e a s of Au gus t 1 5 we re p led ged ag ai ns t t hat

17 c oll ate ra l?

18 A. Well, the 13 million was a note that I took

19 o ver . T hat w as a T im B li xs et h not e to C ro ss Har bo r tha t

20 I took over that was part of the 35-. The Lemond, I was

21 aware it was on as a second already when Tim had the

22 f ami ly c omp oun d a nd t he t hi rd w as a n ew l oan th at w as

23 part of the collateral for the CrossHarbor.

24 Q. So you were fully knowledgeable of all that.

25 7 million Yellowstone --






1 A. I was knowledgeable of those. I wasn't aware

2 t hat t he va lue w as no t $ 40 m ill ion on t he fa mil y

3 compound.

4 Q. Did you believe at the time of this financial

5 s tat eme nt w hen yo u g av e i t t o l end ers t ha t i t w as

6 $40 million?

7 A. I did.

8 Q. 7 million to Yellowstone Development, what's

9 that, Ms. Blixseth?

10 A. That's the -- that's Lot 48. That's the house

11 that - - I don't k now w hy i t s ays B FI. That's a house

12 that I ended u p getting. It w as t raded i n to

13 Y ell ows to ne Cl ub a nd I e nde d u p ge tti ng i n t he M SA.

14 Q. The Rancho Mirage homes, 4 million; Bellevue

15 condo, 3 million. Is t hat a condo y ou b ought?

16 A. 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 W est ern C ap is no t o n h er e, o nl y t he 3 mi lli on; i s t ha t

21 c orr ect ? S o th er e' s 10 m il li on t ha t' s no t on t he re ?

22 A. Correct.

23 Q. And as of August 15, '08, were you in default

24 on all your loans?

25 A. I don't know.






1 Q. What is your best memory as to when you were in

2 default o n all y our l oans?

3 A. I don't know at the time -- the first time I

4 was i n d efault o n a ll l oans. Some t hings I would g et

5 c urr ent a nd so me t hin gs I co uld n't ge t c ur re nt, s o I

6 can't answer that.

7 Q. Okay. Let me show you a letter. We'll have to

8 mark out of order. I'm n ot s ure i t's in t he pile.

9 A. Are we done with this one (indicating)?

10 MR. FLYNN: Please mark that next exhibit in

11 order.

12 I've got copies for you and copies for you.

13 (Discussion off the record.)


15 BY MR. FLYNN:

16 Q. Is this a letter that you received from your

17 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?







1 Q. And having read and signed the letter from your

2 lawyers and deciding to forward with the marital

3 s ett lem en t agr eem en t --

4 MR. HOLAHAN: How did you get this letter?

5 T his i s a tt orn ey- cl ie nt p ri vi le ge. H ow d id y ou g et th is

6 document?

7 MR. FLYNN: I'm not going to answer that now,

8 b ut b eli eve me i t c am e t o my po sse ssi on p rop erl y.

9 MR. HOLAHAN: Well, you better answer it.

10 MR. FLYNN: Don't tell me what to do.

11 MR. HOLAHAN: Just tell me quickly where you

12 g ot o r w e c a n' t a ns we r. It 's a t to rne y- cl ien t, s o i f y o u

13 got it --

14 MR. FLYNN: If you want to move to strike it,

15 you c an m ove t o s trike i t. You'll f ind o ut w here i t

16 comes from.

17 Q. Ms. Blixseth, did you give this letter to

18 somebody?


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'm not clear on your question. I don't recall






1 if I gave this to anybody or if I didn't and your

2 q ues tio n h as a ssu mp ti ons in i t t ha t I h av e n o i de a.

3 Q. Okay.

4 MR. HOLAHAN: I have to object to this being

5 m ark ed a s a n ex hib it. I t's a n a tt orn ey -c lie nt

6 privileged document. There's nobody outside of the

7 attorney-client privilege that's copied on it and it's

8 between Ms. Blixseth's divorce attorneys and her and I

9 don't know how Mr. Flynn got it, but it's

10 attorney-client privileged.

11 MR. FLYNN: For the record, it's emailed to

12 numerous people by Ms. Blixseth.

13 MR. HOLAHAN: Well, I'm objecting. Just let me

14 f ini sh a nd w e' ll b e t hro ugh . I 'm o bj ec ti ng t o i t.

15 MR. FLYNN: Your objection is noted.

16 Let's move to these exhibits starting with 111.


18 MR. FLYNN: She emailed it to a bunch of

19 people.

20 Q. Did you send this Exhibit 111 to Jory Russell

21 re f inancing o n July 8 th?

22 A. I can't tell, but it appears because it came

23 f rom me u p t he re a nd a ns wer in g J or y's t ha t I di d.

24 Q. It says, "Would you like me to send you the

25 most current financial statement for your review and






1 then send to Sam?"

2 And you say, "Keep with the end of the month.

3 Yes, send i t w hen y ou have i t."

4 Was that a financial statement that you sent to

5 S am B yrn e i n c on ne cti on w it h t he 3 5 m il li on?

6 A. I have no idea by reading this what that would

7 b e. T ha t's t he o nl y tra nsa ct io n I h ad o ng oi ng w as S am

8 so I assume so, but I really can't tell by looking at

9 this.

10 Q. Did you give a financial statement to Sam

11 Byrne?

12 A. I can't recall.

13 Q. Did Sam Byrne know about the 35 million Western

14 Capital guarantee?

15 A. I don't recall if he did or not. I do recall

16 t ell ing h im ab out f in din g t he U CC - - h e m ust ha ve ,

17 b eca use I t old hi m w e fo und t he UC C f il in g o n ev ery thi ng

18 w hen we w er e d oin g s om et hin g w it h W ac ho vi a, s o I th ink I

19 w oul d ha ve b ro ugh t th at u p t hen .

20 Q. Was it in the agreement to form, Ms. Blixseth?


22 Q. Was it referenced in the agreement to form?


24 Q. Okay. Just yes or no without regard to this

25 s ubp oen a: D id yo u g iv e S am B yr ne a c om pl ete fi na nc ial






1 statement with regard to your true financial situation

2 p rio r t o g et ti ng t h e $ 35 m il lio n l oan ?

3 A. I don't recall when he got the financial

4 statement.

5 Q. Did you disclose to him a full picture of your

6 then current financial situation when you got the

7 $35 million loan?

8 A. Hard -- that's a hard thing to answer. I don't

9 recall the conversation.

10 Q. Do you recall withholding any information from

11 S am B yr ne b efo re h e g ave yo u t he $ 35 m ill ion ?

12 A. I did not knowingly withhold information from

13 Sam.

14 Q. Did he do his due diligence before he gave you

15 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 information?

19 A. They had conversations; I don't know about

20 information exchanged.


22 BY MR. FLYNN:

23 Q. Let's look at the 6/30/08 financial statement.

24 T o y our k no wle dge , d id t hat g o t o S am B yr ne?







1 Q. This shows your net worth at $1.2 billion. Did

2 this statement accurately reflect your financial

3 position as of 6/30/08, Ms. Blixseth?

4 A. It must have reflected what I thought at the

5 time.

6 Q. As of June 30, '08, it accurately reflected

7 your financial situation?

8 A. I'm looking at the notes here.

9 We hadn't done the CrossHarbors deals at this

10 date, s o I 'm n ot c lear. I'm not s ure if t his was a

11 w ork ing d oc ume nt o r i f t his w as a d oc um en t t hat e ve r

12 actually went to somebody, so I'm sorry, I can't answer

13 y our qu es ti on.

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 c los ing a nd at th at t ime I d idn 't h av e a ll t he b ook s a nd

21 records for BGI.

22 Q. Who owned Porcupine Creek that Sam Byrne was

23 p utt ing t he $ 35 m il li on l oa n on ?

24 A. BGI.

25 Q. And did Mr. Byrne conduct any inquiry into the






1 financial status of BGI, to your knowledge, before he

2 gave the $35 million?

3 A. I think he questioned if there was -- I think

4 they did a title search and saw there was no loans

5 against BGI -- excuse me, Porcupine Creek.

6 Q. And Mr. Byrne and his lawyers participated in

7 t he c los ing in w hi ch t he $ 18 1 m ill ion c he ck b y y ou w as

8 s ign ed a nd t he $ 40 mi lli on n ote by yo u w as s ign ed ; i s

9 t hat c or rec t, M s. B li xse th?

10 A. Can you start over? Because I heard --

11 Q. Yeah.

12 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 h ow t o a nsw er y ou r q ue st ion , s o I d on 't k now wh at w as

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?






1 A. I don't know.

2 Q. Did he know about the $40 million note that you

3 were w riting a s p art o f t he M SA?

4 A. I think -- there was so many questions on what

5 w e w er e a ll owe d t o s ay a nd n ot s ay a t t ha t t im e, be cau se

6 i t w a sn' t p u bl ic r eco rd a nd w e h ad a c onf ide nti al it y - -

7 Q. Who is "we"?

8 A. Tim Blixseth and me had a confidentiality of

9 w hat w e c ou ld d isc los e a nd n ot d is clo se , e xc ept i f i t

10 h ad t o d o w ith b an kin g o r ge tti ng f in an ci ng a nd t ha t

11 k ind of t hi ng, so I a ctu all y d on 't re ca ll .

12 Q. Did Mr. Byrne and his lawyers tell you and your

13 lawyers that they had to approve the MSA, Ms. Blixseth?

14 A. I don't recall that ever being said.

15 MR. FLYNN: Okay. Let's go to this 7/15/08

16 financial statement.


18 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 If there's an email that goes with it or letter

24 that goes with it, it would be easier for me to tell.

25 Q. Now your net worth is up to 1.312 billion?






1 A. And it was 1.32 there.

2 Q. So Ms. Blixseth, is this financial statement,

3 to your knowledge, accurate in all respects?

4 A. Again, to the time and the values with the

5 exceptions of what I've already addressed, I think that

6 t he i nsu ran ce t hi ng w as a lr ea dy ta ken c ar e o f b y t hi s

7 time, by this one.


9 BY MR. FLYNN:

10 Q. Let me show you a series of emails between

11 Yankelevitz Heller from the Liner firm, Goldfarb, your

12 f ina nci al a dvi sor , d at ed as o f J ul y 2 2, J uly 21 .

13 Do you recall these emails marked as

14 E xhi bit 1 14 , Ms . Bl ix set h?

15 MR. HOLAHAN: How many?

16 THE WITNESS: There's one, two, three.

17 BY MR. FLYNN:

18 Q. What I'm really interested in is the two

19 sentences on the second and third page, Regenstreif, one

20 o f t he L ine r l awy er s w ri tes t o - - a nd G ol dfa rb i s

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 t his. We h ave a call w ith t hem a t 9 :30 a .m. P ST






1 to discuss."

2 Did everything you were doing at the time to

3 g et t he M SA co nc lu ded an d t he 3 5 m ill io n l oa n r eq ui re

4 the approval of CrossHarbor Capital?

5 A. I don't believe so, but this was actually --

6 when I said this was Archer, this was when we still

7 thought PEM was going to be -- so I'm going to correct

8 m y t es ti mon y f rom e ar lie r w he n I s aid I t hou ght i t w as

9 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 C ros sHa rb or ha s n ot y et a gr ee d t o t hi s a nd d id y ou h av e

15 a c on fe re nc e ca ll t o d is cus s?

16 Do you recall that CrossHarbor had to approve

17 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. Not to

25 the b est of my knowledge and I'm s ure they d idn't. I






1 don't know w hat "it" i s t hey had t o a pprove. It's n ot

2 clear.

3 Q. You realize you're under oath, Ms. Blixseth.

4 Let's look at the next exhibit in order.


6 THE WITNESS: This doesn't make clear what this

7 is about.

8 BY MR. FLYNN:

9 Q. Ms. Blixseth, this is an email from you to Jory

10 R uss ell d at ed A ug us t 5th . T his h as t o d o w it h ho ck ing

11 your jewelry at the jeweler and being behind in payments

12 to him.

13 Did --

14 MR. GLASSER: What's the date of this?

15 MR. FLYNN: August 5th.

16 MR. HOLAHAN: August 5.

17 BY MR. FLYNN:

18 Q. Were your circumstances such that you were

19 hocking your jewelry at the time, Ms. Blixseth?

20 MR. GLASSER: That's Exhibit 115.

21 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 then I'm going to answer you.

25 I think this was for an interest payment on






1 j ewe lry t ha t I h ad bo rro wed a ga ins t, y es.



4 BY MR. FLYNN:

5 Q. Did you attend discussions between

6 Edra/Yellowstone Club Entities and CrossHarbor Capital

7 Partners o n A ugust 1 , 2 008?

8 A. Where was this held?

9 Q. Did you attend a meeting with --

10 A. I don't know. I don't know if I -- not going

11 to a nswer. I t hought i f y ou k new w here i t w as h eld, I

12 m igh t ha ve a b ett er r eca ll.

13 Q. 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 t hin g. T hi s w as a wo rki ng p ape r, w or ki ng do cum en t, fo r






1 d isc uss io n p oi nts .

2 Q. "In order to move forward, CrossHarbor needs

3 assurance of its complete understanding of the

4 situation; therefore, CrossHarbor requires it be

5 provided with the following documents: All divorce

6 settlement-related documents received."

7 Did I read that correctly, Ms. Blixseth?

8 A. I think you did a great job.

9 Q. In fact, all your divorce settlement documents

10 go to CrossHarbor before the transaction was finalized?

11 A. I believe that we had it checked out through

12 the confidentiality that since CrossHarbor would be

13 d eem ed a -- li ke a ba nk o r c red ito r o r a ny bo dy e lse th at

14 I co uld g iv e i nfo rm at ion to , t ha t I w as a llo wed t o g iv e

15 them information.

16 Q. So they had all the divorce settlement-related

17 d ocu men ts ?

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 Q. Were your lawyers and Jory Russell sending them

22 all of the divorce settlement-related documents?

23 A. We were sending them things as we found that we

24 c oul d a n d t h ey we re r equ est ed , u nl ess I h ad a q ue st ion

25 a nd s o t hey wo uld b e d ee med s en t o ut o f t he o ffi ces .






1 Q. Did you send them detailed, updated financial

2 statements for EB, Edra Blixseth?


4 Q. Is there any reason to dispute that pursuant to

5 this requirement of CrossHarbor they got updated

6 financial statements?

7 A. It's on here from a working document, so it

8 doesn't say "received" but it says they were requested.

9 Q. Do you have any reason to believe you didn't

10 get them updated financial statements where they knew

11 a bou t t he W ach ovi a l oa n, th e F ir st Ba nk l oan , t he

12 American Bank loan, the Western Capital loan?

13 Do you have any reason to believe they didn't

14 h ave t ho se d oc ume nt s?

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 Did you give those to them?

19 A. I believe those were not allowed to be given to

20 t hem be ca us e I be li ev e P EM a nd A rc her o bj ect ed, b ut I

21 j ust ki nd o f h ave a s mal l r ec ol lec tio n o f th at.

22 Q. Who referred you to PEM and Archer?

23 A. I was referred to Goldfarb by Liner. Goldfarb

24 i s t he o ne t ha t f ou nd -- W ac hov ia w as o ri gin all y

25 s upp ose d t o b e wh o c lo se d o n - - wh ich T im wa s a wa re






1 of - - who c losed o n the M SA.

2 Wachovia had their very public, huge hiccup

3 r igh t b ef or e t his a nd sa id t hat th ey c oul dn' t c lo se on

4 it now.

5 Q. I'm not interested in all that. I want to know

6 who referred.

7 A. Well, I'm trying to answer your question.

8 Liner referred Wachovia. Wachovia was going to

9 do t he d eal. When Wachovia didn't do the deal, then

10 L ine r p ut m e i n to uch wi th J im G ol dfa rb w ho w or ke d w it h

11 hard-money lenders and that's -- with the market and

12 e ver yth in g e ls e, t hat 's w ho I w as f or ce d t o t ry t o

13 n ego tia te w ith .

14 Q. Did you work with Matthew Kidd to try to get

15 all this documentation to CrossHarbor through Matthew

16 K idd wh o w as w ork in g f or Cr os sH arb or a t t he t im e?

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 Russell.

21 Q. Detailed, updated financial statements for the

22 Yellowstone Club from 3/31/08.

23 A. Are you on the second page?

24 Q. No, same page.

25 A. I see, yes.






1 Q. Did you do that?

2 A. I don't recall. Again, this is a working

3 d ocu men t. I d on' t re cal l wh at t he y ac tua lly g ot a nd

4 w hat t he y we re r eq ues tin g.

5 Q. "Additionally, CrossHarbor needs a full

6 recognition of its existing rights through the execution

7 of the previous agreed-upon letter agreement."

8 Do you see that, Ms. Blixseth?

9 A. I do.

10 MR. FLYNN: For the record, no letter agreement

11 h as e ve r b ee n p ro vi de d b y M s. B lix set h, I be lie ve , i n

12 this litigation that we've seen.

13 Q. What letter agreement is referenced there?


15 Q. Did you previously agree upon a letter

16 agreement with CrossHarbor Capital?

