montgomery v risen #203 risen decl with exhibits

8/20/2019 Montgomery v Risen #203 Risen Decl With Exhibits

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Case No. 15-cv-20782-MARTINEZ/GOODMAN

DENNIS MONTGOMERY,

Plaintiff,

v.

JAMES RISEN et al.,

Defendants.

________________________/

DECLARATION OF JAMES RISEN

I, James Risen, declare:

1. I am a defendant in the above-captioned action. I make this declaration in support

of Defendants’ Motion for Summary Judgment and Memorandum in Support. I make the

following statements based on my own personal knowledge and, if called as a witness, I could

and would testify competently to these facts under oath.

2. I am the author of Pay Any Price: Greed, Power, and Endless War (the “Book”).

Defendant Houghton Mifflin Harcourt Publishing Company (“HMH”) published the Book on

October 14, 2014. HMH and I entered into a publishing agreement to write the Book on

November 7, 2013, in which HMH and I agreed that I was an independent contractor. A true and

correct copy of the publishing agreement, redacted for highly sensitive and proprietary

information, is attached hereto as Exhibit 1. Among other things, Chapter 2 (the “Chapter”) of

the Book is about Plaintiff Dennis L. Montgomery. A true and correct copy of relevant excerpts

of the Book is attached hereto as Exhibit 2.

3. I have reviewed Montgomery’s Amended Complaint in this action.

4. I have worked as a journalist for the New York Times in its Washington, D.C.

bureau since 1998, where I have won two Pulitzer prizes, the first in 2002, for explanatory

reporting as a member of the New York Times reporting team, and the second for National

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Reporting in 2006, and received seven New York Times Publisher’s Awards. Among other

honors, I have received awards from the Overseas Press Club (1990, 2003), the National Press

Club (2012), the Newspaper Guild (2014), the Goldsmith Prize for Investigative Reporting from

the Shorensten Center on Media, Politics and Public Policy at Harvard University (2006), the

Payne Award for Ethics in Journalism from the School of Journalism and Communication at the

University of Oregon (2007), and been elected to the American Academy of Arts and Sciences

(2007). I received in 2015 the Ridenhour Courage Prize, the Constitutional Champion Award

from the Constitution Project, and the Hugh M. Hefner First Amendment Award.

5. I conducted much of the newsgathering for the Chapter in Washington, D.C. for a

February 19, 2011 New York Times article titled Hiding Details of Dubious Deal, U.S. Invokes

National Security (the “New York Times Article”), which I co-authored with Eric Lichtblau. A

true and correct copy of the New York Times Article is attached hereto as Exhibit 3. Lichtblau

also worked and continues to work in the Washington, D.C. bureau of the New York Times. For

the article, Lichtblau and I interviewed sources for the story by phone, email, or in person;

gathered court, official, and congressional records; gathered correspondence involving

Montgomery; and reviewed and found support in previously published news articles about

Montgomery. In February 2011, Lichtblau and I sent a New York Times stringer to attempt to

obtain comment from Montgomery at his home in California. The stringer identified herself to

Montgomery while he stood in his garage. Montgomery did not speak to the stringer and closed

the garage door. The New York Times Article has not been retracted or the subject of any

defamation lawsuit. I did not receive any demand for a correction and, to my knowledge, no one

at the New York Times received a demand for a correction.

6.

During the course of gathering information for and writing the New York Times

Article and the Chapter and up to the time HMH published the Book, I did not have any doubts

about the truth of the statements I wrote about Montgomery. I still do not have any doubts about

the truth of the statements I wrote about Montgomery.




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I. RELIANCE ON PRIOR MEDIA COVERAGE OF MONTGOMERY

7. For the Chapter and New York Times Article, I reviewed and relied in previous

news reports, including but not limited to those outlined below. To my knowledge, up to the

time of publication and today, none of the articles I reviewed and relied were subject to a

correction, retraction, or lawsuit.

8. For the New York Times Article and the Chapter, I reviewed and found support in

a June 27, 2005 NBC News article by Lisa Meyers, Aram Roston, and the NBC News

Investigative Unit titled Bogus Analysis Led to Terror Alert in Dec. 2003: CIA Experts Saw

Secret Code on Al-Jazeera that Wasn’t There, at true and correct copy of which is attached

hereto as Exhibit 4. I found support in the article, which stated that, around Christmas 2003, the

U.S. government wrongly raised the terror alert level and canceled international flights based on

bogus CIA intelligence derived from non-existent Al Qaeda codes purportedly embedded in Al

Jazeera broadcasts. I found support in the article’s exclusive interview with Tom Ridge, former

Secretary of the Department of Homeland Security at the time. I found support in Ridge’s

statement that the intelligence was “bizarre, unique, unorthodox, unprecedented”; that he

“wonder[ed] whether or not it was credible,” and that “we weren’t certain” about this

intelligence at the time. I also found support in Ridge’s statements that “the CIA analysis

certainly turned out to be wrong,” that he “confirmed there were no secret terror messages” on

Al Jazeera, and that there was “no evidence that terrorist were actively plotting against aviation

at that time.”


a November 1, 2006 front-page story in the Wall Street Journal titled Congressman’s Favors for

Friend Include Help in Secret Budget by John R. Wilke, a true and correct copy of which is

attached hereto as Exhibit 5. I found support in the article, which stated that Montgomery had

accused then-Congressman, later Nevada Governor, Jim Gibbons of taking bribes from Warren

Trepp, Montgomery’s former business partner at eTreppid Technologies (“eTreppid”).




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a February 15, 2007 follow-up article in the Wall Street Journal titled Nevada Governor Faces

FBI Probe into Contracts by John R. Wilke, a true and correct copy of which is attached hereto

as Exhibit 6. I found support in the article, which stated that Trepp accused Montgomery of

giving “false testimony” in their litigation over Montgomery’s software.


a May 11, 2007 NBC News article by Lisa Meyers, Jim Popkin, and the NBC News Investigative

Unit titled FBI Probes Nevada Governor for Corruption, a true and correct copy of which is

attached hereto as Exhibit 7. I found support in the article, which included Montgomery’s

exclusive interview with Lisa Meyers of NBC News in which he repeated the “explosive charge”

against Trepp and Gibbons.


an August 4, 2007 article published in the Reno Gazette-Journal by Martha Bellisle titled

eTreppid Court Documents Unsealed , a true and correct copy of which is attached hereto as

Exhibit 8. I found support in the article, which stated that, in Montgomery’s then unsealed

declaration, he claimed that his technology warned of and thwarted terrorist attacks around the

world.


a November 3, 2008 article published in the USA Today by Associated Press writer Matt Apuzzo

entitled Attorney: Nevada Gov. Gibbons Cleared in FBI Probe, a true and correct copy of which

is attached hereto as Exhibit 9. I found support in the article, which stated that Gibbons was

ultimately cleared in 2008 and the quote of Gibbons’ lawyer saying: “It should be crystal clear

that the only persons who should be investigated or charged are those who made false allegations

of wrongdoing and who tried to fuel this investigation for their own private purposes.” (Chapter

at 50.)


an August 29, 2008 Bloomberg News article by Anthony Effinger titled Yellowstone Club




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Divorcee Entangled in Terrorist Software Suits, a true and correct copy of which is attached

hereto as Exhibit 10. I found support in the article, which publicly identified Montgomery as the

contractor who allegedly provided the bogus intelligence from Al Jazeera to the government.

