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Media organizations seek transcript of debtor's exam of Yellowstone Club founder Blixseth

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BILLINGS, Montana — Details of a debtor's examination of Yellowstone Club founder Tim Blixseth should be made public despite a federal judge's decision to close the proceedings, media organizations in Montana argued Monday.

U.S. Bankruptcy Judge Ralph Kirscher closed the Nov. 3 exam in Butte at Blixseth's request after an Associated Press reporter and attorneys from the state Department of Revenue sought to attend.

That prompted The AP, Bozeman Daily Chronicle and Montana Newspapers Association to intervene in the case.

The media organizations requested Monday through attorney Martha Sheehy that a transcript of the proceeding be made public. They also asked for the release of any documents reviewed at the debtor's exam.

Blixseth's attorney said in response that the closure was appropriate.

During the exam, attorneys for the club's creditors questioned Blixseth about his assets over the course of several hours.

The creditors are seeking to collect on civil fraud judgments against Blixseth totaling $241 million that resulted from the Yellowstone Club's 2008 bankruptcy.

As of early November, the trust had managed to collect just $141.07 from Blixseth, according to court documents.

Sheehy said the Nov. 3 exam was a judicial proceeding and thus subject to public access. She said the court did not provide sufficient notice that it was closing the proceeding and could not justify doing so.

"A transcript of the hearing exists, and no compelling reason exists to seal the transcript which could possibly outweigh the public's right to scrutinize the proceeding," she wrote.

Kirscher said when he closed the exam that he wanted it to elicit "candid statements" from Blixseth that "might not otherwise be heard."

Blixseth attorney Philip Stillman said he planned to submit arguments late Monday opposing the media organizations' request.

"It's not a court record, so it's not a part of the case," Stillman said. "If it was a part of the record, then the court would be able to seal that as it does on many different occasions and then it wouldn't be available to the public."

Blixseth founded the Yellowstone Club with his ex-wife, Edra Blixseth, in the late 1990s. It spiraled into bankruptcy soon after he gave up control of the members-only ski and golf resort as part of their 2008 divorce.

State tax authorities say Blixseth owes $57 million from unpaid taxes on a $375 million loan to the club that Tim and Edra Blixseth largely diverted for their personal use.

The club was reorganized in 2009 and is under new ownership.

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