17 A. Not that I recall. I'm reading this and seeing

18 t hat an d I k no w i t' s b ee n r ef er enc ed a le tte r o f

19 a gre eme nt b efo re, b ut we di dn 't ha ve - - w e d idn 't h ave

20 an LOI. We didn't have anything. This was all d one

21 very, very quickly when Wachovia fell out and I couldn't

22 get P EM o r Archer t o --

23 Q. So the answer is you don't know of any letter

24 o f a gre em en t; i s t h at co rre ct ?

25 A. I think I've answered that five times now.






1 Q. So you don't know of any agreement?

2 A. And the answer is still the same.

3 Q. Prior to getting the $35 million, did you

4 execute a previously agreed-upon letter agreement?

5 A. Mike, I keep telling you that I don't -- I'm

6 not a ware o f a l etter o f a greement. I'm a ware o f

7 agreement t o f orm. I'm a ware o f a ll t he c losing

8 documents, but we didn't have anything prior to that.

9 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 a gre eme nt .

24 Q. As part of what, getting the $35 million?

25 A. Until it was paid back, they wanted control of






1 t he u se o f t he f un ds, an d s o t hi s i s b asi cal ly s ayi ng

2 the use of the funds.

3 And yes, until that was -- that's why we put in

4 a n i nt er im C OO t ha t w as s ome bod y t hat w as do ing t hi ngs

5 with CrossHarbor until their money was paid back.

6 They wanted to have some supervision, just like

7 a bank might ask for of where the money was going.

8 Q. Thank you.

9 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 C lub w or kin g ca pi ta l; y es o r n o?

14 A. No. They got control of --

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 w as u nd er o ath 9 o 'cl ock th is m orn ing .

18 Q. I got the answer. The answer was no, they

19 d idn 't c ont rol it ?

20 MR. HOLAHAN: She hadn't finished her answer.

21 BY MR. FLYNN:

22 Q. Do you want to change your answer from no to

23 yes?

24 MR. HOLAHAN: As you have been doing all day,

25 M r. F ly nn , y ou di dn 't le t h er f ini sh h er a ns wer .






1 BY MR. FLYNN:

2 Q. Do you have anything else to add after the no,

3 Ms. Blixseth?

4 A. I have to add you keep asking if I'm aware I'm

5 u nde r oa th. T he r eas on i t f eel s li ke y ou 're a sk ing m e

6 that is to intimidate me or to have me scared that I'm

7 not answering the right question.

8 I want to make it clear to you as I was sworn

9 i n t hi s m or nin g I k no w I 'm u nde r o ath u nt il w e' re d one

10 today so, when I answer the questions I'm answering them

11 k now ing I 'm u nd er o at h.

12 MR. FLYNN: For the record, I interject that

13 b eca use a s p ar t o f th e r eco rd w her e t hi s r ec ord m ay be

14 read, grand jury or elsewhere, I'm interjecting that

15 M s. B li xs et h i s c og ni zan t i s co gni zan t o f he r d ut y t o

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 m one y t ha t I b orr ow ed an d w e ha d c ert ai n o th er t hin gs

21 t hat I' ll g o i nto l at er w he n I 'm a ske d o f t hi ng s t ha t w e

22 w ere n't a wa re o f w hen it cl os ed th at I ne ede d h is h elp

23 on and we did that.

24 But he did not get control of Yellowstone Club

25 at the signing of this and the 35 million.






1 BY MR. FLYNN:

2 Q. Did he take control after the 35 million was

3 paid of the Stockman Yellowstone Club bank accounts and

4 remove y ou a s a c heck s igner?

5 A. I'm not sure I was a check signer on them

6 before. And we were at American Bank.

7 Q. Did he take --

8 A. We were at American Bank. We just changed the

9 accounts to Stockman Bank and Moses Moore retained

10 c ont rol - - w ho ha d b ee n - - w ho T im a nd Di ete r h ad h ire d.

11 H e r ema in ed on bo ar d j us t l ik e h e h ad b ee n.

12 And so my answer is no, CrossHarbor did not

13 take over total control of Yellowstone Club.

14 Q. Did they take over -- please listen to the

15 question, Ms. Blixseth.

16 Did they take control of the Stockman Bank

17 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 t o s ee w her e m oni es w ere go in g a nd ho w t he m oni es w ere

22 b ein g u se d b as ed o n t hem fu nd in g t his l oa n.

23 Q. Did the loan ever get paid back?

24 A. No, it did not.

25 Q. What was the term of the loan?






1 A. It was either 30 or 45 days. It was short

2 t erm , be cau se, ag ai n, I t ho ug ht PE M o r Ar che r w a s g o in g

3 to c ome i n and t ake t hem o ut.

4 Q. Did you disclose to PEM or Archer when you were

5 seeking monies from them, apparently about $55 million

6 or so, that you had defaulted on all of your lender

7 o bli gat io ns a t th at t ime ?

8 A. I'm not aware that I defaulted on all my lender

9 obligations a t t hat t ime. They k new t hat I was i n a

10 v ery ti gh t c as h s it ua tio n a nd I ha d b ee n u nd er

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 o rde r t o ge t m one y f ro m P EM a nd Ar che r C ap it al?

15 A. I don't know if that's what that was used for.

16 I'm n ot sure t hat was given to a nybody. As I said, that

17 c oul d h av e b ee n a w or kin g d oc um ent .

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,






1 b asi cal ly , w ha t i t ca me d ow n t o is ei th er Mr . B li xs eth

2 w oul d b uy Y ell ows to ne Cl ub o r y ou w ou ld b uy i t a nd y ou

3 m ade t he ch oic e t o b uy i t; i s t hat w ha t h app ene d?

4 A. No. The very first part of your commentary

5 b efo re t he q ue sti on w as n ot a cc ura te a s w ell .

6 The Porcupine Creek, the year prior to that,

7 w as M ini S et tl eme nt , I b eli ev e, N o. 1 . I t's j us t th at

8 T im a nd t he ac co un tan ts c ou ld n' t f igu re o ut h ow t o g et

9 i t f ro m B GI in to m y p ers on al na me w it ho ut ha vin g s om e

10 huge tax ramifications.

11 So part of the negotiations for the final MSA

12 didn't involve Porcupine Creek, because it had already

13 b een es ta bl ish ed a nd t he MS A w as c lea r a nd t he t hin gs

14 t hat we re d one ah ea d o f t im e o n th e t wo m ini s et tle men ts

15 were n ot p art o f t his. They w ere r olled i nto i t.

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

19 it?

20 A. I can't answer that as a yes or no. George

21 Mack had called and said -- Tim and I had gone back and

22 f ort h. W e had d on e th is s uc ces sfu lly o n t wo m in i

23 s ett lem en ts . W e' d g ot te n t o a s ta nds ti ll on tr yi ng to

24 g et i t d one , s o G eo rg e M ack c am e u p w it h a v er y s im ple

25 f orm ula - - i t w as a o ne- pag er ; y ou gu ys h ave it - - t ha t






1 said this is a deal that could be for if Edra wants this

2 a nd t his an d t hi s, if Ed ra d oes n't wa nt t his , t hi s a nd

3 this a nd you had to pick.

4 I had pick based on part of that being --

5 i nco rpo ra ti ng B FI , w hi ch I d idn 't h av e a r ig ht t o d o

6 that according to BFI, so I really had no choice but to

7 t ake t he on e t ha t t oo k Y el lo wst one Cl ub .

8 Q. So you choose to buy the club?

9 A. Right, I chose to take the club as the

10 s ett lem en t.

11 Q. And this was roughly three months after you had

12 f ile d t h e m o ti on t o i n te rve ne s ayi ng t hat th e c l ub w as

13 i n a l iq uid ity cr is es ; i s t ha t c or rec t?

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 2 00 p ag e o f do cum en ts sa yin g t he c lub w as in a l iqu idi ty

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 l ot o f p art s, t ha t t he m emb er s h ad fo rm ed an ad h oc

24 committee that --

25 Q. I'm just wondering if you made the choice.






1 Next question: You just testified that BFI

2 somehow factored into your decision, but, in fact, you

3 h ad g ott en B FI a y ear be fo re th at i n a mi ni s ett lem ent ;

4 isn't that correct?

5 A. I had gotten Tim's 30 percent of BFI.

6 Q. So you effectively controlled BFI as of the

7 date you made the decision to take the Yellowstone Club;

8 isn't that correct, Ms. Blixseth?

9 A. I was the manager for BFI, but part of the --

10 p art of t he ag ree me nt th at w as p ut to wa rd me wa s t ha t

11 there were conditions to make decisions on BFI that had

12 t o b e t he ir B s har es, th eir A s har es r oll ed i nt o a ll

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: Are we on the same document?

19 MR. FLYNN: -- which is attached to this

20 document.

21 THE WITNESS: I'm sorry, were you talking to

22 yourself or me?

23 MR. FLYNN: Yeah, I was making something for

24 the record. It's o n the document. You can put t hat

25 d ocu men t as ide .






1 MR. GLASSER: No, no. On Exhibit 116 there's

2 n oth ing b ut t he p ow er p oi nt .

3 MR. HOLAHAN: 11 pages.

4 MR. FLYNN: It must have been stapled. I

5 b eli eve i t w as p ar t o f - - i t go t s ta pl ed i nc orr ec tl y

6 then because t he n ext -- the 7/15 - -

7 MR. HOARD: What's the official exhibit look

8 like?


10 MR. FLYNN: Okay. fine.

11 MR. GLASSER: Well, I mean can I see that?


13 MR. GLASSER: I guess what I'm saying is,

14 Mr. Flynn, that my 116 stops here at page 11 and this --

15 MR. FLYNN: The official exhibit does, too,

16 then.

17 MR. GLASSER: All right. Fair enough. Take

18 this off.

19 MR. HOLAHAN: No, no, no, hold it. Where did

20 this come from?

21 THE WITNESS: He had that attached to what --

22 MR. FLYNN: You mistakenly put that --

23 MR. HOARD: He had paperclipped.

24 MR. HOLAHAN: This is yours. Wait a minute.

25 That's -- yeah, that's underneath your --







2 BY MR. FLYNN:

3 Q. Ms. Blixseth, did you and Sam Byrne exchange

4 that email?

5 MR. GLASSER: What's the date of that one?

6 MR. FLYNN: August 20, '08.

7 MR. GLASSER: Let me find it.

8 MR. HOLAHAN: Is there an exhibit number on

9 that?

10 THE WITNESS: Yeah, but is this contiguous or

11 is it --

12 BY MR. FLYNN:

13 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 MR. GLASSER: Do you know the date, the exhibit

17 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 s ays , " Wh at is yo ur Y CW t it le f or d oc s? "

24 But then the next one that comes a couple of

25 hours later doesn't answer that question, so it cuts in






1 a not her s om eth ing t ha t S a m s a ys an d t h en a n a ns we r f ro m

2 me, so it doesn't look like -- it looks like there was

3 something in between or something because it doesn't

4 make sense.

5 BY MR. FLYNN:

6 Q. Did you write, "You, Jory and me are the only

7 o nes t ha t w ill k no w t hat b ec aus e w e h av e t o s ig n p ap er s

8 on this"?

9 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 i t's no t - - th ere 's s ome thi ng t hat 's n ot - - t hi s h as

14 e ith er b een cu t a nd p ast ed i n b eca use i t d oe sn' t m ak e

15 sense.

16 MR. FLYNN: I'll represent for the record

17 that's the way it came off Jory Russell's computer.

18 MR. HOLAHAN: So you're not representing that

19 y ou k no w w ha t t hi s i s r ef er ri ng to th en ?

20 MR. FLYNN: No, I know exactly what it's

21 r efe rri ng t o . It c am e o ff J o ry Ru sse ll 's co mpu te r i n

22 the exact form it is in and nothing has been cut and

23 p ast ed u n le ss M r. R us sel l d id i t .

24 MR. HOLAHAN: What's it referring to, do you

25 know?






1 THE WITNESS: But there's a whole other thing

2 on h ere t hat's n ot o n this.

3 BY MR. FLYNN:

4 Q. I'm moving on. We've got the testimony as it

5 is.

6 Next exhibit, did you and --

7 A. I want to ask a question, because I didn't --

8 Q. I don't care about your questions. Your lawyer

9 can a sk t hem a t a l ater t ime.

10 MR. HOLAHAN: W hat is the question?

11 MR. FLYNN: We're moving on to the next

12 exhibit.

13 THE WITNESS: My question is he asked me to

14 a nsw er a qu est ion t ha t n ow I th ink I' ve a nsw ere d, b ut

15 how do I know what this means? It's doesn't gibe with

16 that.

17 MR. HOLAHAN: I don't know what it means

18 either.

19 THE WITNESS: So I don't want to answer any

20 q ues tio ns o n t his .

21 BY MR. FLYNN:

22 Q. Did you tell Jory Russell at any time to

23 destroy documents off his computer?

24 A. Never. I've answered that question tons of

25 t ime s. I n eve r t ol d J or y R us se ll t o d est roy do cu me nts .






1 Q. Did you delay the June 24th deposition of Jory

2 R uss ell s o h e c oul d d e st roy e xh ibi ts b y h a vi ng J ohn

3 R ose lli c om e to t he d epo sit io n?


5 Q. Do you know who John Roselli is?

6 A. To the best of who we could check out, we knew

7 who he was.

8 Q. Did you have him come to the deposition?

9 A. We had him meet us there to say that he wanted

10 t o d o a d ea l a nd t ake ou t S am B yrn e' s p os iti on a nd

11 Western's position.

12 Q. Did he take out that -- was that a delaying

13 t act ic, M s. B li xs et h?

14 A. No.

15 Q. Was it actually intended for Mr. Roselli to pay

16 $13 million to Western Capital?

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

18 and CrossHarbor's position.

19 Q. Did you tell anyone in that meeting Sam Byrne

20 would p ut u p $13 m illion?


22 Q. Did you tell anyone during the meeting that Sam

23 Byrne had approved Roselli putting up $13 million and

24 w oul d s ta nd be hin d it ?







1 Q. What exactly was Mr. Roselli doing to come into

2 a deposition and get the deposition suspended after

3 roughly an hour or two in which only 6 inches of

4 documents had been produced?

5 How did he get there, Ms. Blixseth?

6 A. He wasn't in the deposition.

7 Q. But how did he come in in the middle of the

8 deposition to -- or when the deposition was taking place

9 to get the deposition suspended on the representation

10 that he would pay $13 million?

11 Who arranged that?

12 A. He -- he came in and said that he was going

13 t o - - he wa nte d t o ha ve P orc upi ne C re ek b eca use o f h is

14 d eal ing s wi th t he R it z Ca rl to n. H e ga ve m e l et te rs

15 based on that.

16 Q. The question is: Who arranged that?

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. It was all a big discussion

22 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.






1 A. Oh, Peggy Lane from Stewart Title.

2 Q. I see.

3 So how is that right in the middle of the

4 deposition that Mr. Roselli happened to represent that

5 h e b uy o ut W es te rn Ca pit al P art ner s?

6 A. It wasn't right in the middle of deposition.

7 Q. Did Peggy Stewart arrange that?

8 A. Tell me when I can answer it.


10 BY MR. FLYNN:

11 Q. Did Peggy Stewart arrange it or did you arrange

12 i t, f or R os ell i to g et i nvo lv ed ?

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 R itz C arlton. He s aid, " What e lse d o I need t o d o

19 on how we can get this done and resolved and I can make

20 an offer?"

21 We talked about the Western Capital Partners

22 issue, we talked about the collateral that they had and

23 he s aid h e w as w illing t o d o that a s w ell. He d idn't

24 c ome in t he mi ddl e o f t he de pos iti on.

25 The deposition happened to be going on. He






1 made the offer to that he was going to do that.

2 Q. During the deposition?

3 A. No.

4 Q. He was going to make the offer before?

5 A. You keep interrupting me, so I can't answer my

6 q ues tio n -- y ou r qu es tio n.

7 He presented it to us the day or two before.

8 W e a sk ed hi m t o c ol le cti vel y s ho w u s b oth an d s ho w u s

9 his p art w ith t he R itz. We b elieved t hat i t w as t rue

10 that's what he was going to do, so we asked Western if

11 t hey wa nt ed to me et w ith hi m a nd p ost po ne Jo ry' s

12 d epo sit io ns to se e i f t he y c oul d w ork o ut a d ea l o n

13 t ryi ng t o g et s om et hi ng d on e.

14 We had done that before, seeing if CrossHarbor

15 c oul d w or k o ut a d eal wi th W est ern Ca pi ta l.

16 Q. Did you have any conversations with Dennis

17 M ont gom er y o n o r a bou t J une 2 5t h o r e xc ha nge an y t ex t

18 messages regarding --

19 MR. HOLAHAN: What year, please?

20 MR. FLYNN: '09, during this deposition, on

21 e ith er s i de of th e d ep os iti on .

22 Q. -- that you were buying time so Jory Russell

23 c oul d d es tr oy e ma il s a nd th at w as i t w as a t act ic t o b uy

24 time?

25 A. Absolutely not. Anybody that says that is a






1 liar.

2 Q. So Dennis Montgomery then would be a liar if he

3 said that?