(Ex. 10, at 10, 12-18.) I found support in the article, which summarized Trepp’s allegations in

court records that Montgomery stole eTreppid’s “computer code that purportedly could sift

through broadcasts from Qatar-based news network Al-Jazeera and find embedded messages

from terrorists.” ( Id.) I found support in the article, which quoted from Montgomery’s former

attorney saying that the “software was a sham.” ( Id.) I also found support in the article, which

stated, based on FBI reports unsealed in Montgomery’s cases, that former fellow employees at

eTreppid told the FBI that Montgomery had them rig demonstrations of his software to sell his

technology to visiting government officials. ( Id. at 17.)


a January/February 2010 Playboy Magazine feature by Aram Roston titled The Man Who

Conned the Pentagon (the “Playboy Article”), a true and correct copy of which is attached hereto

as Exhibit 11. I found support in the Playboy Article, which revealed the central allegations

Montgomery now challenges. I found support in its investigation that claimed Montgomery

rigged software demonstrations and sold the U.S. government sham “noise filtering” software to

decode purported Al Qaeda messages hidden in Al Jazeera broadcasts – bogus intelligence that

led the White House to ground international flights around Christmas in 2003. I found support in

the article’s explanation that, soon after, a French contractor determined that not enough pixels

existed in Al Jazeera broadcasts to include the hidden messages and the CIA and White House

soon concluded that they had been hoodwinked. I found support in the article’s quote of Sloan

Venables, Montgomery’s co-worker, who stated that he doubted Montgomery’s software existed.

I found support in the article’s statements that, because of the secrecy surrounding the project,

other government agencies continued to contract with Montgomery until 2009. I found support

in the quote of Joseph Liberatore, a former Air Force official who worked with Montgomery on

the 2009 contract, who said the Air Force was just looking at Montgomery’s software “to see if




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there was anything there.” I found support in a quote of an Air Force spokesman who said that

the results of the Air Force’s evaluation of Montgomery’s software were “inconclusive,” so Air

Force ended discussions. The Playboy Article has not been retracted or the subject of any

defamation lawsuit.

16. For the Chapter, I relied on our 2011 New York Times Article, which covered

much of the same material as previous news articles about Montgomery, but, based on highly-

placed government sources, added that the White House had considered shooting down

transatlantic flights based on Montgomery’s intelligence and focused on the U.S. government’s

invocation of the state-secrets privilege to cover up Montgomery’s misdeeds and the

government’s gullibility. For the Chapter, I relied on our quote of Liberatore, the former Air

Force official who later realized Montgomery’s software was bogus, who said in 2008 that he

supported Montgomery but he realized that others in the government did not think Montgomery

was credible. (See Chapter at 52.) A true and correct copy of the email containing Liberatore’s

statements that I relied upon is attached hereto as Exhibit 12. I also relied on our quote of Steve

Crisman, who oversaw business operations for Montgomery at Blxware, and who said he

believed that Montgomery’s technology was not real.

17. For the Chapter, I reviewed and found support in an October 1, 2012 article in

Defense News by Aram Roston titled Obama’s Counterterrorism Czar Gave Bogus Intel to Bush

White House, a true and correct copy of which is attached hereto as Exhibit 13. I found support

in statements by Jose A. Rodriguez, Jr., who headed the CIA’s Counterterrorism Center when

Montgomery was providing the Al Jazeera intelligence, who said the Counterterrorism Center

was “very skeptical” of Montgomery’s intelligence and viewed it as “crazy.” (Ex. 13, at 2). I

also found support in statements by Tommy Vietor, former spokesman for the National Security

Council, who echoed these views. Vietor stated that, although John Brennan passed along the

information to the White House, “[i]t is absolutely wrong to say Mr. Brennan believed in the

veracity of the information” from Montgomery. ( Id. at 3.)




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18. For the New York Times Article and the Chapter, I reviewed and relied on a

number of other articles that repeated the same claims about Montgomery, true and correct

copies of which are attached hereto as Exhibit 14.

II.

RELIANCE ON PUBLIC RECORDS

19. For the New York Times Article and Chapter, I also relied on court, official, and

congressional records and accurately described the contents of these records as a basis for the

statements I wrote about Montgomery, including but not limited to those outlined below.

20. For the New York Times Article and the Chapter, I relied on FBI and U.S. Air

Force Office of Special Investigations (“OSI”) reports filed in court records for allegations of

fake software. (Chapter at 37, 48-49). True and correct copies of the FBI and OSI reports

contained in Government’s Compliance with Court Order of August 17, 2006, in In re Search

Warrant , No. 3:06-cv-00263, ECF Nos. 70-5, 70-8 (D. Nev. Sept. 11, 2006 ) are attached hereto

as Exhibit 15. I relied on, cited, and accurately quoted in the Chapter FBI and OSI reports

contained in court records that state, “recently Trepp has found out that Montgomery’s skills

may not be what he has purported them to be. Trepp cited a recent Air Force Office of Special

Investigation Inquiry, which determined that Montgomery’s programming skills were not what

he alleged.” (Ex. 15 at DEFS002219). I relied on these reports for statements that “Venables

advised that in the fall of 2005, Patty Gray suspected Montgomery was doing something other

than what he was actually telling people he was doing” and “Venables knew Montgomery

promised products to customers that had not been completed or even assigned to programmers.”

( Id. at DEFS002223.) I relied on these reports for statements by an eTreppid employee in which

“Gray said that on 21 Dec 2005 ... she told Trepp that she had reason to believe [Montgomery]

had not written significant software for the company.” ( Id. at DEFS002338.) I also relied on

statements by another employee in which “Anderson also informed Trepp that [Montgomery]

was using open source to develop eTreppid Source Code, [Montgomery] was dishonest,” and

that “he had suspicions that [Montgomery] was less technically competent than he led people to

believe.” ( Id. at DEFS002340.)




