At a time when millions of Americans are losing their homes as a result of questionable or fraudulent mortgage banking practices, Attorney General Eric Holder’s Justice Department is being accused of blocking prosecution of a high-visibility real estate deal.

Holder, who is under pressure by Congress members investigating the Fast & Furious gun-running scandal to resign, allegedly aims to protect a high-profile international bank client of his former law firm and shield Democratic Party operatives implicated in the scheme.

WND has obtained several hundred pages of documents alleging that Holder and Lanny Breuer, the assistant attorney general for the DOJ’s criminal division, have intervened to block recommended federal prosecutions in an ongoing dispute involving the exclusive Yellowstone Club, a private golf and ski resort now owned by supermarket billionaire Ron Burkle and international bank Credit Suisse.

Allegedly, Holder and Breuer want to shield from federal criminal prosecution the bank, Credit Suisse Group AG, a client of the Washington-based law firm Covington & Burling, as well as key Democratic Party operatives suspected of playing a role in allegedly fraudulent mortgage financing and bank lending practices.

Before joining the Department of Justice in the Obama administration, Holder and Breuer were partners at Covington & Burling.

“I know how Eric Holder and Lanny Breuer operate,” Mike Flynn, legal counsel for Tim Blixseth, the founder of the Yellowstone Club, told WND.

Holder and Breuer are protecting Credit Suisse, he charged.

“In my 42 years of trying high profile cases, I have never seen such corruption,” Flynn said. “The American people need to know what is happening inside the Holder-controlled Justice Department. The fox is now truly guarding the hen house.”

Brian O’Neill, a Secret Service special agent based in Montana, insisted to WND in a telephone interview that Flynn’s allegations were “untrue” in that no prosecutions had been quashed by the Justice Department in Washington.

When pressed to be specific, O’Neill refused to say anything further, referring WND to the Secret Service public information office in Washington, D.C.

The Secret Service public information office in Washington declined comment, referring WND to the Justice Department.

After a series of emails with WND to clarify the particular case, the Department of Justice public information office in Washington also declined comment on the case.

Credit Suisse loan fraud?

The controversy originated with a decision by financial giant Credit Suisse AG in the boom real estate years of the mid-2000s to market a variety of exotic loans. They included what were known as “equity recapitalization” loans designed to allow the developers of high-priced real estate, including the Yellowstone Club luxury resort destination in Montana, to realize anticipated profits years before the profits were actually earned.

Instead of holding the equity in the luxury developments, Credit Suisse, after making the equity recapitalization loans, typically sold the equity to a syndication of institutional investors, including hedge funds and foreign investment entities.

One of the hedge funds purchasing the Yellowstone Club was Boston-based CrossHarbor Capital Partners, operated by Sam Byrne, now a partner of Ron Burkle in the ownership and operation of the Yellowstone Club.

The problem was that the “equity capitalization” loans first marketed by Credit Suisse First Boston, beginning Sept. 21, 2004, were valued according to appraisals conducted by Cushman & Wakefield that arguably were not compliant with the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the FIRREA.

The valuations were based on a non-FIRREA-compliant standard of “total net value” that established a value for the Yellowstone Club at $1.165 billion when it was only worth approximately $455 million.

The scheme was simple: Credit Suisse made untold millions in fees making inflated loans on high-visibility luxury real estate based on fraudulent appraisals, with virtually no risk after the loans were sold to a “syndicate” of investors, including hedge funds and foreign investors.

Ultimately, when the pricey properties went into bankruptcy, the investors in the syndicate were left holding the bag, with their only recourse to go after the high net-worth homeowners to recover the losses.

Setting $420 million as the “as-is market value” of the property, Credit Suisse made a $375 million syndicated loan through a Credit Suisse branch in the Cayman Islands to the Yellowstone Club in 2005. Founder Tim Blixseth received $209 million from the loan proceeds as his “equity recapitalization” pay-out.

Unknown to Blixseth at the time and to his lawyers who approved the loan, the Credit Suisse loan violated FIRREA as well as relevant state laws and regulations regarding fair market appraisals, and the first loan made in September 2004 was already in default.

With the industry-wide downturn in real estate in the United States, the Yellowstone Club has gone through a contentious bankruptcy proceeding before U.S. Bankruptcy Judge Ralph Kirscher, a Democrat appointed to the bankruptcy court by the U.S. Court of Appeals for the Ninth Circuit Nov. 15, 1999, during President Clinton’s second term in office.

In 2008, Kirscher issued a $40 million fraud judgment against Blixseth that Blixseth and his attorneys continue to contest. The judge then approved in May 2009 a reorganization plan giving the Yellowstone Club to Burkle and Byrne for less than $10 million.

In March, according to the Montana Standard, after Kirscher dismissed an attempt by Blixseth to vacate the $40 million fraud judgment against him, Blixseth charged Kirscher was politically influenced – in a 2009 meeting with Montana’s Democratic Gov. Brian Schweitzer – to allow Blixseth’s ex-wife and Sam Byrne, a Boston real estate investor with ties to the Democratic Party, to buy the 13,600 acre property cheaply after the bankruptcy had been declared.

Who is Ron Burkle?

Burkle is the college-dropout supermarket-king who started out as a bag boy in his dad’s neighborhood grocery and eventually bought and sold supermarkets through his private equity firm, Yuciapa Companies. He became a Democratic Party operative who reportedly raised more than $1 million for Hillary Clinton’s 2008 presidential campaign.

Blixseth and other victims of the Yellowstone Club bankruptcy proceedings have charged that Burkle conspired with his ex-wife Edra Blixseth and Sam Byrne, the managing partner of Boston-based CrossHarbor Capital Partners, to buy the Yellowstone Club from bankruptcy for a fraction of its value.

Kirscher rejected Tim Blixseth claims of political influence in a published statement he issued Feb. 25, 2011, from his bench on the U.S. Bankruptcy Court for the Montana District.

Blixseth attorney Mike Flynn, Kirscher wrote, “clearly implies that Ron Burkle, whom I have never heard of, Governor Schweitzer, whom I have never met, and Mr. Byrne, who I would recognize only from his appearances in my courtroom, met and somehow exerted pressure on me. This Court has not and will not succumb to any pressure, political or otherwise.”

WND, however, has an affidavit signed by Tim Blixseth on Feb. 27, in which he alleges a federal task force investigated the case and recommended prosecution:

On multiple occasions during the summer of 2011, I had conversations with federal investigators from a Federal Task Force exploring certain conduct involving Edra Blixseth and other parties to the Yellowstone Mountain Club, LLC bankruptcy, which is currently pending in the U.S. Bankruptcy Court for the District of Montana. These conversations with federal investigators involved my status as a “victim” of criminal conduct and the investigators were always careful to explain to me that any conversations with them related to my position as a victim.

Blixseth further recounts he had learned a “Target Letter” had been issued to Edra Blixseth as a result of nearly a two-year federal law enforcement investigation and that the federal task force had recommended prosecuting her for loan fraud.

Yet, the indictment never came forward.

Despite the Federal Task Force’s recommendation, I received word that the Montana Office of the Department of Justice would not prosecute Edra Blixseth, that the investigation was to be closed, and that the Yellowstone Club was “OFF LIMITS.”

In concluding the affidavit, Tim Blixseth made clear he believed “certain high ranking individuals in the Department of Justice, who are widely known associates and friends of Ron Burkle, caused the investigation to be halted; thus, using their political positions to assist a friend financially and obstruct justice.”

Flynn also served as legal counsel to Bill Clinton paramour Monica Lewinsky. He faced off against Lanny Breuer, who was White House special counsel representing Clinton during his impeachment trial.

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