4 A. If he said that, he's a liar.

5 Q. And, in fact, after the deposition was

6 suspended, did Jory Russell, in fact, admittedly delete

7 o r de str oy e ma ils o ff a c omp ute r?

8 A. Jory Russell -- there's a deposition that has

9 what h is r ecord o f w hat h e s aid h e d id. Jory R ussell

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 h e d est ro ye d e mai ls .

16 A. And he testified that it wasn't under anybody

17 e lse 's s ayi ng t ha t he s ho ul d do i t.

18 Q. Are you also aware that he did virtually

19 everything under your instructions?

20 Are you aware he testified everything he ever

21 did was under your instructions, Ms. Blixseth?

22 A. I think that he testified that when it came to

23 g ett ing o ka ys o n w hat to se nd o ut f or b il ls a nd t ha t

24 k ind of t hi ng, al wa ys fe ll u nde r g ett in g a n o ka y f ro m

25 m e. No t ev ery thi ng h e d id, b ec aus e he c er ta inl y






1 testified that I had never instructed him to destroy any

2 emails.

3 Q. The night he showed up before his deposition he

4 b rou ght t he la pto p t o yo ur o ffi ce a t y our ho me e ven

5 though it was under subpoena; isn't that correct?

6 A. He brought that and some other things that he

7 left there.

8 Q. And the next day even though it was subpoenaed,

9 t hat l ap top wa s n ot t urn ed o ver , w as i t, M s. Bl ix se th?

10 A. It was brought to the depositions, but not

11 turned over.

12 Q. Is it your testimony that on June 24th the

13 laptop was brought to the deposition?

14 A. I believe it was in -- I'm not sure if the

15 l apt op w as b ro ugh t to t he d ep os iti on. I k no w th at w e

16 had it when -- the next deposition we had it in the car

17 w hen t he n ex t dep os it ion r es ume d. I' m no t su re i f w e

18 brought it to the one we ended up not having.

19 Q. You were in possession of the laptop the night

20 before the Jory Russell deposition took place on

21 J une 2 4t h; i s tha t co rre ct?

22 A. I believe I was.

23 Q. And you did not produce it at the deposition,

24 did y ou, o n June 2 4th?

25 A. The deposition -- is that the deposition that






1 didn't go forward?

2 Q. The deposition that was suspended because of

3 R ose lli , Ms . B lix se th .

4 A. That wasn't turned over at that time then.

5 Q. And thereafter Mr. Russell destroyed documents

6 off --

7 A. He couldn't have destroyed off that computer,

8 because he didn't have possession of that computer.

9 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 t o h er n ext time s he w as here. The

12 forensic accounting proved that I never plugged it in, I

13 never t urned i t on. It w as n ever t urned o n.

14 Q. I got it.

15 A. We turned it over the next time there was a

16 d epo sit io n, it wa s t ur ne d o n th en a nd I h ad n ot hi ng to

17 do with it.

18 Q. How do you know the forensic accounting proved

19 t hat it h ad ne ver b ee n t urn ed o n a fte r i t c am e i nto yo ur

20 p oss ess io n?

21 A. I was told that.

22 Q. By whom?

23 A. I don't remember if it was Gary Deschenes or if

24 i t w as W est ern or s om ebo dy t old me th at , t ha t i t pr ove d

25 t hat wh at w as t ry in g t o b e a lle ged by W es ter n o f bo th






1 G ary D es che nes an d m e w as no t a ccu rat e.

2 Q. Now when you got possession of the laptop, how

3 long after you possessed it did you give it to Pat

4 Yarborough?

5 A. I just told you I never gave it to Pat

6 Yarborough.

7 Q. You kept it?

8 A. Yeah, it was in a drawer.

9 MR. FLYNN: Let's go to Exhibit 118.


11 BY MR. FLYNN:

12 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 t han th e W or ld Cl ub , w hi ch i s c ons ist en t w it h t he

20 agreement to form between CrossHarbor and Edra, which

21 d oes no t h av e E dr a a s a s ign er o n t he S to ckm an B ank

22 accounts"; is that true, Ms. Blixseth?

23 Did you work out an agreement as part of the

24 a gre eme nt t o f orm w he re y ou w ou ld n ot b e a s ign er b ut

25 t hat Ha ns , M os es a nd H ar ris w ou ld b e t he s ig ner s?






1 A. I don't think I was ever a signer before this.

2 I t hink t hat M oses a nd H ans w ere o n i t. I w asn't t here

3 to b e a signer on t he accounts.

4 Q. Let's go down to the email below that, Jory

5 R uss ell t o D es ta D use nbe rry o n w hi ch y ou w er e C C 'd.

6 " Des ta, I h ope t hi s f ind s y ou w ell an d a pp re cia te a ll

7 you h ave d one f or u s. This i s to c onfirm t hat E dra

8 B lix set h i s t o b e o n a ll a cc oun ts t ha t p er ta in t o h er

9 operation, Yellowstone Club, et al., Big Springs,

10 et cetera. Thanks, Jory."

11 Did you tell Jory to send that email?

12 A. Yes. I told Jory that what our agreement was

13 w as f or s ig nat ure , w e wa nte d t o st ay t he s am e w it h i t

14 being Moses and Hans with Joe, which was my suggestion,

15 b ein g t he i nte rim C OO , b ut t hat my na me n eed ed t o b e o n

16 things so that I could get information and accounts and

17 i nfo rma ti on o n t he a cc ou nts . I t wa sn 't a s a si gn er o n

18 the accounts.

19 Q. And, in fact -- and, in fact, you were

20 prohibited from being a signer by CrossHarbor Capital;

21 i s t hat c or rec t, M s . B li xse th ?

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






1 signer o n the a ccounts?

2 A. I don't know if I would use the word

3 "prohibited." It's not the way we set the things up.

4 It w asn't h ow i t w as s et u p b efore.

5 Q. After you signed the MSA and got the

6 $35 million, did you have any signing authority for

7 Y ell ows to ne Cl ub?

8 A. No, I don't think I did before.

9 Q. You were chief operating officer before that?

10 A. Yes.

11 Q. And after you signed the MSA and got the

12 $ 35 m il li on an d t ur ne d o ver c on tro l o f th e c lub t o

13 Byrne --

14 A. I didn't turn over control of the club to

15 B yrn e. Y ou as k m e q ue st ion s a nd m a ke s ta tem ent s t ha t

16 are false, I can't answer your questions.

17 Q. Who controlled the hiring and firing after you

18 got the $35 million?

19 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 c onc ern s o f th e a d ho c m emb er sh ip i s t hat th ey w ant ed

23 professional management.

24 We were negotiating with Discovery Land at that

25 t ime an d D is co ver y L an d w ou ld h ave be en i n c har ge o f






1 d oin g al l th e hi ri ng a nd f ir ing .

2 MR. FLYNN: Look at this next exhibit in order.

3 T his i s dat ed S ept emb er 5 th .


5 MR. HOLAHAN: What exhibit?

6 BY MR. FLYNN:

7 Q. What exhibit number is that, Ms. Blixseth?

8 A. I'm having trouble with the nines. It's either

9 114 or 119.

10 MR. HOLAHAN: I think it's got to be 119. Is

11 t his th e la st exh ib it ?

12 MR. FLYNN: No.

13 THE WITNESS: And then it's --

14 MR. HOARD: I thought they went to 121.

15 MR. FLYNN: Ms. Blixseth --

16 THE WITNESS: I'm trying -- sorry, what?

17 BY MR. FLYNN:

18 Q. This is dated September 5th, 2008, and I'd like

19 to go to the charts.

20 A. I'm not familiar. Give me time to --

21 Q. This is roughly three weeks after Byrne gave

22 you the 35 million.

23 A. Okay.

24 Q. Go to the charts at the end, please.

25 Go to the last chart.






1 A. On the last page?

2 Q. Uh-huh. And it says at the top, "CrossHarbor

3 Capital Partners, LLC, Existing Yellowstone Club

4 O wne rsh ip a nd C on tr ol as of A ug ust 19 , 2 00 8, " a nd i t

5 s how s a t t he t op o f t he p yra mid , E dra B li xse th,

6 50 percent, Blixseth Family Investments and then that

7 breakdown.

8 Do you see that?

9 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 d ocu men t is d at ed S ep tem ber 5 th ? W hy d id t he y pi ck

13 A ugu st 1 9th , Ms . Bl ix set h?

14 A. I have no idea. This is a working document, it

15 l ook s l ik e, be twe en S am a nd M at t a nd J oe w it h t he ir

16 l ega l c ou ns el.

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 g oin g t o t he n p re se nt to me o r w ha t, b ut I c an 't an swe r


21 Q. Let's go to the next, second page from the

22 back, D raft a s of S eptember 8 , 2 008. And n ow

23 CrossHarbor Capital -- CrossHarbor Institutional

24 Partners is now in the proposed Yellowstone Club

25 ownership and control as of September 8, 2008.






1 You see that, Ms. Blixseth?

2 A. Are you saying that they're in ownership and

3 c ont rol b ec aus e t he y' re a t t h e t op ?

4 Q. I'm saying that this document reflects them as

5 o f S ep te mbe r 8 th a s o wni ng a nd c on tro ll in g t he

6 Y ell ows to ne Cl ub.

7 MR. HOLAHAN: And you're saying that based on

8 what? I m ean d o you k now w ho d rafted t his?

9 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 p erm it a sse ts t o b e d rop ped d ow n t o a n ew en tit y) D raf t

14 as o f September 8 , 2008."

15 THE WITNESS: This is all draft and working

16 d ocu men ts . I' ve n eve r se en t hi s an d th is n ev er c am e to

17 fruition so I --

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?






1 A. No. We had discussions that BGI -- this keeps

2 saying BFI and I think they mean BGI -- had to retain

3 the control and ownership of 51 percent of Yellowstone

4 C lub d ur ing th e C re di t S uis se l oan an d t ha t i f t hey we re

5 going to do part of what the agreement to form was, was

6 r ais e t he 7 5 m il li on t o p ut i nt o Y ell ow st one Cl ub f or

7 t he m uch -ne ede d c as h f lo w i t n ee de d o f - - w e h ad

8 discussions on how that would change the ownership or

9 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 s imp ly: As of Se pt em ber 8t h - - b et we en A u gu st 1 4 , 2 00 8,

18 a nd S ep te mb er 8 th , 2 00 8, ye s o r n o, d id y ou a nd

19 Mr. Byrne participate in discussions with Credit Suisse

20 t o h a ve C re dit Su is se re neg ot ia te i ts l oa n i n a ny w ay?

21 Did you participate with Mr. Byrne in those

22 discussions?

23 A. No. I did not.

24 Q. Thank you.

25 Did Mr. Byrne disclose to you at any time






1 b etw een S ep tem ber 8 th an d A ug us t 1 5 w he n y ou go t t he

2 3 5 m il li on - - A ugu st 1 4, w he n y ou g ot t he 35 m il lio n,

3 that he was negotiating with Credit Suisse?

4 A. We had an agreement. It's not a yes-or-no

5 q ues tio n, s o y ou' re g oin g t o ha ve t o i ndu lge me h er e.

6 S am a nd I h ad a n a gre eme nt t hat wi tho ut t he o th er s'

7 approval, either someone from CrossHarbor or me from

8 Yellowstone Club, couldn't talk to Credit Suisse -- and

9 I believe there's some other creditors, how we were

10 trying to go about doing things without the other one's

11 approval o r b eing o n a call.

12 Sam had talked to me about wanting to talk

13 w ith , I t hi nk i t w as, St eve f ro m C red it S uis se a bou t

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 i f I w as tr yin g t o ne got iat e, b eca use w e w er e t ry in g t o

20 do the best thing for Yellowstone Club to stabilize it

21 a nd I di dn' t h ave a n o bj ect io n t o h im t al kin g - -

22 Q. Where is that evidenced in any document, this

23 agreement that you just referenced?

24 A. It might be in the agreement to form. It might

25 be -- we had the same agreement when it came to press






1 r ele ase s a nd t hos e k in d o f t hin gs, so I d on' t k no w f or

2 sure b ut i t might b e like t hat.

3 Q. Was Mr. Byrne forwarding you emails in

4 connection with his negotiations with Credit Suisse

5 during t his t ime f rame?

6 A. I don't recall that he was, no.

7 Q. Do you recall seeing any emails during this

8 time frame between -- you knew at the time he was a

9 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 h im a s p art of h is du e d il ig enc e f or t he p ur cha se o f t he

16 Y ell ows to ne Cl ub, b ut I d id n' t k no w t h e d e ta ils o f i t.

17 Q. Did you fly from the West Coast on US Air

18 N o. 6 83 t o N ew ark , N ew J ers ey , a rr ivi ng a t 1 0:5 8 p .m . o n

19 7/31/09, renting a car from National Rental Car and

20 drive to Boston?

21 A. I can't answer that question. I have no idea.

22 Q. Do you remember flying into Newark and then

23 driving from Newark to Boston, Ms. Blixseth?

24 A. Tell me the date again.

25 Q. July 31st.






1 A. What year?

2 Q. Of 2008.

3 MR. BLIXSETH: '-9.

4 BY MR. FLYNN:

5 Q. I mean of 2009.

6 A. Oh, I do remember that. My granddaughter

7 M ade lin a w as i n c am p t he re a nd I d rov e a nd l and ed a t

8 Newark and rented a car and drove to camp with her.

9 I never saw Sam Byrne. I never did anything

10 w ork wis e a nd I to ok h er t o f ly t o S wed en w he n s he l eft

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 w as t ra ve li ng a lo ne , s o w he n m y da ugh te r t ol d m e th at

16 h er f li gh t w as ou t o f N ew ar k, I ju st c han ged mi ne t o f ly

17 in and out of Newark.

18 Q. How many times had you flown into Newark and

19 driven to Boston?

20 A. I'm not sure I drove to Boston. I think where

21 I went was her -- was either in New York or New Jersey.

22 Q. How many times during that time frame -- strike

23 that.

24 Between May 1 and September 1 of '09, how many

25 m eet ing s h av e y ou h ad wi th S am B yr ne?






1 A. Give me the time frame again.

2 Q. May 1 to September 1, '09.

3 A. A hand -- I don't even remember. I mean I

4 think we've had phone calls. I don't think we've had --

5 MR. HOLAHAN: Do you mean in-person meetings?

6 MR. FLYNN: Yeah, in person.

7 THE WITNESS: I think we came to Porcupine

8 Creek w ith t he t rustee. I c an't - - I can't r eally

9 a ctu all y r ec al l. I h a ve n't h ad ha rdl y a ny i n -p er so n

10 m eet ing s wi th S am .

11 BY MR. FLYNN:

12 Q. How much money has Sam Byrne given you to

13 maintain Porcupine Creek since the MSA? Notwithstanding

14 t he $ 35 m il lio n y ou o we, ho w m uc h m on ey h as h e g ive n t o

15 you?

16 A. Well, Sam Byrne, nothing, but the CrossHarbor,

17 who has the mortgage, started doing protective advances

18 to p rotect t he asset. I believe i t w as i n J anuary o r

19 F ebr uar y. I 'm n ot s ur e wha t th e to ta l am oun t is .

20 Q. Did Mr. Byrne give a check for $90,000 in the

21 l ast f ou r, f iv e mo nth s?

22 A. To me?

23 Q. Yes.

24 A. No.

25 Q. Who did he give it to?






1 A. I don't know.

2 Q. Did he give it to Mr. Deschenes?

3 A. No.

4 Q. Do you know anything about a $90,000 check as

5 p art o f a c ons ul ti ng a gr eem en t t ha t y ou h ave wi th

6 Mr. Byrne?

7 A. I don't have a consulting agreement with

8 Mr. Byrne.

9 Q. Do you have any agreement of any nature or

10 description to get anything from the Yellowstone Club,

11 e ffe cti ve t ran sfe r b y y ou t o M r. B yrn e?

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 A. I have no ownership of the Yellowstone Club

17 assets.

18 Q. So let me see if I understand this and you can

19 explain t o m e w hy d id y ou t his. As o f A ugust 1 4 u nder

20 the marital settlement agreement you have a net worth of

21 a billion dollars and you own the Yellowstone Club.

22 As of today you have no ownership of the

23 Yellowstone Club and you've received nothing for it; is

24 that correct, Ms. Blixseth?

25 A. That is correct.






1 Q. Please explain how that happened.

2 A. Well, it's not what I had in my plans, but with

3 the things that we thought we were going to be able to

4 do --

5 MR. FLYNN: I know.

6 THE WITNESS: -- after closing hinged on a lot

7 of different things and those just didn't come together.

8 BY MR. FLYNN:

9 Q. So the answer why you lost this -- depending on

10 h ow y ou w an t t o v al ue it - - $ 1. 2 b il li on a ss et,

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 Is your answer that you've lost control of

23 Porcupine Creek because things didn't come together?

24 A. My -- my loan with Sam Byrne, if you look at

25 t he o ri gi na l l oan , w as o nly g oi ng t o b e 3 0 t o 4 5 d ay s,






1 b eca use I t hou ght I h ad t he o th er f in an ci ng b eh in d i t

2 a nd t hat d id n' t co me t og eth er .