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21. Further, I relied on, cited, and accurately quoted in the Chapter statements in the

FBI reports that:

Trepp recently learned that Montgomery would require eTreppid employees to

falsify the results of live demonstrations for it’s [sic] customers. Jesse Anderson,a programmer for eTreppid, told Trepp that Montgomery would require Anderson

and Jim Bauder, another eTreppid employee, to go into an office at eTreppid

while Montgomery was out in a nearby field with a toy bazooka to demonstrateeTreppid’s recognition software capabilities. Montgomery instructed Anderson

and Bauder to go into a room and wait to hear a noise on their cell phone and then

instructed them to press a button on a computer keyboard that would display an

image of a bazooka on the computer screen viewed by the customers, includingDepartment of Defense employees. Trepp advised that the Department of

Defense employees were at the demonstration to make a judgment regarding the

purchase of this technology.

(Ex. 15 at DEFS002219.) I relied on statements by other employees who confirmed these

accounts in their interviews with the FBI. ( Id. at DEFS002342, DEFS002343.)

22. For the New York Times Article and the Chapter, I relied on the November 18,

2010 deposition of Dennis L. Montgomery in In re Dennis & Kathleen Montgomery, No. 10-bk-

18510 (Bankr. C.D. Cal.), a true and correct copy of excerpts of which is attached hereto as

Exhibit 16. I relied on the statement by Michael Flynn, Montgomery’s former lawyer, to

Montgomery: “I know you conned me and you conned the U.S. Government.... You’re a

computer hacker and you’re a fraud, Mr. Montgomery.” (Ex. 16, Tr. 230:2-11.) I relied on

Montgomery’s testimony in his deposition in which the attorney asked if his software was a

“complete fraud” and he answered, “I’m going to assert my right under the Fifth Amendment.”

( Id. Tr. 194:8-11.) I also relied on a number of other instances in which Montgomery took the

Fifth in the deposition. ( Id. Tr. 57:12-58:3, 60:14-17, 80:16-81:7, 188:15-191:7, 193:20-194:20,

199:24-201:9, 273:19-21).

23.

For the New York Times Article and the Chapter, I relied on Flynn’s affidavit

stating that, “Based upon personal knowledge, and information and belief, Blxware possesses no

marketable technology, the technology as represented does not exist[.]” A true and correct copy




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of the Affidavit of Michael J. Flynn in In re Yellowstone Mountain Club, LLC , No. 09-00014,

ECF No. 473-1 (Bankr. Mont. Mar. 1, 2006) is attached hereto as Exhibit 17, at 10.

24. For the New York Times Article and the Chapter, I relied on public court records,

in which the ex-husband of Montgomery’s benefactor Edra Blixseth, Tim Blixseth, alleged the

fraud in an affidavit, stating: “Montgomery and Edra Blixseth have engaged in an extensive

scheme to defraud the U.S. Government,” a “fraud [that] involves Mr. Montgomery’s purported

‘noise filtering software technology,’ which “does not exist, yet has been used repeatedly by

Edra Blixseth and Montgomery to commit financial frauds ....” A true and correct copy of the

Supplemental Affidavit of Timothy L. Blixseth in In re Yellowstone Mountain Club, LLC , No.

08-61570, ECF No. 2117 (Bankr. Mont. Jan. 17, 2011) is attached hereto as Exhibit 18, at 1, 4.

25. For the Chapter, I cited, expressly relied on, and accurately described excerpts of

the Vice-Chairman Saxby Chambliss’ post-confirmation hearing Questions for the Record

submitted by the U.S. Senate Select Committee on Intelligence to Mr. John Brennan that

confirmed that Montgomery’s software was fake (Chapter at 47), a true and correct copy of

which is attached hereto as Exhibit 19. I relied on Senator Chambliss’ written question to

Mr. Brennan titled “Bogus Intelligence,” which states that “[m]edia reports indicate that when

you led the Terrorist Threat Integration Center (TTIC), you championed a program involving IT

contractors in Nevada who claimed to intercept al-Qaida targeting information encrypted in the

broadcasts of TV news network Al Jazeera.” The written questions confirm in congressional

records that not only “[t]he media” but “documents we have reviewed show, that CIA officials

derided the contractor’s information, but nonetheless, you passed it to the White House and alert

levels ended up being raised unnecessarily.” I relied on Brennan’s response that confirmed that

Montgomery’s purported software “‘was determined not to be a source of accurate

information.’” (Chapter at 47) (quoting Ex. 19 at 9).

III. RELIANCE ON SOURCES

26. For the New York Times Article and the Chapter, I also found support in

interviews Lichtblau and I conducted and documents obtained from numerous high-placed




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government sources and other sources close to Montgomery or familiar with his work, including

but not limited to those outlined below. For the Chapter, I also relied on interviews I conducted

with Montgomery.

27.

For the New York Times Article and the Chapter, in or around January or

February 2011, October 4, 2011, and February 2014, I interviewed William D. Murray, who was

CIA Paris Station Chief in late 2003 when Montgomery gave purported intelligence gleaned

from Al Jazeera broadcasts to the CIA. I referred to Murray in the Chapter as a “former senior

CIA official” or one of the “former CIA officials.” ( Id .) (Chapter at 32-33, 39-47.) Murray told

me, and I relied on him, for the following facts, which accurately reflect what Murray told me

when I interviewed him:

a. Murray was the CIA Paris station chief at the time. Murray was talking to

Tyler Drumheller, the CIA European Division Chief at the time, about the purported threat information coming from a technology company that said

it detected and decrypted hidden Al Qaeda codes on Al Jazeera television.

Drumheller believed it was crazy, but that it was becoming the mostimportant and sensitive intelligence at CIA headquarters. The problem

was that this threat information from this supposed technology company

was coming in so fast, the CIA was not vetting it. So the intelligencewould come in to the CIA, then CIA personnel would take it to George

Tenet, then CIA Director, and then Tenet would take it right to President

George W. Bush. The U.S. government grounded flights based on this

threat information. The French authorities wanted to know the source ofthe information, because their Air France flights were being affected.

b. Murray was talking to French intelligence, and French intelligence hired a

high technology company of their own to look at the Al Jazeera

broadcasts. Murray visited the company in France, and the head of thecompany said the company would conduct the analysis. Then the French

technology company came back a few days later, and said they could not

find anything in the Al Jazeera broadcasts. They said there are a couplekinds of bar codes, and there are not enough pixels there for either one.

The French technology company said there is just nothing there. Therewas no way there were hidden messages in the Al Jazeera broadcast. Itwas not real.

c. The CIA officials who were pushing this, from the CIA Directorate of

Science and Technology, were Donald Kerr and Edward Charbonneau.

