Blixseth Seeks Sanctions Against Montana Officials, Lawyers

Lots of people probably would like to get a bit of comeuppance with tax collectors. Now, an ex-billionaire is looking for his.

Timothy Blixseth, who founded Montana’s exclusive Yellowstone Club, is asking a bankruptcy judge to impose sanctions against the officials and attorneys who filed an involuntary bankruptcy petition against him earlier this month seeking payment for unpaid taxes.

According to Blixseth, the Montana Department of Revenue, its director and attorneys made a “knowingly false statement” in the Chapter 7 petition they filed by saying that the tax claim wasn’t the subject of a dispute. Blixseth and the tax agency are currently battling over the claim, which is as much as $59 million, in a Montana state court.

In fact, it’s this litigation that Blixseth said improperly spurred the filing.

“MDOR’s petition was filed for the improper purpose of harassing Mr. Blixseth by abusing the Bankruptcy Code to gain a litigation advantage over Mr. Blixseth in the state court litigation where MDOR’s purported tax claim is being resolved,” Blixseth’s attorneys wrote in the motion, filed Wednesday with the U.S. Bankruptcy Court in Las Vegas.

That court will consider Blixseth’s request at a May 18 hearing, when it’s also scheduled to consider whether the case might be better suited to a different court. As Bankruptcy Beat previously blogged, Blixseth neither lives nor works in Nevada.

Two other state tax agencies—California and Idaho—joined Montana in filing the involuntary bankruptcy petition against Blixseth on April 5. However, they’ve since halted their participation in the case after striking a settlement of their tax claims with Blixseth.

By Jacqueline Palank

Source: WSJ