3 Subsequent to that I've been working to try to

4 put -- before I had to file for the personal

5 bankruptcy -- actually, even after that, but before I

6 couldn't get from the 7 back to the 11 -- I was still

7 t ryi ng t o p ut t hin gs t og eth er t o t ake S am ou t o f t ha t

8 p art a nd ha ve P orc upi ne C re ek a nd g o f orw ard .

9 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 y ou' ve l ost $7 00 m ill ion of a ss ets wi th in a y ea r o r le ss

13 to Sam Byrne because things didn't come together and you

14 h ave n't g ot an yth in g f ro m i t; i s t hat a c orr ect

15 s tat eme nt ?

16 A. It is a correct statement.

17 Q. And you have no expectancy of getting anything

18 f rom S am B yr ne ; is t ha t cor re ct ?

19 A. I have no expectations and I have no

20 a gre eme nt s.

21 Q. Now let's focus in on the things not coming

22 t oge the r. W er e s om e o f t he t hi ngs no t c om in g t og et her

23 t he r ou gh ly $4 0 m i lli on i n l o an s t h at y ou ha d b o rro wed

24 from these lending institutions that I'm going to

25 represent for the record reflect false statements.






1 Is that part of things not coming together,

2 t hat y ou ow e s om e $ 40 mi ll io n p lus an d y ou c an' t p ay

3 t hem ? I s th at p ar t of t he t hin gs n ot c om ing t og eth er?

4 A. The part of the things not coming together that

5 I 'm t alk ing ab out i s i f e ver yth ing wo ul d h av e b ee n a s

6 advertised with Yellowstone Club and the other assets

7 and not having anyone behind the scenes interfering with

8 g oin g f or wa rd o n t he a ss ets , I w ou ld h ave be en a ble to

9 t ake t ho se l oa ns a nd h av e a ss et s t hat w er e f ree a nd

10 c lea r t ha t h ad eq ui ty in th em a nd t ha t c ou ld ha ve c ash

11 f low in t he m a nd t ake ca re o f m y o bl ig ati ons an d

12 long-term Yellowstone Club with having the proper amount

13 o f m one y p ut i n a nd t he r est ruc tur e o f th e o wne rs hi p

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 t est imo ny . Wh o in ter fer ed a nd w ha t di d th ey d o t o

21 interfere in things not coming together as you just

22 described? Who did that?

23 A. You and Tim.

24 Q. How did we do it?

25 A. Tim Blixseth with contact people, there would






1 be things that you filed in Reno court and then you

2 w oul d c on ta ct t he p re ss a nd h av e t hem t he n h ave i t i n - -

3 i n p re ss re lea ses o r t hi ngs i n t he pr es s a nd th en t he

4 j udg e w ou ld th row t he m o ut t he n ex t d ay , b ut th e d am ag e

5 w as d one be cau se t hey we re a lre ady in t he pa per ; th ing s

6 t hat y ou fi led i n c ou rt t hat th e j udg e t hr ew ou t t ha t

7 were just these arbitrary comments and statements that

8 t he j udg e d idn 't a llo w t o st and in th e c ou rt roo m w er e

9 t hro wn o ut, bu t i n t he m ea nt ime ca lls h ad be en m ade to

10 t he p re ss a nd p re ss r epo rts w er e d one o n t he m.

11 Q. What was reported in the press that interfered

12 with your ability to pull everything together?

13 A. The credibility on Dennis Montgomery. I mean,

14 you keep talking --

15 Q. The credibility on -- let's just enumerate them

16 first. The credibility on Dennis Montgomery.

17 A. -- Dennis Montgomery, the slant on his

18 c har act er a nd h is b ei ng. I m ea n th re e we eks a go T im

19 sent me a text and said, "Do you think I should go

20 a fte r - - d o y ou th ink th at I sh oul d g o a ft er t hi s,

21 because I think Dennis's deal probably could work," and

22 I s aid w hat I said, " I'm s taying o ut o f t his. I'm n ot

23 d isc uss in g thi s wi th y ou ."

24 So you guys go back and forth on when it's

25 convenient and credible and it's worth something and






1 w hen i t' s n ot c onv eni ent , h e' s a m ad s cie nti st a nd t he

2 t ech nol og y h as no b as is.

3 The things you gave me today on the FBI reports

4 w ere - - i f s om eo ne di dn' t k no w w ha t t ho se we re a bou t,

5 w ere b as ed o n w hat yo u d ef en ded De nni s o n, o n s ay in g

6 t her e w as a fa ls e F BI ra id w hic h i t w as d ete rmi ne d i t

7 w as a fa lse FB I r ai d a nd D en nis go t e ve ry thi ng b ack .

8 Agent West's testimony was based on false

9 information that was determined false information,

10 things were given back. So you're giving information

11 r igh t n ow p rov ing m y p oi nt i n t his ro om t hat if i t w or ks

12 t o y our b en efi t t o sa bot age s om eth ing t ha t h as t o d o

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 s cen es w ith th at, t he n t hat 's w hat yo u d o an d t ha t' s

18 been ongoing.

19 Q. 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.






1 Q. Did you not get money from a federal contract

2 or another contract that you would have otherwise gotten

3 but for the press exposure, as you put it?

4 A. There's a lot of things I didn't get. I had a

5 l oan t ha t w as s et f or Po rc up ine Cr eek t ha t w oul d h av e

6 t ake n Cr oss Har bor o ut wh en o ne o f t he a rt icl es c ame ou t

7 i n t he R eno ca se a nd t he y c al le d a nd s aid , " You k no w,

8 u nti l th is i s s e tt led , w e ca n't go fo rw ar d b e ca us e e ve n

9 i f i t 's n ot tr ue w hat 's b ein g s a id , t h at' s w h at 's b ein g

10 s aid in t he pr ess a nd we 've g ot pe opl e t ha t a re g oi ng t o

11 vote on this l oan and we can't d o i t."

12 So I've been harmed several times of those

13 kinds of things.

14 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 A. I don't have the name in front of me, but I can

18 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?






1 A. The loan was going to be for 50 million.

2 Q. And as you sit here today you have no idea who

3 t his m ys ter iou s l oa ne r i s a ft er --

4 A. I didn't say it was a mysterious loan and I

5 didn't s ay I didn't h ave a ny i dea. I s aid I don't h ave

6 his name off the top of my head, but I can certainly get

7 it for you.

8 Q. Had you submitted financial documents to this

9 lender?

10 A. I would assume so, because they had been out to

11 P orc upi ne C ree k a nd t hey we re r ead y t o - -

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 t he n am e o f t ha t l end er d ow n t ha t w as g oi ng t o g ive yo u

20 the $50 million?

21 (Information requested_______________________

22 ____________________________________________.)

23 A. Yeah, I have no problem with that.

24 Q. Okay. Now what article did this lender read

25 and what was untruthful in the article that caused them






1 not t o g ive y ou t he $ 50 m illion?

2 A. It was an article that came out. I believe it

3 came out in Reno first and then came out in the Desert

4 S un a nd i t w as b as ica lly t al kin g a bou t e ve ry ti me

5 anything was mentioned with Dennis Montgomery or

6 questions on Dennis Montgomery, it would say his

7 employer, Edra Blixseth, Yellowstone Club. It would,

8 you know, tie it all in.

9 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 h ad t wo r ep ort ers t ha t h ave c al led to a sk fo r t hi ng s a nd

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. Look at this thing.

19 We w ant t o get t his o ut."

20 Q. Let me see if I understand your testimony

21 correctly: Because Flynn and Tim Blixseth contacted

22 some reporters and wrote some articles, you lost some

23 $ 700 mi ll io n i n a ss et s t hat y ou go t i n th e m ari ta l

24 a gre eme nt .

25 A. That's not what I testified to. I said that






1 contributed to doubts and questions of other things.

2 Q. What about your responsibility, Ms. Blixseth?

3 D o y ou t ake an y r es po nsi bil it y f or th e l os s o f

4 $700 million and writing these loans and defaulting on

5 t hes e lo ans ? D o yo u tak e an y re sp ons ib il ity , Ms .?

6 A. I didn't ever take a loan that I didn't think I

7 had a plan probably A, B and C of a way to try to repay

8 it. When t he f acts c ame t o l ight e ven t hen, I tried t o

9 f igu re o ut w ay s t ha t I c ou ld st ill ma ke i t w ork .

10 Do I take responsibility for any of this? Of

11 c our se I do . I ta ke r es pon si bi lit y f or b e li evi ng t h e

12 wrong people and not asking for facts of things. I take

13 responsibility for the things that I could control which

14 was, maybe, you know, trying to get more information,

15 t ryi ng t o h ave th in gs -- th er e w er e s om e t hi ngs t ha t

16 w ere ou t o f my c on tro l t hat w e' re s ti ll t ryi ng t o f ind

17 out if the actual offer on Farcheville was legitimate or

18 not, because that came through Gary Peters.

19 I have no control over the market hitting when

20 it d id. Some o f t he t hings on t he agreement to form h ad

21 q uit e a f ew th ing s t ha t h ad t o c om e t og et her in o rd er t o

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. Ms. Blixseth, do you have any bases whatsoever,






1 as you sit here today, any facts that you know of, to

2 try to set aside the marital settlement agreement?

3 MR. HOLAHAN: You can -- you can answer in

4 general, but I'm going to cut it short because it's not

5 on the subject here.


7 I think I do. I think I do based on books and

8 records that were turned over that were different than

9 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 l oan. Now i t's a n unsecured l oan. And t here

20 just -- there were many things that ended up not being

21 from the very moment I signed the MSA.

22 Q. 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






1 loan, it's your testimony that that fact entitles you to

2 set aside the MSA; is that correct?

3 A. I said that is one of the considerations.

4 Q. Okay. And then you mentioned Big Springs

5 Realty. Are there any others?

6 MR. HOLAHAN: Just for the record, Mr. Flynn,

7 as you know that's going to be -- this subject is going

8 to be the subject of another adversary proceeding and

9 you'll have an opportunity to depose Ms. Blixseth again

10 o n t hes e s pe ci fic i ss ues th en .

11 I would rather defer all that to that action.

12 I think that --

13 MR. GLASSER: Well, I was going to say,

14 a ctu all y, i t's ac tu al ly g oi ng t o c ome u p i n 1 4 a nd 1 7 - -

15 MR. FLYNN: -- 18.

16 MR. GLASSER: -- the case we're going to try in

17 February, because they're going to go next. They're

18 g oin g to p ut o n t he ir d ef en se . Th ey' re g oin g to s ay

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 MR. HOLAHAN: Well, then maybe you could let

23 them h ave t heir t urn n ow.

24 MR. FLYNN: No. I'm going to finish with my

25 q ues tio ns o n t his s ub jec t.






1 MR. GLASSER: Well, I've got a question for

2 you. Ms. B lixseth h as s aid s he's g oing t o b e here

3 today. You've g one o ver s ix h ours. I'd l ike t o go a n

4 hour. If the judge stops us, then we've met the federal

5 r ule s o f s ev en h ou rs u nl ess s he ne eds s om e t ime - - I

6 don't know if you need some time, Christina, or somebody

7 on the phone.

8 There's a chance a judge will say, "You're

9 done. Today's y our o nly d ay." I u nderstand y ou're

10 g oin g t o m ak e a rg um en ts t o t he c on tra ry . I u nd er st and

11 Ms. Blixseth's lawyers are going to make arguments that,

12 y ou k no w, a gai nst t ha t, b ut w e d on 't k now ho w t ha t' s

13 going to turn out.

14 I'm here; I'd like to ask an hour's worth of

15 q ues tio ns .

16 MR. FLYNN: But Brian, you're going to get

17 y our -- t he re' s n o wa y J udg e K ir sc her i s g oi ng t o d eny

18 you f rom getting y our chance. I h ave not had e ven m y

19 seven hours and I need two or three days.

20 MR. GLASSER: But the rules provide, as I read

21 them, unless the court orders otherwise the deposition

22 lasts seven hours. And I take that to mean seven hours

23 on t he r ecord, so when d o I get my share?

24 MR. CONANT: I'm just curious, who's asking for

25 t he add it io nal ti me ?






1 MR. FLYNN: For the notice --

2 Is this Judge Kirscher?

3 MR. BLIXSETH: No, it's CJ.

4 MR. GLASSER: This is Brian Glasser saying I

5 want my hour.

6 MR. FLYNN: I'm the noticing party and I

7 subpoenaed Ms. Blixseth. Under the rules I get the

8 seven hours.


10 MR. HOARD: That's not accurate.

11 MR. HOLAHAN: No, that's not true.

12 MR. FLYNN: 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 MR. GLASSER: And I'm just saying to you

16 that --

17 MR. FLYNN: I think you'll have to do it

18 another day, Brian.

19 MR. GLASSER: -- that I would like to do it

20 today.

21 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.






1 MR. GLASSER: I'm just saying, you at some

2 point --

3 MR. FLYNN: How much time do you think you

4 have?

5 MR. GLASSER: I'd like to have an hour today.

6 MR. FLYNN: Oh, well. I'm nowhere close.

7 MR. GLASSER: Right, but you're not going to be

8 any c loser a n hour f rom n ow.


10 MR. GLASSER: So my point is you've covered the

11 w hol e pa nop ly o f t ime . I f yo u hav e ma ybe a no th er 1 5

12 minutes of important things you'd like to get, because

13 w e'r e r ig ht he re r igh t n ow I do n't ha ve a ny p ro bl em wi th

14 that, b ut I 'd l ike a n hour.

15 MR. FLYNN: Let me see what I can do in the --

16 I've got days. I haven't e ven r eally got into t he

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: Three minutes.

21 MR. FLYNN: Let's take a three-minute break.

22 MR. GLASSER: Uh-huh.

23 (Recess taken.)


25 ///






1 BY MR. FLYNN:

2 Q. This is a document, Ms. Blixseth, that you sent

3 o n J ul y 6 , 2 00 8, t o a ll t he Y el low sto ne C lub me mb er s v ia

4 email right after you agreed to the marital settlement

5 agreement and I just want to go through a couple of

6 parts of it.

7 You say in the second paragraph, "This past

8 Thursday, the judge signed an order regarding the

9 personal and professional issues between Tim and me."

10 Now at that date that you made that statement,

11 y ou w il l a gr ee wi th m e t her e w as a s et tle men t o f a ll

12 personal and professional issues between you and

13 Mr. Blixseth?

14 A. Restate your question.

15 Q. Yeah.

16 As of July 6, you agree that there was a

17 settlement -- let me give you a little background.

18 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 g oin g o n f or p age s, a s t he c our t l ed y ou t hr oug h t he

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?






1 A. I do.

2 Q. And do you recall your testifying, which is one

3 o f t he se ex hib its w hi ch w e d on' t h ave t he ti me t o g o

4 i nto , o ve r a nd o ve r a gai n a nd i nfo rmi ng t he c ou rt y ou

5 h ad p len ty o f t ime , y ou h ad s pe nt m il li on s o f d ol la rs o n

6 lawyers and accountants?

7 MR. HOLAHAN: We'll stipulate to all that.

8 BY MR. FLYNN:

9 Q. So you understand three days before you signed

10 t his yo u h ad b een i n c ou rt a t t his p ro ve- up h ea ri ng an d

11 y ou h ad a gr eed to t he ma rit al s ett lem en t a gr eem en t. Y ou

12 understand and your counsel has so stipulated.

13 You understand that, Ms. Blixseth?

14 A. I don't know about the millions and lawyers,

15 but yes.

16 Q. How much had you paid Liner and Jaffe and

17 C lem ens - - str ike t ha t.

18 How much had Liner and Jaffe and Clemens and

19 billed y ou a s of J uly 6 , 2 008?

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?






1 MR. HOLAHAN: Hold on a second. I'm going to

2 have t o start. You're n ow g etting i nto - -

3 MR. FLYNN: I'll withdraw it.

4 Q. How much did you pay Deloitte & Touche, the

5 forensic accountants you hired?


7 Q. Is it your testimony that any documentation was

8 withheld from you that Deloitte & Touche didn't get that

9 had been requested?

10 A. Yeah. I don't think we got all of the

11 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 g oin g f ro m b ei ng a se cur ed l oan to an u ns ecu red l oa n

24 that relates to your setting aside the marital

25 settlement agreement?






1 A. That part was -- was -- that had nothing to do

2 with this letter.

3 Q. Just tell me: What did Tim Blixseth have to do

4 w ith t he Cr edi t S ui ss e l oan g oi ng f ro m s ec ur ed t o

5 unsecured?

6 A. I don't think that's been determined yet,

7 because the UCC versus Tim Blixseth trial hasn't

8 continued so I don't know if that's been determined.

9 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 s he' s no t qu al ifi ed t o g ive .

18 MR. FLYNN: I want her understanding. That's

19 all.

20 Q. Just give me your understanding, Ms. Blixseth,

21 t hat 's a ll I w ant , o f wh ate ve r y ou kn ow o f t he s ecu red

22 v ers us t he u ns ecu re d a s t o h ow i t i mp ac ts my cl ie nt ,

23 Mr. Blixseth.

24 MR. HOLAHAN: She's already stated the loan

25 going from secured to unsecured was something she didn't






1 k now w as go ing t o h ap pen w he n s he s ig ne d t he ma ri ta l

2 settlement agreement.