Murray did not think they were doing it because they were in on it oranything like that. Murray believed they were caught up in trying to get

this intelligence. And Tenet was letting it go straight to President Bush




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without being vetted. Nobody was ever held accountable for the bogus Al

Jazeera intelligence. Later, officials all acted like it never happened.

d. Fran Townsend had a meeting at the White House that Murray attended,where they talked about shooting down airplanes over the Atlantic.

Townsend had a National Security Council lawyer there who said the

President now has this authority. A general there nodded and said yes, wecould do that. Murray said, “I couldn’t believe they were talking about it”

and “I thought this was crazy.” Murray believed whole thing was insane.

e. Murray repeated his version of events at the White House meeting after I

told him Townsend denied the discussion about shooting down airplanes.

28. For the New York Times Article and the Chapter, in or around January or

February 2011, I interviewed Tyler Drumheller, the CIA European Division Chief in late 2003,

when Montgomery gave purported intelligence gleaned from Al Jazeera broadcasts to the CIA. I

referred to Drumheller in the Chapter as a “former senior CIA official” or one of the “former

CIA officials.” ( Id .) (Chapter at 32-33, 39-47.) Drumheller passed away on August 2, 2015. A

true and correct copy of the notes I took while interviewing Drumheller are attached hereto as

Exhibit 20. The notes I took contemporaneously were taken in the normal course of my practice

as a professional journalist and accurately reflect what Drumheller told me. I relied on

Drumheller for the statements reflected in the interview notes I took.

29.

For the New York Times Article and the Chapter, in or around late 2010 or

January 2011, I reached out to and obtained comment from CIA spokespeople, George Little and

Jennifer Youngblood. A true and correct copy of the email I received from Youngblood is

attached hereto as Exhibit 21. I relied on the CIA’s statement “[o]n the record, from

[Youngblood] as CIA spokesperson,” that “‘[t]he agency never had a contract with this

individual,’” referring to Montgomery. (Chapter at 44.) I also relied on her as a US intelligence

official for the CIA’s statement that “‘[a]s you’d expect, the CIA looked at what Montgomery

claimed he could do but determined that his threat detection tools weren’t exactly as billed.’”

( Id.)


February 2011, I interviewed Frances Townsend, a former White House counterterrorism official




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on the National Security Council (“NSC”) who dealt with Montgomery’s intelligence at the

White House. The Chapter states that I interviewed Townsend. (Chapter at 45.) A true and

correct copy of the notes I took while interviewing Townsend is attached hereto as Exhibit 22.

The notes I took contemporaneously accurately reflect what Townsend told me. I relied on

Townsend’s statements that “[w]e understood we may have been played” and“[t]here was stupid

sh[**] reported to the [CIA] for variety of reasons” but “it[’]s fair to say it’s the biggest one that

makes it all the way through the system.” (Chapter at 32.)

31. For the New York Times Article and the Chapter, on or about February 1, 2011, I

interviewed Samantha Ravich, former advisor to Vice President Dick Cheney. A true and

correct copy of the notes I took while interviewing Ravich are attached hereto as Exhibit 23. The

notes I took contemporaneously accurately reflect what Ravich told me. I relied on her

confirmation that she met with Montgomery but refused the technology absent proof that the

software worked, which she said was never forthcoming. (Chapter at 51.)

32. For the New York Times Article and the Chapter, on or about January 11, 2011, I

interviewed Melvin Dubee, a former staff member on the U.S. Senate Select Committee on

Intelligence. A true and correct copy of the notes I took while interviewing Dubee are attached

hereto as Exhibit 24. The notes I took contemporaneously accurately reflect what Dubee told

me. I relied on Dubee for his statements that the committee staff contacted the CIA about

Montgomery’s technology and the CIA was “very skeptical of it at the time.”

33. For the New York Times Article and the Chapter, Lichtblau and I reached out to

and obtained comment from an Air Force spokesman, Todd Spitler. A true and correct copy of

Lichtblau’s January 21, 2011 email to Spitler is attached hereto as Exhibit 25. A true and correct

copy of Spitler’s return email to me containing a statement from the Air Force is attached hereto

as Exhibit 26. I relied on the Air Force’s statement that the Air Force awarded a contract to

Montgomery’s company in 2009 but that “the contractor did not perform in accordance with the

terms of the contract.” (Ex. 26 at 1.)




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February 2011, I reached out to a spokesman for United States Special Operations Command. I

relied on the spokesman’s statement that “The technology did not meet our requirements,”

referring to Montgomery’s software. (Chapter at 48.)

35. For the New York Times Article and the Chapter, on or about January 13, 2011,

Lichtblau interviewed George Birnbaum, a former chief of staff to Prime Minister Benjamin

Netanyahu. Birnbaum confirmed that Montgomery tried to sell his technology to the Israeli

government but the Israeli government was unimpressed and chose not to enter into a contract

with Montgomery.

36.

For the New York Times Article and the Chapter, I interviewed Michael Flynn,

Montgomery’s former lawyer, by email and phone from late 2010 to 2014. Flynn gave Lichtblau

and then me public court records and confirmed his previous statements in articles and court

records that he believed Montgomery was a “fraud” and had “conned” him and others. (Ex. 16,

at 230; Chapter at 36.)

37. For the New York Times Article and the Chapter, I interviewed Tim Blixseth in

person and by email from 2011 to 2014, the ex-husband of Montgomery’s former business

partner. Blixseth gave me and Lichtblau information about Montgomery’s interactions with

Edra Blixseth and his observation of a demonstration of Montgomery’s software in Palm

Springs, California. (Chapter at 50-52.)

I interviewed Montgomery by phone and email for the Chapter starting in 2011 or 2012.

A true and correct copy of the notes I took while interviewing Montgomery is attached hereto as

Exhibit 27. The notes I took contemporaneously accurately reflect what Montgomery told me

and included Montgomery’s point of view and denials in the Chapter. (Chapter at 33-34, 37, 51,

53.)




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February 19, 2011

Hiding Details of Dubious Deal,U.S. Invokes National Security By ERIC LICHTBLAU and JAMES RISEN

WASHINGTON — For eight years, government officials turned to Dennis

Montgomery, a California computer programmer, for eye-popping technology

that he said could catch terrorists. Now, federal officials want nothing to do

with him and are going to extraordinary lengths to ensure that his dealings with

Washington stay secret.

The Justice Department, which in the last few months has gotten protective

orders from two federal judges keeping details of the technology out of court,

says it is guarding state secrets that would threaten national security if

disclosed. But others involved in the case say that what the government is

trying to avoid is public embarrassment over evidence that Mr. Montgomery

bamboozled federal officials.

A onetime biomedical technician with a penchant for gambling, Mr.

Montgomery is at the center of a tale that features terrorism scares, secret

White House briefings, backing from prominent Republicans, backdoor deal-

making and fantastic-sounding computer technology.

Interviews with more than two dozen current and former officials and business

associates and a review of documents show that Mr. Montgomery and his

associates received more than $20 million in government contracts by claimingthat software he had developed could help stop Al Qaeda’s next attack on the

United States. But the technology appears to have been a hoax, and a series of

government agencies, including the Central Intelligence Agency and the Air

Force, repeatedly missed the warning signs, the records and interviews show.

Mr. Montgomery’s former lawyer, Michael Flynn — who now describes Mr.

Montgomery as a “con man” — says he believes that the administration has

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been shutting off scrutiny of Mr. Montgomery’s business for fear of revealing

that the government has been duped.

“The Justice Department is trying to cover this up,” Mr. Flynn said. “If this

unravels, all of the evidence, all of the phony terror alerts and all the

embarrassment comes up publicly, too. The government knew this technology was bogus, but these guys got paid millions for it.”

Justice Department officials declined to discuss the government’s dealings with

Mr. Montgomery, 57, who is in bankruptcy and living outside Palm Springs,

Calif. Mr. Montgomery is about to go on trial in Las Vegas on unrelated charges

of trying to pass $1.8 million in bad checks at casinos, but he has not been

charged with wrongdoing in the federal contracts, nor has the government tried

to get back any of the money it paid. He and his current lawyer declined to

comment.

The software he patented — which he claimed, among other things, could find

terrorist plots hidden in broadcasts of the Arab network Al Jazeera; identify

terrorists from Predator drone videos; and detect noise from hostile

submarines — prompted an international false alarm that led President George

W. Bush to order airliners to turn around over the Atlantic Ocean in 2003.

The software led to dead ends in connection with a 2006 terrorism plot in

Britain. And they were used by counterterrorism officials to respond to a bogusSomali terrorism plot on the day of President Obama’s inauguration, according

to previously undisclosed documents.

‘It Wasn’t Real’

“Dennis would always say, ‘My technology is real, and it’s worth a fortune,’ ”

recounted Steve Crisman, a filmmaker who oversaw business operations for

Mr. Montgomery and a partner until a few years ago. “In the end, I’m convinced

it wasn’t real.”

Government officials, with billions of dollars in new counterterrorism financing

after Sept. 11, eagerly embraced the promise of new tools against militants.

C.I.A. officials, though, came to believe that Mr. Montgomery’s technology was

fake in 2003, but their conclusions apparently were not relayed to the military’s






Special Operations Command, which had contracted with his firm. In 2006,

F.B.I. investigators were told by co-workers of Mr. Montgomery that he had

repeatedly doctored test results at presentations for government officials. But

Mr. Montgomery still landed more business.

In 2009, the Air Force approved a $3 million deal for his technology, eventhough a contracting officer acknowledged that other agencies were skeptical

about the software, according to e-mails obtained by The New York Times.

Hints of fraud by Mr. Montgomery, previously raised by Bloomberg Markets

and Playboy, provide a cautionary tale about the pitfalls of government

contracting. A Pentagon study in January found that it had paid $285 billion in

three years to more than 120 contractors accused of fraud or wrongdoing.

“We’ve seen so many folks with a really great idea, who truly believe theirtechnology is a breakthrough, but it turns out not to be,” said Gen. Victor E.

Renuart Jr. of the Air Force, who retired last year as the commander of the

military’s Northern Command. Mr. Montgomery described himself a few years

ago in a sworn court statement as a patriotic scientist who gave the government

his software “to stop terrorist attacks and save American lives.” His alliance

with the government, at least, would prove a boon to a small company,

eTreppidTechnologies, that he helped found in 1998.

He and his partner — a Nevada investor, Warren Trepp, who had been a toptrader for the junk-bond king Michael Milken — hoped to colorize movies by

using a technology Mr. Montgomery claimed he had invented that identified

patterns and isolated images. Hollywood had little interest, but in 2002, the

company found other customers.

With the help of Representative Jim Gibbons, a Republican who would become

Nevada’s governor and was a longtime friend of Mr. Trepp’s, the company won

the attention of intelligence officials in Washington. It did so with a remarkable

claim: Mr. Montgomery had found coded messages hidden in broadcasts by Al

Jazeera, and his technology could decipher them to identify specific threats.

The software so excited C.I.A. officials that, for a few months at least, it was

considered “the most important, most sensitive” intelligence tool the agency

had, according to a former agency official, who like several others would speak

only on the condition of anonymity because the technology was classified.






ETreppid was soon awarded almost $10 million in contracts with the military’s

Special Operations Command and the Air Force, which were interested in

software that Mr. Montgomery promised could identify human and other

targets from videos on Predator drones.

In December 2003, Mr. Montgomery reported alarming news: hidden in thecrawl bars broadcast by Al Jazeera, someone had planted information about

specific American-bound flights from Britain, France and Mexico that were

hijacking targets.

C.I.A. officials rushed the information to Mr. Bush, who ordered those flights to

be turned around or grounded before they could enter American airspace.

“The intelligence people were telling us this was real and credible, and we had

to do something to act on it,” recalled Asa Hutchinson, who oversaw federalaviation safety at the time. Senior administration officials even talked about

shooting down planes identified as targets because they feared that supposed

hijackers would use the planes to attack the United States, according to a

former senior intelligence official who was at a meeting where the idea was

discussed. The official later called the idea of firing on the planes “crazy.”

French officials, upset that their planes were being grounded, commissioned a

secret study concluding that the technology was a fabrication. Presented with

the findings soon after the 2003 episode, Bush administration officials began tosuspect that “we got played,” a former counterterrorism official said.

The C.I.A. never did an assessment to determine how a ruse had turned into a

full-blown international incident, officials said, nor was anyone held

accountable. In fact, agency officials who oversaw the technology directorate —

including Donald Kerr, who helped persuade George J. Tenet, then the director

of central intelligence, that the software was credible — were promoted, former

officials said. “Nobody was blamed,” a former C.I.A. official said. “They acted

like it never happened.”

After a bitter falling out between Mr. Montgomery and Mr. Trepp in 2006 led

to a series of lawsuits, the F.B.I. and the Air Force sent investigators to

eTreppid to look into accusations that Mr. Montgomery had stolen digital data

from the company’s systems. In interviews, several employees claimed that Mr.