3 MR. FLYNN: What does Mr. Blixseth have to do

4 with it?

5 MR. HOLAHAN: He doesn't have to have anything

6 to do with it. It's a mistake.

7 BY MR. FLYNN:

8 Q. Ms. Blixseth, is it true that Mr. Blixseth has

9 got nothing -- that's all I need from you -- has got

10 nothing t o do w ith t his?

11 A. Well, he had something to do with it, because

12 part of that came out of when it was the UCC versus

13 C red it S u is se a nd T im Bl ixs et h. P art o f t he de ci si on

14 f or h ow t ha t c ame o ut ca me o ut b ec aus e o f th at t ria l.

15 Q. But you were 50 percent owner of the

16 Y ell ows to ne Cl ub a t t h e t im e. Y ou we re f u ll y a wa re th at

17 t her e w er e u ns ecu re d c re dit or s. A s a m at ter of f ac t, a s

18 the accounting shows, the unsecured creditors,

19 9 0 p erc en t o f t he m c am e i n a fte r y ou t ook co ntr ol , s o

20 w hat do es t hat ha ve t o d o w it h M r. B li xse th?

21 A. That was just another statement that's not

22 a ccu rat e t ha t i s n ow o n t he r ec ord th at w asn 't a

23 question to me.

24 Q. What does Mr. Blixseth have to do with this

25 s ecu red v er sus un se cu red ? C an y ou ju st t e ll me y ou r o wn






1 understanding?

2 A. Because some things came out in the UCC versus

3 C red it S uis se a nd T im Bl ixs et h t ha t c au se d t hat t o b e

4 changed. I didn't have anything to do with that. I'm

5 not the one that filed the suit and I didn't have

6 anything t o do w ith t hat.

7 And the -- the determination from what the

8 j udg e d id c ame o ut of th at l aws uit wh ic h T im di d

9 p art ici pa te in an d h ad s ome th in g t o d o wi th.

10 Q. But you engineered the entire reorganization,

11 Ms. Blixseth.

12 A. I didn't have anything to do with that lawsuit

13 with t he t rial f or t he U CC.

14 Q. You went and got Mr. Byrne as the DIP lender,

15 d id y ou n ot ? Y ou w er e th e de bt or i n po ss ess ion .

16 MR. HOLAHAN: You're talking about two

17 different things, Mr. Flynn.

18 MR. FLYNN: I'm just trying to understand where

19 y our c li ent i s co mi ng f ro m.

20 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 m ake M r. B li xs eth t he f al l gu y.

24 You wanted all fingers pointing at Tim,

25 a cco rdi ng t o o n e o f y our em ai ls . D id n' t y ou wr it e t ha t?






1 A. I wrote that certain things that Tim was trying

2 t o - - be twe en y ou a nd Ti m c al li ng M ar k C he hi at S ka dde n

3 and trying this conspiracy theory against Sam and me

4 w hic h w as n ot t rue , t hat p eo ple ne ede d t o be lo ok in g a nd

5 p oin tin g t he f ing er s a nd lo ok i n t he d ire cti on o f T im.

6 Yes, I did say that.

7 Q. So because we took on -- let me see if I

8 understand what you're saying.

9 Because we contacted Mark Chehi, there's a

10 conspiracy between Tim and Credit Suisse?

11 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 m e w hic h m ad e t he m t hi nk th at t her e m ig ht ha ve b een an d

15 made them go down that direction when there was nothing

16 there.

17 The judge ruled there was nothing there.

18 Q. Okay. The judge ruled there was nothing. So

19 how d id t hat i mpact y ou?

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 a nd t hi ng s t ha t c am e o ut in t he tr ial i mp act ed t he

24 Credit Suisse loan going from the secured to unsecured

25 loan.






1 Q. But you're the one who engineered the entire

2 b ank rup tc y alo ng w ith t hi s.

3 MR. HOLAHAN: We're not talking about the

4 bankruptcy. We're talking about what the court stated

5 in clear and concise language about the Credit Suisse

6 l oan a nd wh y i t w as p red at or y l end ing a nd wh y i t w en t

7 from a s ecured to a n u nsecured.

8 We're talking about what happened and what the

9 court ruled. She did not know t hat w as g oing t o h appen

10 when s he s igned t he M SA.

11 BY MR. FLYNN:

12 Q. Do you agree with your -- I will not ask one

13 m ore qu es ti on i f y ou s im ply s ay th at y ou a gr ee w ith th e

14 s tat eme nt o f y our c ou nse l.

15 A. Yeah, I agree with that. I didn't know that

16 t he l oa n w as g oin g t o go f ro m s ecu red t o u ns ecu re d.

17 MR. FLYNN: Thank you very, very much.

18 MR. GLASSER: All right. Cool. My turn.

19 MR. FLYNN: I'm not quite done, Brian.

20 Q. Then you write, "Naturally, this will be

21 a ppe ari ng i n t he p res s. I' m so rry t ha t ma ny o f y ou w il l

22 have learned about this from the media before receiving

23 this l etter. I c an a ssure y ou t hat I intend t o k eep

24 press attention to minimum."

25 Do you know that there are emails in there






1 where you and others were engineering press leaks

2 attributing falsely to Mr. Blixseth?

3 A. I do not believe that to be true.

4 Q. I'm representing the emails are in that batch.

5 A. You show me the emails and I might change my

6 mind, but I doubt it.

7 Q. "To that end, I have retained the Edelman PR

8 firm in Chicago, contact Bill Keegan, to field all media

9 requests."

10 Then you say you sat back in silence and you're

11 n ot g oi ng t o d o s o an y l on ge r e ven t ho ugh yo u f il ed th is

12 200-page motion that appeared all over the world.

13 How could you say you sat back in silence when

14 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 e ter nit y, a wh ole l ot of ag on y a nd ne ga ti ve p re ss , I a m

18 pleased to announce that I will retain ownership of

19 Yellowstone Club."

20 Isn't that the whole ball, the whole story

21 h ere , M s. B lix set h? Y ou wa nt ed co ntr ol n o m att er w hat

22 i t to ok . Y ou w en t an d bo rr ow ed $ 40 m il li on o n f als e

23 l oan a pp lic ati ons t o g et c on tro l an d yo u won . Y ou g ot

24 control.

25 A. What's the question, Mike?






1 Q. Isn't it a fact that everything you've done for

2 t he l ast tw o y ea rs in yo ur d ivo rce fr om M r. B li xs et h w as

3 t o g et c ont rol o f t he Ye ll ow sto ne C lu b?

4 A. No. That, in fact, is not accurate and all I

5 wanted to do was save Yellowstone Club from imploding

6 and the --

7 Q. And what's happened? Has it imploded?

8 A. I didn't get to finish my answer.

9 That with the ad hoc members committee that was

10 p ut t og et he r a nd h ow t he y f el t a bo ut T im, wi th m e b ein g

11 t old th at t her e w er e g oi ng t o b e f ive l aw sui ts f ile d b y

12 CrossHarbor, the other B shareholders were getting ready

13 t o f i le l aw sui ts, a ll th ese t hi ngs we re c omi ng d own to

14 r igh t w he n t he MS A w as d one , t ha t - - t hat my i nt ent wa s

15 n ot - - t hat Ye llo ws to ne C lu b w ou ld no t - - I' m s it ti ng

16 h ere no w n ot b ene fi ti ng a t a ll f ro m t hi s.

17 Would I have been better off to let it implode

18 and T im t ake o n t he t hings t hat h e c reated? Yes.

19 Q. You didn't say any of that. You only said I

20 will retain ownership.

21 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 Q. Next paragraph, "Additionally, I've been able

25 to make this happen without adding partners or selling






1 or borrowing against any Yellowstone Club assets"; is

2 that true?

3 A. That is true.

4 Q. "I used personal, separate assets to gain

5 o wne rsh ip o f t he 5 0 p erc ent o f t he Ye ll ow sto ne C lub I

6 did n ot o wn"; i s that t rue?

7 A. That is true. Porcupine Creek was not part of

8 Y ell ows to ne Cl ub n or w as th e f am il y c om po und . T hat 's

9 the collateral I u sed.

10 Q. So your testimony is you collateralized those

11 a sse ts p ers ona lly o wn ed b y y ou t o S am B yr ne t o g et

12 c ont rol ; is t ha t co rr ect ?

13 A. One was personally owned by me and one was BGI,

14 b ut i t w asn 't o wn ed b y Y ell ow st one Cl ub .

15 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. I thought Tim was

20 g oin g t o mo ve f or wa rd wi th t he t hi ngs t ha t h e g ot a nd

21 not s tay h is c ampaign o n m e.

22 I thought that I could try to put together --

23 i f a ll t he i nf orm at io n w oul d h av e b ee n t ru e, a

24 reformatting of how Yellowstone Club was without

25 pledging at the time to get this closed any Yellowstone






1 Club assets or fire-selling additional lots and how that

2 had b een g oing o n f or m onths.

3 Q. And then in league with Sam Byrne, you put the

4 club in bankruptcy?

5 A. That's not accurate. Is that a question?

6 Q. Yeah.

7 A. No. That's not accurate.

8 Q. Did you voluntarily file a bankruptcy?

9 A. I absolutely had to.

10 Q. Thank you.

11 And you say, "I have always felt the

12 Yellowstone Club is," quote, "'my baby'"?

13 A. You're reading it and I'm not objecting to what

14 y ou' re r ead ing .

15 Q. So at all times you believed that Yellowstone

16 C lub wa s " yo ur ba by " a nd be lo ng ed t o y ou?

17 A. No. I think that at the time when Yellowstone

18 Club was started that it was -- it was Tim and I and

19 t hat -- t ha t w e d id a gr ea t j ob to ge th er o f c rea tin g

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 w as s uc ce ss ful at a nd th en r eal ity of l if e h it a nd f or

24 m e s ayi ng i t's "m y b ab y" wa s t ha t - - t hat tr yin g t o

25 p rot ect i t f ro m d is as ter fo r t he m emb er s, fo r t he






1 e mpl oye es , f or th e c om mu nit y, w as - - w as m or e o f a

2 maternal or thing I just -- I didn't want to see it die.

3 Q. And did you borrow all the monies that you

4 borrowed all the way along the way to try to keep your

5 dream alive so the Yellowstone Club wouldn't die?

6 A. No. I actually really thought that Tim was

7 going to do it. I actually r eally was borrowing all

8 a lon g d ur in g t he t ime th at I wa s f roz en o ut t ry in g t o

9 s urv ive u nt il w e s ay t ha t i t w as e ith er g oin g t o s el l o r

10 Tim w as g oing t o buy o ut o f i t.

11 I really didn't think it was going to end up

12 the w ay i t d id. I t hought I was g oing t o come o ut o f

13 it. I really thought from the very first sheet that we

14 h ad t ha t w e we re e ith er g oi ng t o t ry t o r un Y ell ows ton e

15 Club together -- that became easy that we couldn't

16 b eca use w e c ou ldn 't e ven sp ea k - - a nd I t hou ght T im

17 would b uy m e o ut o r i t would s ell.

18 Q. So the reason for borrowing all those monies

19 and all those loans we went into in excess of

20 $ 40 m il li on w as f or w hat , Ms . Bl ix set h? W ha t di d yo u

21 b orr ow a ll t ha t mo ney f or ?

22 MR. HOLAHAN: She's --

23 You can -- one more time.

24 THE WITNESS: I've been repeating saying to --

25 f irs t o f al l, y ou k ee p s ayi ng 4 0 m ill io n, bu t t o su rvi ve






1 t he t ime un til I g ot t he a ss ets th at w ere fr ee a nd c le ar

2 in my name that I could try to borrow against,

3 consolidate that, monetize and bring forward into a

4 business t hat h ad a cash f low.


6 Pursuant to our accommodation, Brian.

7 MR. GLASSER: Okay. What exhibit number are we

8 up to?

9 MR. HOLAHAN: This 123.

10 MR. GLASSER: This will be Exhibit 124.


12 MR. HOLAHAN: Mike, what did you want to do

13 with t he r est o f these?

14 MR. FLYNN: Hold on to them.

15 MR. HOLAHAN: Are they on the website?

16 MR. FLYNN: T hey're on the website.

17 MR. GLASSER: Here you go, and the court

18 reporter and I g ot --


20 THE WITNESS: This is a little font.

21 MR. GLASSER: Yeah, I'm sorry. I'll read it

22 out loud.

23 EXAMINATION

24 BY MR. GLASSER:

25 Q. I've handed you what's been marked as






1 E xhi bit 1 24 , M s. B lix set h, a nd I j ust w an t t o w al k

2 t hro ugh E xh ibi t 1 24 , w hi ch i s a ba lan ce s hee t f or

3 M r. B lix set h d ate d a s o f D ec emb er 3 1, 2 00 7.

4 And I want to identify those entities which

5 o ugh t t o b e r em ove d f rom t he ba lan ce s hee t o f

6 M r. B lix set h a s a r es ult o f t he ma rit al s ett lem en t

7 a gre eme nt ; o ka y?

8 A. Okay.

9 Q. I guess we can skip the cash, securities and

10 automobiles, unless you can remember. Let's just skip

11 that for now.

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. Can you, please, put a line through on

17 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 a nd t hen y ou c an c heck i t.

22 MR. HOLAHAN: Are we going to underline?

23 MR. GLASSER: No, just scratch through the

24 B lix set h Gr oup , I nc .

25 MR. FLYNN: You want it removed because it's no






1 longer Tim's.

2 MR. HOLAHAN: You want her to do it on the

3 exhibit, Blixseth Group, Inc., the first one.

4 BY MR. GLASSER:

5 Q. That line under 376 million, 94 million and

6 281-, just scratch through that line.

7 MR. FLYNN: The record is clear this is as of

8 12/31/07.

9 MR. HOLAHAN: You want her to put a line

10 t hro ugh t he w ho le t hi ng?

11 BY MR. GLASSER:

12 Q. Just that last column, fair market value -- or

13 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 o f t he M SA a te c ash. It d idn't c reate c ash, i s

17 that correct, on a cash-flow basis?

18 A. Well, BGI had Porcupine Creek in it, but at the

19 t ime th at h e d id t his he s ho uld n't ha ve h ad P or cu pi ne

20 Creek a s p art o f i t. It h ad C asa C aptiva, w hich

21 s hou ldn 't h ave b ee n pa rt o f i t.

22 Those would have been negative cash flow, but

23 Y ell ows to ne C lu b wa s par t of B GI . Th at s hou ld h ave h ad

24 p osi tiv e ca sh flo w.

25 Q. Let's go to the day of the MSA. I'm just using






1 this because it's a list prior to the MSA.

2 A. Okay.

3 Q. On the day of the MSA, all in, Blixseth Group,

4 Inc., ate cash, it didn't create cash, counting

5 everything under it; correct?

6 A. Correct.

7 Q. So when you received it on the day of the MSA,

8 you received an entity that on a cash-flow basis

9 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. If you're talking about starting a project, it

22 would e at c ash. It d idn't m ake c ash.

23 Q. It was not a cash-making entity at the time of

24 the MSA?

25 A. Correct.






1 Q. So on a cash-flow basis it couldn't be expected

2 to throw off cash?

3 A. Correct.

4 Q. Okay. Mobile Home, RM, California?

5 A. I'm assuming that's something that I got that

6 o ne o f t he e mp lo ye es f or P or cup ine Cr ee k l iv ed i n.

7 Q. All right. Scratch that.

8 A. Unless there was another mobile home I don't

9 know about.

10 Q. Blixseth Family Investments, LLC. You got that

11 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 f low o n the b ack.

19 A. Okay.

20 Q. One lot, 28 North Subdivision, Big Sky,

21 M ont ana , wh o g ot th at ?

22 A. Is this for Lot 1?

23 Q. Yeah. Well, it says "One lot, 28 North

24 Subdivision, Big Sky, Montana."

25 A. Well, at the time of the MSA -- I've got to go






1 i nto a l itt le e xpl ana tio n on t hi s. I 'm n ot q ui te s ure .

2 There was one --

3 Q. Is that the one that was sold?

4 MR. HOLAHAN: Who got it?


6 BY MR. GLASSER:

7 Q. Sold prior to the MSA?

8 A. Right, but I'm not sure exactly.

9 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. I don't know.

17 By the way this is worded, it's tough for me to

18 tell.

19 Q. Section 5 640 acres in Bozeman, Montana. At

20 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?






1 A. I believe that would be part that ended up

2 b ein g p ar t t ha t w en t t o Y ell ows ton e C lu b, bu t I 'm n ot

3 positive on that. When it's listed as Lot 200A, I'm not

4 positive.

5 Q. All right. So put a question mark beside that.

6 Lot Bighorn Golf Club.

7 A. I believe that's the Johnson residence and Tim

8 got that.

9 Q. Okay. Leave that alone.

10 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 b y l aughing a t m e. That w as a lot t hat I

15 owned and I did get and I sold it prior to the MSA.

16 Q. All right. Scratch it off because at the time

17 of t he M SA t hat didn't e xist.

18 A. Thanks, Tim, I appreciate that.

19 Q. All right. Condominium in San Diego?

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 the day of the MSA?

25 A. I can't answer on the day of the MSA.






1 MR. FLYNN: I'll object to this whole line.

2 M ove t o str ike . L ack s fo un da ti on. T he re 's a bs ol ut ely

3 n o f ou nd ati on f or t he at e c as h o r d id n' t e at ca sh t hat

4 has been laid with the witness, so I object and move to

5 strike.

6 BY MR. GLASSER:

7 Q. All my questions are based on your personal

8 knowledge, Ms. Blixseth, and thank you for pointing out

9 when y ou don't h ave it.

10 Miscellaneous acreage 640 acres, do you know

11 what that is?

12 MR. HOLAHAN: It's another section.

13 THE WITNESS: Yeah, it's a section of land.

14 I 'm n ot s ur e i f th at' s w hat I w as c ons ide rin g p ar t o f

15 t he D es er t Ran ch p roj ect . I 'd h av e to k no w whe re i t w as

16 t o be a bl e to a nsw er t ha t qu est ion .

17 MR. FLYNN: I'll also object this is as of

18 December 3 1, ' 07. It's a ll i rrelevant. The M SA w as

19 eight months later, so this whole line of questioning is

20 completely irrelevant.

21 BY MR. GLASSER:

22 Q. Yellowstone Club compound, 160 acres. Where

23 did that go? The family complex?

24 A. Yes. That ended up going to me, and that was

25 t he v al ue t hat I w as t ol d w it h t he c on tra ct w it h S am






1 Byrne, which would have been in place as of

2 December 31st, the value was 40 million.

3 Q. So delete that?

4 A. Delete that.

5 Q. Scratch through Yellowstone Club compound

6 because he didn't have it on the day of the MSA.

7 A. Correct.

8 Q. Did it eat cash or make cash on the day of the

9 MSA?

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. Who got

14 that?

15 A. Tim got that.

16 Q. Did it eat cash or make cash, to your

17 knowledge?

18 A. Again, for the overhead it would have eaten

19 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 MR. FLYNN: And lacks foundation and

25 irrelevant.






1 BY MR. GLASSER:

2 Q. On the day of MSA; right?

3 By the way, you know this because you helped

4 b uy t his an d k n ew i t w as n' t f ul ly d ev el op ed y et ; ri ght ?

5 A. Yeah. Turks and Caicos was almost completely

6 developed, but the Yellowstone Club World never came to

7 fruition, so the -- how it was going to be used for the

8 c ash f lo w a nd t hat ki nd o f t hin g n eve r c am e a bo ut .

9 Q. Nashville?

10 A. That was a house that Tim bought, I wasn't even

11 aware o f, f or s omebody. He g ot t hat.

12 Q. Western Aviation & Marine, did that exist on

13 the day of the MSA?

14 A. I believe it did and I believe that went Tim's

15 way.

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.

22 MR. FLYNN: Object. Move to strike.

23 BY MR. GLASSER:

24 Q. Is that based on your personal knowledge of

25 w hat it c os t t o r un t he a irp lan es w he n y ou g uys r an th em






1 together?

2 A. Correct.

3 Q. Monarch Investments, who got that?

4 A. I did.

5 Q. Did it eat cash or make cash?

6 A. That actually -- that's the building that

7 Monarch was in and so it didn't pay rent, so it kind of

8 ate cash for the overhead of it but not much.

9 Q. So you got the two Monarchs. Please delete

10 both of those.

11 Furniture, antiques and equipment, I guess you

12 all split it up in the MSA some ways; right?

13 A. I believe that's -- yes.

14 Q. All right. So just -- just put a question mark

15 beside that.

16 Heavy equipment, I guess that was split as

17 well; right?

18 A. I'm going to go back to the furniture, antiques

19 a nd e qu ip me nt. I b el iev e t ha t t ha t's p ro bab ly w hat wa s

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 w orth g oing i nto.

24 Q. So delete furniture, antiques and equipment,

25 because that went with Porcupine Creek.






1 A. Correct.

2 Q. Heavy equipment we'll skip over because it's

3 small.

4 Western Pacific Timber, did he get it or you

5 get it?

6 A. He got it.

7 Q. Do you know if that ate cash or made cash?

8 A. That should have made cash.

9 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

13 MSA?

14 A. At the time of the MSA, actually when the MSA

15 was signed, I found it was just insolvent.

16 Q. Okay. I don't know what the other investments

17 are. What's TWJ, LLC?


19 Q. Okay. Do you know if he got it or you got it?

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.

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






1 the l ike; i s that r ight?

2 A. Right. That, and there was a lot of back and

3 f orw ard o f s om e t hi ng s t hat I w asn 't a war e o f, o f

4 s ell ing t o i nd ivi du al s a nd b ack to th e c lu b a nd t ha t

5 kind of stuff, so there was a lot that went on with

6 that.

7 Q. So just sign the bottom. Just write your name,

8 E dra B li xse th, ri gh t n ex t t o Ex hib it 1 24 o n t he b ot tom

9 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 g ive yo u - - t hi s i s E xhi bit 5 6, bu t b ec au se I 'm g oi ng t o

17 cause you to write on this as well, I'm going to give

18 you a new one.

19 MR. HOARD: You want to make it 56A?

20 MR. GLASSER: Yeah, let's make it 56A.

21 (Exhibit 56A was marked for identification.)

22 BY MR. GLASSER:

23 Q. I want turn your attention, Edra -- or

24 Ms. Blixseth --

25 A. You can call me Edra.






1 Q. Okay. Thanks.

2 -- the third page of Exhibit 56A and that's

3 where you have the revenue and expense projections as of

4 the d ay, y ou k now, a s o f 8 /15/08.

5 You see that?

6 A. I do.

7 Q. Okay. Now it's fair to say that as of the day

8 of this financial statement on a cash-flow basis, look

9 there in September, you expected negative net cash flow

10 in t he n ext m onth; r ight?

11 A. I did.

12 Q. So the day of the MSA, the day it was signed,

13 y ou w er e o n a c ash -fl ow b as is n ot s ol ve nt ; r igh t?

14 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 u s b ein g a bl e t o c rea te s om e c as h f lo w a nd r eve nu e t ha t

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 b it, "A ss um pti on 1 CF is so ld b y S ept em be r 1 5, 2 008 ."

23 You see that?

24 A. I do.

25 Q. That's Castle Farcheville; right?






1 A. Actually --

2 MR. HOARD: Chateau Farcheville.

3 THE WITNESS: Yeah, Chateau Farcheville.

4 BY MR. GLASSER:

5 Q. That's my West Virginia heritage, sorry.

6 That's why in October you get a $21 million

7 infusion of cash there next to YC October; correct?

8 A. Correct.

9 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: Object.

18 THE WITNESS: Farcheville had to sell.

19 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.






1 Q. -- were all insolvent on a cash-flow basis to

2 m eet t he ir d eb ts a s t hey c am e t hro ugh o ve r t he n ext

3 couple of months without some infusion; right?

4 A. Correct. That's why of the 35 million -- you

5 h ave t o r em emb er t he 3 5 m ill ion th at a lre ady -- t ha t - -

6 t hat I g ot, 13 m il lio n w as a ssu min g a $ 13 mi lli on

7 r ece iva bl e n ot e t ha t S am ha d a lr ea dy l oan ed t o T im, so

8 there was o nly 22 m illion cash.

9 And so if you look at how that cash was used --

10 I do n't k no w i f t ha t w as a f ina l a gr ee men t t o f or m t ha t

11 h e u sed o r w or kin g p ap er s, b ut t ha t d id n' t l eav e

12 a nyt hin g le ft ove r.

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 r ece iva bl es th at h ad n ot be en p aid .

17 Q. And, actually, so the infusion of CrossHarbor

18 t he d ay o f t he M SA al low ed Y ell ows ton e C lu b t o - -

19 A. -- get by.

20 Q. -- to basically make its payroll and get by,

21 b ut b y N ove mbe r i t wa s b ank ru pt an d h ad t o f ile ; r ig ht ?

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






1 of capital; right?

2 A. Capital had to be brought into Yellowstone Club

3 to stabilize it. Yes.

4 Q. And so were you, because -- let's look at the

5 next page. You see where it says Loan Detail? This

6 l oan d et ail de tai ls a ll t he l oa ns y ou o we d, e xc ep t f or

7 t he 1 20- , $ 187 m il lio n t hat M r. Fl ynn a sk ed y ou a bo ut

8 t hat y ou al so e xec ute d o n t he d ay o f t he M SA ; r ig ht ?

9 A. Correct.

10 MR. FLYNN: Object to the amount.

11 BY MR. GLASSER:

12 Q. More than a 180 million; right? Is that right?

13 MR. HOLAHAN: 183.

14 MR. FLYNN: 181.

15 BY MR. GLASSER:

16 Q. All right, okay.

17 So there's $63 million on page 4, 56A; is that

18 r igh t, Ms . B li xse th ?


20 Q. And in addition to that we could write in the

21 1 81- -- l et 's w ri te 1 81 u nd er t her e - - w hi ch wa s a

22 d ema nd n ote th at y ou e xe cut ed i n f avo r o f, I gu es s, BG I;

23 right?

24 A. Personally in favor of BGI.

25 Q. Yeah.






1 A. BGI -- on behalf of BGI to the Yellowstone

2 Club.

3 Q. Right.

4 And then there was the Tamarindo note which was

5 roughly 39-95-?

6 A. 40-.

7 Q. Call it 39,995-; right?

8 A. Okay.

9 Q. Okay. And so I don't know about the Tamarindo

10 n ote , b ut e ver y o th er no te o n h ere wa s e it he r a d em and

11 note, right, or going to be already due or going to be

12 d ue i n t he r em ain de r of ' 08 ; ri ght ?

13 A. They were all -- yeah. They were all

14 r ela tiv el y com ing u p o n me.

15 Q. And that's listed on the maturity date on the

16 right s ide o f 56A; r ight?

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 i s n o, y ou d id n't h av e a deq ua te ca pit al t o m eet t ho se

22 current capital demands; correct?

23 A. That would be correct.

24 Q. And everyone knew that on the day of MSA;

25 right?






1 A. I don't know who knew.

2 Q. Well, you knew it; right?

3 A. I knew things had to fall into place or we

4 wouldn't have enough.

5 Q. And Tim knew it?

6 A. I can't speak for Tim.

7 Q. And you wanted to do some transformative

8 transactions over the next few months to save the club?

9 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?


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. Go ahead. You can put 56A aside.

23 MR. FLYNN: By the way, Brian, for the record

24 who a re y our c lients?

25 THE WITNESS: Yellowstone Mountain Club,






1 Yellowstone Development, Inc., BSR, I'm also here on

2 behalf of the Bs, the 7Bs who settled.

3 MR. FLYNN: Four of the seven votes are

4 c ont rol le d by C re di t Sui sse . I s Cr ed it S uis se y our

5 client?

6 MR. GLASSER: My client is the trust, the

7 l iqu ida ti ng tr ust .

8 MR. FLYNN: But four of the seven votes, you

9 w ill a gr ee w it h m e, a re c ont rol led by y ou r c lie nt ,

10 Credit Suisse; is that correct?

11 MR. GLASSER: I'm asking the questions. Don't

12 burn m y hour, M r. F lynn.

13 Q. So let's just walk through. I have the

14 s che dul e, I ha ve t he M SA an d i f yo u d on 't re mem be r

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 c lie nt - - w e h ave p ut fo rwa rd a n e xpe rt r epo rt t hat sa ys

21 t he v al ue o f - - o f wh at M r. B li xse th h ad t ak en o ut w as

22 over $280 million at the time of the MSA and he owes the

23 money back.

24 You don't have to assume -- don't care about

25 t he n um be r, bu t w ha te ver it i s t ha t h e o we d i nt o t he






1 c lub s w as b ein g w ai ve d o n t hi s d ay , r ig ht , b y t he

2 release?

3 A. Are you saying that the notes that he was

4 personally --

5 Q. Yes.

6 A. -- yes.

7 Q. Okay.

8 A. Sorry was --

9 Q. So he owed notes in favor of BGI and BGI owed

10 n ote s to t he c lub s; r igh t?

11 A. Correct.

12 Q. Now, in addition, Tim got removed from a

13 $ 746 ,00 0 l in e o f c red it a t A mer ica n B an k t o s ec ur e a

14 Yellowstone Development bond; is that right?

15 A. That is right. That didn't happen on the day

16 of t he M SA. I t hink I had 3 0 days t o cause t hat t o

17 happen.

18 Q. 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 dozers and excavators?

24 A. Tim gets attached to equipment. It was stuff

25 t hat me an t s om eth in g t o h im , s o h e as ke d m e i f I ca red






1 and I said, "Make a list and let me check with the guys,

2 i f i t' s s om eth ing t ha t t hey n ee d t o h av e t he re, " a nd

3 j ust t o k in d o f g et i t d on e e ve ryo ne s aid , " If t hat 's

4 what h e w ants, l et h im h ave i t."

5 Q. And he got Tamarindo; is that right?


7 Q. Which was valued at what?

8 A. 40 million.

9 Q. 40 million.

10 That used to be owned by Yellowstone

11 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 T urk s an d Ca ic os; i s t ha t ri ght ?

16 A. I'm not clear on your question. 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. Sorry. Now I understand. That is correct.

21 Turks and Caicos or Tamarindo?

22 Q. Tamarindo.

23 A. Yes.

24 Q. Right?

25 On Lot 90 at Yellowstone Club, you assumed a






1 $ 2 m i lli on n ot e ex ecu ted by T im in fa vo r o f Y el lo ws ton e

2 D eve lop me nt ; is t ha t rig ht?

3 A. Yes, but there was supposed to be consideration

4 i n th at f or t ha t. Th at w as s om eth ing t ha t wa s br ou ght

5 u p a t t he t ria l w it h a n e xpe rt w it nes s t he re .

6 Q. But I'm just --

7 A. Yes.

8 Q. -- that was what he got; right?

9 A. Yes.

10 Q. And so Yellowstone Development, Yellowstone

11 Club World and BSR waived all their claims against him

12 a nd h e g ot a ll t hi s m one y a nd a ll t hes e r ele ase s; r igh t?

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 t hat r el eas ed h im , ar e yo u?

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 MR. FLYNN: Object to the form, the relevancy

22 a nd t he l ac k of f ou nd ati on.

23 THE WITNESS: Well, yeah. There was no

24 benefit. That's just what he got.

25 ///






1 BY MR. GLASSER:

2 Q. That's just what he got.

3 And what he got had nothing to do with what

4 Mr. Blixseth claims the clubs might -- against

5 Mr. Blixseth?

6 MR. FLYNN: And objection. Calls for legal

7 conclusion.

8 BY MR. GLASSER:

9 Q. In other words, the clubs gave up Tamarindo,

10 40 million; right?

11 A. Correct.

12 Q. They gave up the right to chase him for the

13 money h e'd t aken o ut?

14 A. Right.

15 Q. Which is at least the 187 million you stepped

16 in h is s hoes o n; c orrect?

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 all that? Nothing; right?

25 A. Right.






1 Q. Can you put your finger on a single thing he

2 gave for all that?

3 MR. FLYNN: Object.

4 THE WITNESS: When you say "they," are you

5 talking about BGI?

6 BY MR. GLASSER:

7 Q. No, talking about Yellowstone, Yellowstone

8 Club --

9 A. Yellowstone club did not get benefit from the

10 t hin gs t hat w er e ta ke n.

11 Q. -- Yellowstone Development --

12 A. Correct.

13 Q. -- BSR --

14 A. Correct.

15 Q. -- none of those entities got a single thing

16 f rom re le as ing hi m o f al l t hi s a nd gi vi ng hi m a ll t hes e

17 a sse ts; is tha t r ig ht ?


19 Q. You can't -- and Yellowstone Mountain Club

20 likewise released the claims against him for taking out

21 o r b rea ch in g h is f idu cia ry d uty or al l t he t hin gs h e m ay

22 h ave do ne d uri ng t he t im e h e r an t he c lub ; r igh t?

23 MR. FLYNN: Objection. Calls for legal

24 c onc lus io n.

25 ///






1 BY MR. GLASSER:

2 Q. You've read the release.

3 A. Well, I haven't, but just to answer your

4 question really until Tim made the statement during the

5 adversary proceeding that the cornerstone of him wanting

6 the MSA to close was that I took over all the

7 responsibility and fiduciary of anything he had done was

8 t he f irs t I 'd e ver th oug ht o f t hat or h ea rd t ha t t ha t

9 w as t he c or ner sto ne o f h im w ant ing to c lo se t he M SA .

10 Q. But you know that was the purported effect of

11 the mutual waiver and release agreement executed in

12 c onj unc ti on w it h th e MSA ?

13 A. I do now. The lightbulb went off when he said

14 it on the stand.

15 MR. FLYNN: Objection.

16 BY MR. GLASSER:

17 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. Correct.

21 MR. FLYNN: Objection.

22 BY MR. GLASSER:

23 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,






1 had he?

2 A. Not to my knowledge.

3 Q. Tim had not asserted any claims against

4 Yellowstone Development, Inc., had he?


6 Q. Tim had not asserted any claims against BSR?


8 Q. And each of those entities was jointly and

9 s eve ral ly l iab le o n t he C re di t S ui sse l oa n a t t he t ime

10 of the mutual waiver and release; isn't that right?