Montgomery had manipulated tests in demonstrations with military officials to






Mr. Kemp, meanwhile, used his friendship with Vice President Dick Cheney to

set up a meeting in 2006 at which Mr. Kemp, Mr. Montgomery and Ms.

Blixseth met with a top Cheney adviser, Samantha Ravich, to talk about

expanding the government’s use of the Blxware software, officials said. She was

noncommittal.

Mr. Flynn, who was still Mr. Montgomery’s lawyer, sent an angry letter to Mr.

Cheney in May 2007. He accused the White House of abandoning a tool shown

to “save lives.” (After a falling out with Mr. Montgomery, Mr. Flynn represents

another party in one of the lawsuits.)

But Mr. Montgomery’s company still had an ally at the Air Force, which in late

2008 began negotiating a $3 million contract with Blxware.

In e-mails to Mr. Montgomery and other company officials, an Air Forcecontracting officer, Joseph Liberatore, described himself as one of the

“believers,” despite skepticism from the C.I.A. and problems with the no-bid

contract.

If other agencies examined the deal, he said in a December 2008 e-mail, “we

are all toast.”

“Honestly I do not care about being fired,” Mr. Liberatore wrote, but he said he

did care about “moving the effort forward — we are too close.” (The Air Forcedeclined to make Mr. Liberatore available for comment.)

The day after Mr. Obama’s inauguration, Mr. Liberatore wrote that government

officials were thanking Mr. Montgomery’s company for its support. The Air

Force appears to have used his technology to try to identify the Somalis it

believed were plotting to disrupt the inauguration, but within days, intelligence

officials publicly stated that the threat had never existed. In May 2009, the Air

Force canceled the company’s contract because it had failed to meet its

expectations.

Mr. Montgomery is not saying much these days. At his deposition in November,

when he was asked if his software was a “complete fraud,” he answered, “I’m

going to assert my right under the Fifth Amendment.”

Barclay Walsh contributed research.






EXHIBIT 4




By

Lisa Myers, Aram Roston and the NBC Investigative Unit

NBC News Investigative Unit

updated

WASHINGTON — Christmas 2003 became a season of terror after the federal government raised the terror alert level from yellow to orange,

grimly citing credible intelligence of another assault on the United States.

"These credible sources," announced then-Secretary of Homeland Security Tom Ridge, "suggest the possibility of attacks against the homeland

around the holiday season and beyond."

For weeks, America was on edge as security operations went into high gear. Almost 30 international flights were canceled, inconveniencing

passengers flying Air France, British Air, Continental and Aero Mexico.

But senior U.S. officials now tell NBC News that the key piece of information that triggered the holiday alert was a bizarre CIA analysis, which

turned out to be all wrong.

CIA analysts mistakenly thought they'd discovered a mother lode of secret al-Qaida messages. They thought they had found secret messages on Al-

Jazeera, the Arabic-language television news channel, hidden in the moving text at the bottom of the screen, known as the "crawl," where news

headlines are summarized.

‘Steganography’ suspected

U.S. officials tell NBC News that CIA experts — technicians working for the Directorate of Science and Technology — thought they had found

numbers embedded in the crawl signaling upcoming attacks; dates and flight numbers, and geographic coordinates for targets, including the White

House, Seattle's Space Needle, even the tiny town of Tappahanock, Va. What the analysts thought they had found was something called

"steganography" — messages hidden inside a video image.

President Bush and Ridge were briefed on the Al-Jazeera analysis, U.S. intelligence sources say.

In an exclusive interview with NBC News, Ridge defended the government's actions, although he called the intelligence analysis "bizarre, unique,

unorthodox, unprecedented."

"Maybe that's very much the reason that you'd be worried about it, because you hadn't seen it before," recalls Ridge.

He says the administration had to take the suspected terror messages seriously, although "speaking for myself I've got to admit to wondering

whether or not it was credible."

Was he himself skeptical?

"Yeah, we weren't certain," says Ridge. "Still, in the context of everything else (intelligence chatter and a terror attack in Saudi Arabia), we could

not set it aside and dismiss it as not credible."

So the United States raised the alert level and canceled flights.

Critics question evaluation of the evidence

"I'm astonished," says author and intelligence expert Jim Bamford, "that they would put so much credibility in such a weak source of intelligence."

Bamford says the CIA shouldn't be criticized for considering the theory, but that analysts should have weighed how implausible it was.

"What you have to do is judge the intelligence versus what your actions are going to be. And this is the equivalent, basically, of looking at tea

leaves," Bamford says.

Bogus analysis led to terror alertin Dec. 2003CIA experts saw a secret code on Al-Jazeera that wasn't there

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Intelligence sources say that even within the CIA, the analysis was a closely guarded secret. Still, they say, some top CIA officials who learned about

it were skeptical. Top officials at the Directorate of Operations, which conducts clandestine operations, and others who worked at the CIA

Counterterrorism Center, felt that the whole theory was implausible and was being taken far too seriously.

As discredited as the CIA's interpretation now is, experts say steganography is a valid subject for CIA analysis, and could be used by terrorists to

hide data in files on the Web, in still photographs or in broadcast television images.

"Steganography," says professor Nasir Memon of Polytechnic University in Brooklyn, N.Y., "is the art, if you will, of secret writing. And when two

parties want to talk to each other and not let anybody know they are indeed communicating, they would use steganography."

Memon is an expert in "steganalysis" — using sophisticated software to locate hidden messages. He says such analysis is valuable but not always

reliable, because there are many "false positives." In general, he says, "it's not something I would bet the farm on because there is a significant

chance that it could be wrong."

TV networks commonly hide digital "watermarks" in their video broadcasts, a legitimate use of video encoding to pass along innocuous digital

information. The CIA's Al-Jazeera analysis is classified, and it is still unclear exactly what the CIA technicians were looking for in the network's

"crawl."

Ridge stands by alert

Regardless, Ridge told NBC News that the CIA analysis certainly did turn out to be wrong. He confirms there were no secret terror messages. He

also says there was no evidence that terrorists were actively plotting against aviation at the time.

But Ridge insisted it was not a mistake to raise the alert level or to cancel the flights.

"I think it was the right thing to do," he said.

Even if raising the alert level frightened a lot of people?

"We acted accordingly based on our best information and best conclusions and the information that we had at the time," Ridge said.

Ridge added that the faulty CIA analysis was a significant factor in raising the alert level, but not the only factor.

As for the CIA, a spokeswoman would not confirm or deny this report, but said it's the "agency's job to run all plausible theories to the ground,

especially when American lives could be at risk."

Lisa Myers is NBC’s senior investigative correspondent and Aram Roston is an NBC investigative producer.

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EXHIBIT 5




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http://www.wsj.com/articles/SB116234941031409783

This article was published on Nov. 1, 2006.