11 A. Those were listed as part of what Credit Suisse

12 loaned to, yes.

13 Q. Okay.

14 MR. HOLAHAN: I'm going to make a quick

15 e mer gen cy c all .

16 THE WITNESS: Am I being represented? Gary,

17 D enn is i s s tep pin g ou t of t he r oom .

18 MR. HOLAHAN: Yeah, you are. I'm not stepping

19 out of the room.

20 BY MR. GLASSER:

21 Q. Let's go back to 56A. I'm going to go up to

22 the assumption of Farcheville itself; okay?

23 A. Okay.

24 Q. I think you said in answer to one of

25 Mr. Flynn's questions that the buyer had been presented






1 to you by a guy named Gary Peters; do you --

2 A. The buyer was presented to me by Christie's in

3 London, but Gary Peters supposedly brought the buyer to

4 them. That's correct.

5 Q. And at the time of the MSA, time of the marital

6 settlement agreement, and the waiver and release that

7 w e'r e ta lki ng a bo ut h ere , h a d y o u a ct ua ll y l a id e ye s o n

8 the buyer?

9 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 against Farcheville?

16 A. No. Every time they were supposed to put -- as

17 certain things were done, they were suppose to put

18 monies u p. They w ere a foreign b uyer. I c an t ell y ou

19 that -- that other people -- I don't know if they saw

20 t he a ct ua l b uy er, b ut ot her p eo ple di d s ee - - p eo pl e

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 Q. Do you even know the name of the buyer, the

25 p ote nti al b uye r?






1 A. I believe I have the name somewhere, but I know

2 t hey a ls o h a d a no ndi scl osu re c lau se t o n o t r el ea se th e

3 name of the buyer.

4 Q. Okay. But independent of whether you tell me

5 t he n ame ri ght n ow , y ou s itt ing he re t oda y d on' t k no w

6 t he n ame of wh o w ou ld ac tu al ly h av e d on e t he bu yi ng .

7 A. I know who was supposed to have bought it.

8 Q. But you never talked to them face-to-face?

9 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 f ort h. J am es L ev y wa s th e la wy er t ha t wa s wo rk in g on i t

14 f or Y el lo ws ton e Cl ub. I a ct ual ly g ot t he o ff er j us t

15 b efo re A ugu st w he n t he y k in d o f cl ose d d ow n, so I w as

16 a ctu all y t he re on t he la st d ay o f A ug us t t o h op ef ul ly

17 g et i t c los ed b y S ept emb er 1 5th .

18 So I flew there and was -- met with the

19 lawyers, met with the notaries, thought we were going to

20 g et d on e. T he y ha d me t wit h th e po te nt ia l bu ye r' s

21 l awy ers a nd th ing s, s o w e s ti ll fe lt i t w as s om et hi ng

22 l egi tim at e.

23 Q. But now knowing what you know about

24 Mr. Peters --

25 A. I question the whole thing.






1 Q. -- question the legitimacy of the whole thing?

2 A. I do.

3 Q. Let's walk through this page 3 of Exhibit 56A.

4 I take it every one of the entities on Exhibit 56A in

5 September, just look at September, ate cash; is that

6 right?

7 Porcupine Creek?

8 A. Sorry.

9 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 o ut t o t he s al esp eo pl e, b ut t he fa ct t hat th e

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 m ore t han t he 2 50-?

25 A. Oh, there's no question.






1 Q. So for September that would be a negative

2 number?

3 A. Correct.

4 Q. So the total revenue line even for September

5 was a negative?

6 A. Correct.

7 Q. And then the expenses are all there; right?

8 A. Correct.

9 Q. There's just no doubt you had no sources of

10 current income as a result of the MSA?


12 MR. HOLAHAN: Do you want her to sign this last

13 page?

14 MR. GLASSER: Yeah. That would be good. Get

15 h er t o s ign th at l ast pa ge a nd s ig n a l et ter , g iv e t ha t

16 t o t he co ur t r epo rt er .

17 Q. Let's go over some of the things that you have

18 t est ifi ed t o h ere .

19 Now I think you testified here in response to

20 s ome of M r. Fl ynn 's q ues tio ns t hat 20 07 w as a b ad y ear

21 f or Y el lo ws ton e C lu b a s w el l i n te rms o f c ur ren t c as h

22 needs; i s that r ight?

23 A. It was. 2005 we were doing really well on cash

24 flow and then September 2005 is when the Credit Suisse

25 l oan ha pp en ed a nd 2 00 0- - - w ell , 2 006 a nd 20 07, o nc e t he






1 L emo nd l aws uit go t t he n ega ti ve pr ess i t g ot an d t he

2 divorce, yeah. It was definitely very difficult.

3 Q. And I think what you said in response to one of

4 Mr. Flynn's questions was, quote, "During all of 2007

5 t her e w as n o c o mmu nit y c ash f lo w"?

6 A. That's what I was told.

7 Q. Told by Mr. Blixseth?

8 A. Correct.

9 Q. And was the -- and it looked to me -- I mean

10 I'm just kind of summarizing what happened the prior six

11 h our s o f th is d ep os it ion -- i n 2 00 7 a nd e arl y 2 00 8 t he

12 l ack of c as h f low f ro m t he c omm uni ty p rop ert y t o yo u p ut

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 t est imo ny o f M s . B lix set h. I t i s t ot al ly co ntr ar y t o

18 her sworn declarations, her representations to lenders

19 and almost every statement she made to anyone throughout

20 t he e nt ir e p er iod o f t im e w he re sh e w as s tea lin g o ve r

21 $40 million.

22 MR. GLASSER: I'm not talking about assets.

23 THE WITNESS: How can you say when I was

24 stealing over $40 million.

25 MR. GLASSER: You can just object and if it's a






1 well-founded objection somebody will exclude the answer.

2 Q. But I'm not talking about asset values here.

3 I 'm t alk ing ab out t he ca sh f low or th e ad equ ate c ap ita l

4 needed to meet your debts as they came due.

5 You were choked down in '07 and early '08; is

6 that right?

7 A. Yeah. I believe that was intentional because

8 subsequent to the MSA being signed and closed, things

9 that were community cash flow, things that should have

10 c ome to t he co mmu ni ty an d t he n b ee n d iv id ed u p, I f oun d

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 t he v al ue s y ou pu t - - th e v al ue yo u p ut o n Y el lo wst one

15 M oun tai n C lu b a t t he t im e o f t he M SA; r ig ht?

16 A. Uh-huh.

17 Q. Remember those questions by Mr. Flynn? Is it

18 v ery cl ea r t o y ou t ha t e ven t ho ugh th e v al ue yo u p ut o n

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






1 s ome o f t he do cu me nts Mr . F ly nn sa id, t ha t i n a dd it ion

2 t o F a rch evi lle at l ea st 5 0 m o re mi lli on d oll ars w as

3 needed in the near term for the Yellowstone Mountain

4 C lub p ro per tie s; i s t hat r ig ht?

5 A. He stated that based on the filings from BFI

6 a nd t he s ta te c our t. Ac tua ll y, o n o ur a gr ee men t to f or m

7 w ith C ro ssH arb or w e w ere sa yi ng 75 -.

8 Q. So it is your view at least 75- plus the 21-,

9 a t l ea st $9 6 m il li on h ad t o b e c om mit te d t o m ak e t ho se

10 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 M rs. Bl ix se th?

15 A. Without additional cash flow to support what

16 needed to be done to go forward, yes.

17 Q. I think you said that Tim never -- that

18 M r. F ly nn a ske d y ou a lo t w he th er y ou i nt end ed t o p ay

19 b ack th e 1 81 -, th e $ 18 1 m il li on lo an a nd t he ro ug hl y

20 $40 million Tamarindo loan; do you remember those

21 q ues tio ns ?

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?






1 A. Well, I don't think it was a problem you

2 outrun. I didn't ever try to emphasize that. What I

3 emphasized w as t hat i t w as a loan, n ot a d ividend. It

4 was a loan to us that BGI took out that then loaned to

5 the personal, Tim and Edra, even though Tim was in

6 control of that, that somehow over the course of the

7 next few years the lot sales for Yellowstone Club would

8 pay off the Credit Suisse loan and the loans back to

9 either BGI or BGI back to Yellowstone Club, Tim and

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 Q. And you came to this understanding at the time

18 you w ere m arried t o Tim?

19 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






1 numbers together at 150,000,000, the lots -- each lot

2 sale was going to be 500,000 going toward Credit Suisse.

3 As the loan continued ratcheting up, it was

4 more and more that of what would have to come out of the

5 lot sales in order to support the loan.

6 And I mean Tim even said right after -- within

7 months after getting the Credit Suisse loan that he

8 r egr ett ed d oin g i t an d t hat i t p ut pr es su re t o h ave

9 Yellowstone Club live up to something that might be

10 tougher t o live u p to.

11 MR. FLYNN: Object to spousal privilege.

12 Object to all of that testimony, conversations between.

13 THE WITNESS: I think actually I have to say --

14 MR. FLYNN: It's all excludable as a matter of

15 law.

16 THE WITNESS: The only thing I can say is I

17 t hin k G eo rg e M ack w as pr ivy t o s om e o f t ho se

18 conversations.

19 MR. FLYNN: All lacks foundation when you're

20 d eal ing w it h p riv il eg e - - e xc us e m e - - a p re cis e

21 foundation question by question who was present has to

22 be done. None of that was done.

23 MR. HOLAHAN: I think when a husband sues a

24 wife, those privileges evaporate.

25 MR. FLYNN: Not to third parties under Montana






1 law, Mr. Holahan, as Judge Kirscher has already ruled.

2 BY MR. GLASSER:

3 Q. Is it the case that during the period of '06,

4 '07, well up until you guys separated, that basically

5 a ll o f y our pe rs on al l iv ing e xp ens es o f y ou a nd

6 Mr. B lixseth w ere p aid b y B GI?

7 A. Well, not all. Tim had other things that

8 W est ern C ap ita l - - s o u se d t o t hin kin g o f T im a nd

9 Western C apital a s one.

10 Western Pacific Timber had cash flow and some

11 t hin gs t hat w ou ld d o. T im w oul d do o th er d ea ls t ha t

12 would have other cash flow come in to us, so I can't say

13 that's an accurate statement.

14 Q. So on a regular day, absent some other deal, on

15 a da y-t o- da y b asi s?

16 A. That was the preponderance of where our cash

17 f low fo r o ur l ive li ho od c am e f ro m, ye s.

18 MR. GLASSER: Let me take a little break and

19 talk to Mr. Hoard.

20 (Recess taken.)


22 BY MR. GLASSER:

23 Q. I'm handing you what is marked as Exhibit 125.

24 D o y ou r eco gni ze t hat as an a ss ign men t o f co mpa ny

25 interest agreement that you signed in association with






1 the MSA and were those your signatures on the agreement,

2 Ms. Blixseth?

3 A. Let me get to where the sig pages are.

4 Yeah, on the second to last page is my

5 signature.

6 Q. Okay. All right. And I want you to turn to

7 the last page -- or the third to last page, which is

8 Y SC0 030 59 78 .

9 Do you see that?

10 A. I do.

11 Q. Okay. Does it say that, in fact, as part of

12 t he M SA y ou 're do na ti ng t o y our hu sba nd a ll y ou r

13 interest in Yellowstone Club World, Tamarindo, and

14 Yellowstone Holdings, Mexico?

15 A. It does say that.

16 Q. Okay. Thank you.

17 MR. DESCHENES: Brian -- this is Gary

18 D esc hen es - - d o y ou k now ho w m uc h m or e y ou 'v e g ot ?

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 m aki ng s u re a f ew t hi ngs ar e a dm is sib le . Th at' s a ll I ' m

23 d oin g, s o I ' ll be d on e i n f iv e m in ute s.

24 MR. DESCHENES: Thank you.

25 MR. HOLAHAN: Do you have another copy of that?






1 MR. GLASSER: Yeah.

2 Q. Handing you 126, which is just an amendment to

3 the marital settlement agreement.

4 Do you recognize that, Ms. Blixseth.

5 THE WITNESS: Hang on, she's got to mark it and

6 then I can look at it.


8 BY MR. GLASSER:

9 Q. Do you recognize your signature on it?

10 A. That is my signature, yes.

11 MR. GLASSER: Handing you the second amendment,

12 w hic h wi ll b e Exh ib it 1 27 .


14 BY MR. GLASSER:

15 Q. Do you recognize it, second amendment to the

16 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? That's the only one I've

21 got.

22 Do you recognize the writing though?

23 A. Yes.

24 MR. GLASSER: Okay. And now I'm handing you

25 128 which is the Marital Settlement Agreement itself.







2 BY MR. GLASSER:

3 Q. Do you recognize it?

4 A. It looks familiar, with -- even the redacted

5 parts, so yes.

6 MR. FLYNN: Perfect. The Irish, they're all

7 the same.


9 MR. GLASSER: Okay, I'm finished.

10 MR. FLYNN: Okay. I've got about ten --

11 THE WITNESS: Did you ask me anything on this,

12 I'm sorry?

13 BY MR. GLASSER:

14 Q. Just if you recognize it. Do you?

15 A. Yes.


17 MR. FLYNN: I've got about ten minutes and then

18 w e'r e g oi ng to su sp en d a nd t ake it up w it h t he J udg e.

19 FURTHER EXAMINATION

20 BY MR. FLYNN:

21 Q. Ms. Blixseth, let me show you a series of

22 emails.

23 Would you mark those please, Stephanie.

24 THE REPORTER: 129.







1 BY MR. FLYNN:

2 Q. Now this is an email from you to Yankelevitz at

3 G ary P et ers -- t ha t y ou s ent to Ga ry P ete rs d at ed

4 M arc h 2 0, 2 008 , w hi ch I' ll r epr ese nt t o b e s ix d ays

5 before the Yellowstone sale cratered, one day before you

6 w ere u nd er o at h i n th e f am il y c our t s ay in g y ou w ere

7 doing nothing to interfere with the sale under oath.

8 And it reads -- Yankelevitz writes to you, "YC

9 is p ocket c hange t o D ubai. It w ould s eem t o b e w orth

10 e xpl ori ng i f t hey 'r e i nt ere st ed . P ay S am to wa lk a way

11 from the deal."

12 Did I read that correctly?

13 A. You did.

14 Q. Then you write back, "My guy." "My guy,"

15 t hat 's Ga ry Pe ter s?

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 a t 9 :30 a nd t hen h eading t his w ay. He h as a

20 l ett er w ith hi m s ho wi ng w e c an c lo se a nd t he mo ne y i s

21 already in the US."

22 This is six days before the deal cratered,

23 Ms. B lixseth. Was your g uy in B oston trying to

24 n ego tia te a di ffe re nt de al a nd g et Sa m t o wa lk a way fr om

25 the deal?






1 A. No. He was in Boston trying to find out if Sam

2 r eal ly d i d n ee d m on ey . I in tro duc ed h i m a t Y el lo ws ton e

3 Club. I s tarted t o answer t his e arlier.

4 And he said, "If you really don't have all the

5 money to close," which Sam said he did, that he had

6 m one y t ha t m ig ht b e w ill ing t o c om e i n if so met hi ng

7 happened that they weren't and that's the reason Sam met

8 with him.

9 Q. Now this guy, "My guy," you're referring to,

10 G ary Pe te rs , t his i s t he gu y t ha t y ou j us t t est if ie d

11 conned you about the Farcheville sale?

12 A. I didn't testify that he conned me. I

13 t est ifi ed t hat I q ues tio ned - - o nc e I f ou nd o ut m or e

14 about Gary Peters and how things didn't come, didn't

15 h app en t hat he sa id w ere go in g t o h ap pe n, I s ta rt ed -- I

16 didn't start questioning about Farcheville until you

17 guys actually started talking to Gary and working with

18 G ary i n N ov emb er o r D ece mbe r.

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 f ini sh a nyt hin g.

24 Q. Are you saying in August and September Gary

25 Peters was communicating with either Mr. Blixseth or






1 myself?

2 A. Did I say that?

3 No, I did not say that.

4 Q. Now in order to get control of the Yellowstone

5 C lub , i n or der t o g et co nt ro l, y ou co op er ate d w it h S am

6 B yrn e. A s I u nd er sta nd t he t es tim ony y ou j us t ga ve t he

7 liquidating trust, you just -- you cooperated with Sam

8 B yrn e t o ge t c on tr ol o f i t k now ing yo u w er e i ns ol ve nt;

9 i s th at t he t es tim ony y ou j us t gav e?

10 A. The testimony I gave was that if Farcheville

11 d idn 't s ell an d w e w er en 't a ble to ge t m on ey in to

12 operating Yellowstone Club with what had gone on with

13 i t, t ha t i t wo uld n' t b e a bl e t o go f or war d w ith p ay ing

14 i ts b il ls a nd d oi ng t he t hi ng s t ha t n ee de d t o b e d on e

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. Thank you.

20 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 t hat yo ur te st imo ny ?

25 A. I didn't -- I didn't look at it that way. I






1 knew that Farcheville was pivotal to having everything

2 e lse c om e t oge the r, e ven wh en i t i ncl ud es th e - - wh at

3 S am c oul d d o w it h t he ag re em ent to fo rm o n r ais in g t he

4 7 5 m il li on f or Y el low sto ne C lub as we ll a s t he

5 additional things that we wanted to do vertically.

6 Q. And you did this -- you had never met the

7 R uss ian b uy er; c or rec t?

8 A. I never said it was a Russian buyer.

9 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 l egi tim at e buy er. We h ir ed a l awe r wh o ta lk ed a nd m et

21 w ith t he ir l aw yer s. T he y se nt o ut p eo ple t o

22 Farcheville, including architects and all kinds of

23 people, so we had every indication and belief that they

24 w ere le gi ti mat e.

25 Tim thought they were legitimate. He was






1 trying to get -- to say he got a percentage of the sale,

2 b eca use i t w as s om ebo dy t ha t he mi ght b e i nv olv ed w ith .

3 Q. Now if the sale went forward for the

4 68 million, then you wouldn't have been insolvent; is

5 t hat you r t est imo ny ?

6 A. It was 45 million euros so the 65 to -8 went up

7 and down.

8 Q. Whatever, the $45 million euros if the sale had

9 g one f or war d t hat y ou we re b ett ing on w he n y ou s ign ed

10 the MSA, according to your testimony, then you would not

11 h ave be en in so lve nt ?

12 A. If the sale would have gone forward, it would

13 have enabled us to put enough money into Yellowstone

14 C lub to s ta bil ize i t w hi le S am B yr ne a nd t he ot he r

15 p eop le w ere ta kin g t he s tep f ro m s tep o ne of th e

16 a gre eme nt t o f orm o f r ai sin g t he 7 5 m il li on t o p ut i nt o

17 cash flow for Yellowstone Club, because they would have

18 b een ab le t o i n go od f ai th - - s ayi ng Y ell ows ton e C lu b i s

19 s tab ili ze d n ow wi th t he c as h f lo w a nd t he y w oul d h av e

20 b een ab le t o r ais e t he , t he y f el t, 75 m il lio n t ha t w as

21 their obligation and the additional, I believe it was

22 the same amount, 75 million for vertical.

23 Q. So you wouldn't have been insolvent then; is

24 t hat yo ur te st imo ny ?

25 A. My testimony is that we would have been able to






1 move f orward I f elt, y es.

2 Q. So then your financial statement that the

3 l iqu ida ti ng tr ust i nt rod uce d a s 56 A, t hat we pu t i n as

4 56, then the 800- or $900 million of net worth that you

5 showed would have been accurate; is that correct?

6 Your net worth would have been still worth

7 800-, 900 million?

8 A. Based on the agreement to form that I signed

9 w ith C ro ssH arb or, l oo kin g a t Ph ase 1 a nd P ha se 2 , n ot - -

10 n ot - - n ot t o h app en q ui ckl y, b ut t wo y ea rs d ow n t he

11 r oad , l et 's sa y, t hre e y ear s d ow n t he r oa d w hen w e w er e

12 able to have everything stabilized where it's moving

13 f orw ard a ga in, it s ho wed th e p or ti on o f m ine -- m y

14 p ort ion f or th at p has e t o b e at $5 00 m ill ion .

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 r efe ren ce d?

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.






1 Q. I think you should reread the documents,

2 Ms. Blixseth?

3 A. I have never referred to Sam Byrne as a back-up

4 partner.

5 MR. DESCHENES: We're at this point a little

6 o ver 7 h our s an d 40 -s ome m in ute s. Ev en w ith t he b re ak s

7 you're p robably a good 7 and a half h ours. I t hink

8 we're g oing t o c all i t quits.

9 MR. FLYNN: Well, a couple more minutes,

10 M r. D es ch en es.

11 MR. DESCHENES: Well, the rule allows you 7

12 hours. I g ave you another h alf hour o n t op o f t he s tuff

13 that Brian did.

14 MR. FLYNN: Would you mark that, Stephanie,

15 p lea se, n ex t ex hi bi t.

16 MR. DESCHENES: We're done.

17 MR. FLYNN: I'm going to ask the next question.

18 I cannot -- Mr. Blixseth will be severely prejudiced if,

19 f or w ha te ve r r eas on , w e a re n ot ab le t o c omp let e t hi s

20 d epo sit io n a nd I h ave no t b ee n a bl e t o ma rk k ey e xh ibi ts

21 involving emails between Ms. Blixseth and others that I

22 n ow i nt en d t o m ar k a nd h ave h er id ent if y, so I' m g oi ng

23 to --

24 MR. DESCHENES: You're saying five minutes is

25 g oin g t o m ak e t ha t d if fe ren ce ?






1 MR. FLYNN: No. I'm saying ten more minutes.

2 I in te nd to ma rk t hes e e xh ib its in th e n ex t t en m in ute s.

3 MR. DESCHENES: For ten minutes I'm going to go

4 ahead and l et y ou h ave t hat, Mike.

5 MR. FLYNN: You're not giving me anything.

6 Mark the next exhibit, please.

7 MR. HOLAHAN: Okay. Gary, thank you. It's

8 D enn is, w e' ll g iv e h im t en m inu tes th en I 'll --

9 MR. FLYNN: Stephanie, mark the next exhibit,

10 please.

11 THE REPORTER: I can't until people stop

12 t alk ing , I' m s orr y.


14 THE WITNESS: Are we done with this one

15 (indicating)?

16 BY MR. FLYNN:

17 Q. What is the next exhibit?

18 A. 130.

19 Q. Okay. Would you go down to this exhibit where

20 i t s ays o n t he s ec ond pa ge, " Fi fth , I b el iev e y ou n eed

21 a lso to l ea k s ome th in g t o t he p res s f ro m a n o ut si de

22 s our ce b ut n ot th ro ug h u s b ut f or y ou a nd I t o d isc uss ."

23 MR. DESCHENES: The exhibits are not on your

24 w ebs ite ; is t ha t co rr ect ?

25 MR. FLYNN: No, they're on the website.






1 MR. DESCHENES: I'm looking at it. It ends at

2 121.

3 MR. FLYNN: They're in the middle of the

4 website. We h ad t o p ull them o ut i n o rder t o - - but

5 they haven't been marked yet as exhibits, but they're in

6 the m iddle o f the w ebsite.

7 THE REPORTER: Who was talking, please?

8 MR. HOLAHAN: T hat was Gary Deschenes.

9 THE REPORTER: Thank you.

10 BY MR. FLYNN:

11 Q. Ms. Blixseth, are you now cooperating with the

12 liquidating trust to set aside the marital settlement

13 a gre eme nt ?

14 A. I have had no discussions with the liquidating

15 trust.

16 Q. 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 w hen I' m a sk ed a q ues tio n, t o a nsw er i t t rut hfu ll y a s I

22 can.

23 Q. Is it your intent now to set aside the marital

24 settlement agreement?

25 I'm asking whether it's your intent, not your






1 lawyers'. Is it your intent?

2 MR. HOLAHAN: You're asking for a work-product

3 question and attorney-client.

4 MR. FLYNN: You're instructing her?

5 MR. HOLAHAN: I'm saying you already know what

6 the intent is and I thought you were going to use this

7 ten minutes to mark exhibits.

8 MR. FLYNN: I am. But I want to know whether

9 it's your intent, Ms. Blixseth.

10 MR. HOLAHAN: It is our intent.

11 MR. COTNER: 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 MR. FLYNN: You're saying it's your decision,

16 Dave. Okay, I got it.

17 Q. Would you go over to the next page,

18 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 and page No. 2, I've never seen.

23 Q. Okay. Let's go to page 3. This was to you

24 from Jim Fultz, LearG2.

25 Have you seen this email?






1 A. I don't really recall it, but let me read. Jim

2 Fultz was with things for a very short time and had all

3 kinds of ideas.

4 Q. I'm not interested about Jim Fultz.

5 Have you seen the email from Fultz to you dated

6 M arc h 2 8, t wo d ays af ter t he de al c ra te re d?

7 A. I don't recall it, but I can tell you things in

8 i t t ha t h e' s s ug ge sti ng i n h ere we re n ot t hi ngs t ha t I

9 thought w ere o kay t o do.

10 Q. We'll see in subsequent emails.

11 Let's go to six on that page. "You must shore

12 u p y our b as e w ith y ou r l ega l t ea m, fi re b ack th is

13 morning with letters recanting everything you agreed to.

14 W e n eed t o k ee p p un ch ing Ti m h ar d t hi s m or ni ng.

15 "No more emails or direct contact from you to

16 Tim. He n eeds t o just g et s lammed. Did y ou e ver g et a n

17 email from Tim with the email from Sam about bankrupting

18 the YC companies?

19 "We may want to leak that to the press, of

20 c our se, a tt rib uti ng t his t o T im . W e ne ed t o k no ck h im

21 off h is feet t oday. Perhaps it is time t o w rangle i n

22 Burt Sugarman, loud mouth, but could bring support of

23 s ome me mb er s."

24 Did you get that email?

25 A. I'm having a hard time reading this email to






1 see what part was -- this looks like it was from me, but

2 t her e's p ar ts o f i t t hat a re n't me an d t he n i t l ook s

3 like I sent i t to m y lawyers.

4 Q. Let's go to the next page. From LearG2 to

5 Jaffe, Mendell, Ryden, Klar, et cetera, et cetera, and

6 I 'll r ep res ent fo r t he r eco rd t hat yo u s en t a ll t he se t o

7 G ary P et ers an d t ha t' s w her e w e g ot t h em.

8 Subject, new plan of action.

9 A. Are you saying these that I just said I had

10 never s aw t o Gary P eters?

11 Q. You forwarded them all to Gary Peters,

12 Ms. Blixseth.

13 A. I couldn't have forwarded these to Gary Peters.

14 Q. Okay. Well, did you write the email, the next

15 page, [email protected]?

16 A. I'm reading it. I was actually -- when you

17 w ere re ad in g t he o the r o ne, t ha t's th e o ne f rom F ul tz

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 question f rom w hat y ou - -

22 Q. Did you write that email? It's a simple

23 question.

24 A. I understand it's a simple question. I'd like

25 t o g o ba ck t o t he s im ple q ue sti on y ou a sk ed b ef or e t ha t.






1 Q. I want a simple question --

2 A. But I never answered the question.

3 Q. Did you write the March 28th, 3:42 a.m. email?

4 A. I believe I did.

5 Q. Okay. For the record it reads, "We get the

6 pressure on Tim to get PC," that's Porcupine Creek, "and

7 CC i n my c ontrol." That's C asa C aptiva.


9 A. I'm sure I did. That was already part of my

10 assets that were supposed to be in my control already.

11 Q. "We fight him on all the things that he is

12 trying to pull about the things we're withdrawing for

13 the s upport. We h it h im f rom a ll s ides.

14 "And in Montana court I try to get control

15 b ase d o n hi s h and li ng of th in gs th is p ast ye ar n ow t ha t

16 Sam's deal is dead. We have to move fast on this, so I

17 n eed y ou r th ou ght s no w."


19 A. I'm sure I did.

20 Q. Now when you were trying to get control of the

21 Y ell ows to ne Cl ub --

22 MR. HOLAHAN: Just one thing I have to say

23 about t hat. I d on't k now w here y ou s ay y ou g ot t hat

24 email, but that email on its face is from Edra to --

25 e ver y a dd re sse e t ha t I s ee o n i t i s an at tor ney o f h er s,






1 s o t he s ame ob je ct ion to t hi s e xhi bit a s I d id t he o th er

2 exhibit which is attorney-client privilege.

3 MR. FLYNN: We got it from Gary Peters.

4 Q. Ms. Blixseth --

5 MR. GLASSER: I have a question. There's a guy

6 who's leaving. He's the last guy here. He wonders if

7 you have a key.

8 THE REPORTER: No.

9 MR. GLASSER: Because he's going to lock up.


11 BY MR. FLYNN:

12 Q. Ms. Blixseth, did you attempt by any means to

13 get control of the Yellowstone Club knowing you were

14 i nso lve nt ?

15 A. I didn't think at the time that I was insolvent

16 w hen I w as t ry ing t o g et t he Ye llo wst on e C lu b t o - - to

17 g et t he ir p aya ble s p ai d a nd t ha t k ind o f t hi ng.

18 At that time I didn't -- I wasn't aware of

19 w her e t hi ng s w ere a nd ho w t ha t w as go in g.

20 Q. You believe that you had -- you were getting

21 o ut o f t he M SA a $ 500 mi ll io n a sse t, b y f ar t he b ig ges t

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






1 community.

2 A. That was part of Yellowstone Club.

3 Q. Did you not -- you believed that that's what

4 you were getting in the marital settlement agreement; is

5 t hat c or rec t, M s. B li xse th?

6 A. That would be correct if you put Farcheville

7 back into what I thought -- the totality of the

8 Yellowstone Club entities included Farcheville.

9 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 L evy , o ur a tto rne y, h ad t ol d u s th at i t w as a cr edi ble

16 buyer in there, that Farcheville was going to sell.

17 Q. Now we're almost done. How many lawyers at the

18 time of the MSA did y ou h ave?

19 A. For the MSA?

20 Q. Relating to anything you were working on

21 i nvo lvi ng t he M SA o r r el ate d m at te rs. Ho w m any l aw yer s

22 did you have?

23 MR. HOLAHAN: Do you mean lawyers or law firms?

24 MR. FLYNN: Lawyers.

25 Q. As I understand it somewhere in the range of 15






1 or 16, but how many lawyers did you have?

2 A. I had the Jaffe law firm as my family law, I

3 h ad L ine r l ook ing a t t hi ngs f ro m a ta x s ta nd poi nt a nd a

4 business s tandpoint. Those w ere t he t wo l aw f irms. We

5 r eta ine d J am es Le vy i n P ari s t o h an dl e t he s ale o f

6 Farcheville and they were with -- James Levy was working

7 i n co nju nct ion w it h Li ne r fi rm.

8 Q. And how many accountants did you have?

9 A. We were relying a lot of George Mack, who had

10 been very cooperative.

11 Q. I'm not talking about Mack.

12 How many did you have?

13 A. I'm trying to answer your question.

14 George Mack was helping us. George Mack was

15 w ork ing w it h Li ne r fi rm. Y ou 'v e go t al l the e ma ils .

16 Y ou' ve g ot e ma ils s ho win g th at. A nd t her e wa s a l aw

17 f irm -- e xc use me , a n a cc ou nt in g f irm , n ot t o b e

18 confused with Jaffe, I think it was Stuart Jaffe, that

19 w as a n a cco unt ant , t ha t L in er f irm ha d b ro ug ht i n t o d o

20 things.

21 MR. HOLAHAN: Time's up.

22 MR. FLYNN: I've got to get financial advisors.

23 Q. How many financial advisors did you have beside

24 Goldfarb?

25 MR. DESCHENES: You said you would end in ten






1 minutes. You've now exceeded ten minutes and, frankly,

2 you haven't gotten any further.

3 BY MR. FLYNN:

4 Q. Was Goldfarb also representing you at the time

5 of the MSA?

6 A. I think I've been instructed that we're done.

7 MR. HOLAHAN: We're done.

8 MR. FLYNN: I want that answer, Dennis.

9 MR. HOLAHAN: You can answer it.

10 THE WITNESS: You're instructing me on what?

11 BY MR. HOLAHAN:

12 Q. Mr. Goldfarb, was he acting as a financial

13 advisor to you at the time of the MSA?

14 A. He was kind of the conduit between him and

15 Archer and the hard-money lender.

16 MR. HOLAHAN: We're done.

17 MR. FLYNN: No, we're not done. We're

18 suspending, but to you we're done; to us we're

19 suspending. Everybody is leaving.

20 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: It's up to the deponent.

24 THE REPORTER: It's actually up to noticing

25 attorney.






1 MR. FLYNN: How do you want to handle it?

2 S he' s yo ur c li ent , Mr . Ho la ha n.

3 MR. HOLAHAN: I would like you to send me the

4 original, since I'm down here and Gary's in Montana.

5 Send the original to my office. And I'm leaving for the

6 holidays. I w on't b e b ack u ntil - - h ow s oon c an y ou

7 have it --

8 THE REPORTER: Off the record?


10 MR. HOLAHAN: By Monday, January 4th, and then

11 w e w ill h av e i t r ev ie wed wi th in 14 da ys .

12 MR. FLYNN: Yeah.

13 Dennis, she was going to get me a name that she

14 agreed s upplement. Can y ou g et t hat t o m e?

15 MR. HOLAHAN: Yeah. Well, when I get it.

16 (The deposition was concluded at 5:50 p.m.)

17

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1 I hereby declare under penalty of perjury

2 u nde r t he l aws o f t he St at e o f C al ifo rn ia th at I ha ve

3 read the foregoing deposition and that the testimony

4 contained therein is a true and correct transcript of my

5 t est imo ny g ive n a t s ai d t im e a nd p lac e.

6 Dated this ______ day of ______________, 2009,

7 at __________________________, _________________.

8

9

10 __________________________

11 Signature of Witness

12

13

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Documents

Snow v Blx #319 | Edra Blixseth Depo - Bankr.D.mont._09-00018_319-1_Ex P