On a lavish, weeklong Caribbean cruise last year, software entrepreneur Warren Trepp

wined and dined friends and business partners aboard the 560-foot Seven Seas

Navigator.

Among Mr. Trepp's guests on the cruise ship: Rep. Jim Gibbons of Nevada and his

family. The two men have enjoyed a long friendship that has been good for both. Mr.

Trepp has been a big contributor to Mr. Gibbons's campaigns, and the congressman has

used his clout to intervene on behalf of Mr. Trepp's company, according to congressional

records, court documents and interviews. The tiny Reno, Nev., company, eTreppid

Technologies, has won millions of dollars in classified federal software contracts from the

Air Force, U.S. Special Operations Command and the Central Intelligence Agency.

At a time of rising concern over lawmakers who direct or "earmark" federal spending to

their supporters and business partners, a growing part of the budget is shielded fromscrutiny. This is the "black budget," mostly for defense and intelligence, which is

disclosed only in the vaguest terms. The ties between Mr. Trepp and Mr. Gibbons raise

questions about an influential politician in America's fastest-growing state, and also offer

a rare glimpse of contracts in this secret budget being awarded to a politically connected

businessman without competitive bidding.

BUSINESS UNDER COVER

Congressman's Favors for FriendInclude Help in Secret BudgetWith Rep. Gibbons's Backing, An Ex-Trader for Milken Wins Millions in

Contracts

|

Updated Nov. 1, 2006 11:59 p.m. ET

By JOHN R. WILKE

Page 1 of 9Congressman's Favors for Friend Include Help in Secret Budget - WSJ

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Mr. Gibbons, a 61-year-old Republican, has been elected to

five terms in the House and has served on the Intelligence and

Armed Services committees. A former combat pilot and

decorated Vietnam veteran, he is stepping down at the end of

this term and is running for governor of Nevada in next week's

election. His wife, Dawn, ran unsuccessfully in the Republicanprimary for the House seat being vacated by her husband.

Mr. Gibbons is in a tight and bitterly fought race. He held a double-digit lead until two

weeks ago, when a cocktail waitress said he accosted her after a night of drinking. Mr.

Gibbons has forcefully denied the claim, which is unproven, but details of the case have

been page-one news in Nevada, and his lead slipped to six points in a weekend poll.

Mr. Trepp, 56, is known on Wall Street as the one-time chief trader for Michael Milken at

Drexel Burnham Lambert, which collapsed in 1990 following a criminal investigation of

unk-bond abuses.

In an interview Sunday, Mr. Gibbons said he helped open doors in Washington for his

friend but did nothing improper. He said eTreppid won its business on the merits. "I had

nothing to do with any classified contracts," Mr. Gibbons said. "My connection was to get

people to evaluate the technology." Of Mr. Trepp, he said: "He is like a younger brother

to me, we have dinner, we play golf, we've been friends for years, and our wives are best

friends."






Mr. Trepp said Mr. Gibbons acted at all times in the nation's best interests. "If a member

of Congress becomes aware of a technology they believe will be beneficial to the country,

don't they have a duty to bring it to the attention of the appropriate governmental

agencies?" he asked in an emailed response to questions. "Given my longstanding

personal relationship with Jim and his position on the Intelligence Committee, it was

natural for me to show him our technology."

Public records show that Mr. Trepp has been a

generous supporter of Mr. Gibbons's campaigns.

Nevada law prohibits individuals or

corporations from giving more than $10,000 to

a candidate in a single election cycle. Companies

and partnerships that Mr. Trepp incorporated or

controls have given almost $100,000 to Mr.

Gibbons. These entities, many of which list the

same mailing address, gave the maximum

amount on the same day last year. Mr. Gibbons

said the campaign contributions didn't violate

Nevada law because they came through different

corporate entities.

Mr. Trepp said he believes all the contributions

complied with state law. "Whatever

contributions I made for Jim's gubernatorial

candidacy have nothing to do at all with any

federal contracts," he said, adding that the

company has no new federal contracts on the

way.

Suit's 'Outrageous' Claims

Mr. Gibbons also got other, unreported gifts of cash and casino chips from Mr. Trepp,

according to sworn testimony in a civil lawsuit brought by a former executive at

eTreppid, Dennis Montgomery. The suit, filed in February in federal court in Reno,

involves a dispute between Messrs. Trepp and Montgomery over the rights to certain

software code. Both Mr. Gibbons and Mr. Trepp deny unreported payments. Mr. Gibbons

called the claims "outrageous," adding, "I am not hiding a damn thing, and Warren is not

the kind of person who'd do anything like that."






The suit has raised alarms in Washington because of concern that national secrets will be

revealed if it goes to trial. For example, one of the entities that funded eTreppid is code-

named Big Safari and is a classified program, documents in the case show. The nation's

top intelligence official, John D. Negroponte, recently filed a statement with the court

seeking to seal the case. He wrote that after personally reviewing the matter, he has

concluded that disclosure of some information connected with the case could do"exceptionally grave damage" to national security.

The legal dispute, which hasn't been previously reported, sheds light on the shadowy

world of black-budget contracting and on Mr. Gibbons's efforts to help fund programs in

which eTreppid was involved.

Mr. Gibbons himself touted one earmark in a June 2004 news release. In the release, Mr.

Gibbons's office said he "specifically requested" a program that would pay $3 million for

eTreppid's automatic target-recognition technology, a computerized technique forpicking out objects from a stream of video images. The release also said the technology

had "great potential" for other federal applications, including satellite intelligence

gathering.

In the following year, an email from an eTreppid executive to Mr. Trepp and others at the

company described a $1.5 million "plus-up," or earmark, that the company's Washington

lobbyist "helped us get through Jim Gibbons." The money was for a subcontract on a

secret program, code-named "Eaglevision," involving satellite transmission of high-

resolution video images. Mr. Trepp acknowledged getting help from Mr. Gibbons on this

contract but added, "The specific contract which resulted from Jim's introduction was for

approximately $1.17 million."

Earmarks have attracted intense scrutiny this year and figured in a series of public-

corruption probes. Traditionally, programs are funded based on requests from

departments and agencies to Congress, which then appropriates money. Earmarks are

different because lawmakers can directly insert them into spending bills.






The eTreppid story adds a twist because, as with the Eaglevision contract, some

programs that got funded with Mr. Gibbons's help are classified. The U.S. Constitution

says "a regular statement and account of receipts and expenditures of all public money

shall be published," but since the Cold War era a growing number of programs for

national defense or intelligence have been listed in the federal budget with only vaguedescriptions. This black-budget spending has more than doubled in inflation-adjusted

dollars since 1995, to more than $30.1 billion in the current fiscal year, according to the

Center for Strategic and Budgetary Assessments, a nonpartisan Washington policy

group.

Nevada Rep. Jim Gibbons, circled at top, and Warren Trepp, circled at bottom, with families, business partners

and friends on a Caribbean cruise last year. To the right of Mr. Trepp is actor Patrick Swayze and, behind him,

actor John O'Hurley of 'Seinfeld' fame.






"The problem with earmarks is that they don't go through the normal oversight process --

a problem that is much worse in black programs, which have less congressional oversight

and obviously no public scrutiny," says Steven Kosiak, a researcher at the center.

Source of Secret Funds

One source of secret funds for eTreppid and other companies is the Special OperationsCommand. Based in Tampa, Fla., the command fields special-operations military and

intelligence forces around the globe and is at the forefront of the fight in Iraq and

Afghanistan. It has also been rocked by a criminal investigation of a former contracting

officer. The investigation is continuing, according to a spokesman for the U.S. attorney in

Tampa.

In a separate inquiry, Pentagon investigators last year found evidence that the command

kept special accounts for "unrequested congressional plus-ups," or earmarks. The plus-

ups were used to reward lawmakers with projects in their districts, according to

declassified investigators' notes reviewed by The Wall Street Journal. The Pentagon's

inspector general closed the inquiry after finding that the accounts weren't illegal.

Mr. Trepp said eTreppid won classified work on its merits and already had a number of

government contracts before Mr. Gibbons starting making introductions on the

company's behalf. Mr. Gibbons's campaign manager, Robert Uithoven, said the

congressman has been a strong supporter of new defense technology, particularly after

9/11. But he said there was "no quid pro quo whatsoever" for contributions from

contractors. And while some funding was secret, "it was because of the sensitive nature of

the work," Mr. Uithoven said, not to avoid public scrutiny.

For Mr. Trepp, eTreppid's success at winning multimillion-dollar federal contracts marks

a comeback from his Drexel days. He sat at Mr. Milken's right arm on the firm's famous

X-shaped trading desk in Beverly Hills, sometimes trading as much as $2 billion in

securities a day. Federal regulators filed a civil securities-fraud claim against him in 1995,

and a Securities and Exchange Commission administrative judge found that his

violations had been "egregious, recurring and intentional." But she dismissed theproceeding against him, noting that the allegations were old and he had left the securities

business years earlier.






Mr. Trepp, a Drexel partner, later paid an estimated $19 million to help settle civil claims

against the firm, without admitting culpability in the case. But he emerged with most of

his fortune intact, and landed on the shores of Lake Tahoe, in Nevada, where he played

high-stakes baccarat, started a family and lived in a waterfront compound he later sold

for $32 million. He funded a community-philanthropy foundation in Lake Tahoe and

invested in films and Broadway plays. Mr. Trepp's latest show, "The Times They Are A-Changin'," choreographed by Twyla Tharp with music by Bob Dylan, opened last week

on Broadway.

Mr. Trepp jumped into the technology boom in 1998, founding eTreppid in Reno with

Mr. Montgomery, a software developer who served as chief technology officer, according

to court papers. Its first product converted casino-surveillance tapes into digital data that

could be stored and searched, based on data-compression and pattern-recognition

software written by Mr. Montgomery. It was tested in casinos in Reno and Las Vegas and

was eventually licensed to a unit of General Electric Co., in 2002.

By the following year, eTreppid shifted its focus to winning federal contracts for its data-

compression technology. At the time, military and intelligence officials were looking for

software that could store and search video taken by unmanned aircraft such as the

Predator. In early 2003, Mr. Montgomery was granted a security clearance and asked to

search for specific people, vehicles and other objects in battlefield video images, court

documents show.

The largest publicly known contract award to eTreppid was noted in a routine

announcement in 2004 by the Special Operations Command. The command described it

as an "indefinite-delivery/indefinite quantity...sole source," or no-bid, contract, with a

value of as much as $30 million.

Arranging Meetings

Between 2003 and 2005, Mr. Gibbons repeatedly arranged meetings and demonstrations

for eTreppid executives with top Air Force generals, both in Washington and Reno,

according to congressional staff and company documents.

On Sept. 25, 2003, the congressman had breakfast with the Air Force vice chief of staff,

where he pitched the promise of eTreppid's technology, according to a memo from a

Gibbons staff member to an eTreppid executive. Also in September, Mr. Gibbons, in an

email to an eTreppid executive, offered to try to set up a meeting with the National

Security Agency. It isn't known if the meeting took place.






In May 2004, a lobbyist acting for eTreppid in Washington reported in another email,

"Congressman Gibbons certainly came through for eTreppid!" She said Mr. Gibbons

secured a $7 million appropriation for the company, although she warned in the email

that the amount might be reduced as the legislation moved along. The next month Mr.

Gibbons publicly announced the $3 million appropriation, which was directed to

eTreppid for its video compression and target-recognition technology. The project wasamong several in Nevada that Mr. Gibbons said that he had specifically requested.

House records show that in 2004, the lobbyist pushed for eTreppid's interests in the

defense-authorization and intelligence bills. Mr. Gibbons served on both of those

committees. Mr. Trepp says eTreppid never paid for a lobbyist in Washington.

ETreppid executives even sought help from Mr. Gibbons on routine problems. In 2004,

they asked for his help in getting a top official at the Department of Homeland Security

to return their phone calls, according to company emails reviewed by The Wall StreetJournal. And last year, an eTreppid executive, Patty Gray, wrote to Mr. Gibbons that the

company hadn't yet received funds in a "congressional appropriation that you helped us

with." Mr. Gibbons immediately assigned a staff member to prod the General Services

Administration for the funds, according to a later email.

On the Caribbean cruise in March last year, photos taken on board and at the Atlantis

casino in the Bahamas show the Gibbons and Trepp families together at dinners and

parties. Also on the cruise were actors Patrick Swayze and John O'Hurley, who played the

role of J. Peterman in the "Seinfeld" television series. The group flew back to Nevada

after the cruise on a chartered Boeing 727 paid for by Mr. Trepp.

Mrs. Gibbons says she helped pay for the trip by giving a $1,654 check to Mr. Trepp's

wife and putting $1,508 on her credit card for on-board expenses. An agent for the cruise

line estimated the cost of a comparable cruise for a family of three at more than $10,000,

excluding airfare.






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Required Disclosure

Federal ethics rules require a public disclosure by members of Congress when they

receive gifts or make reimbursements. Mr. Gibbons says he believed the cruise was an

exception because he and Mr. Trepp are longtime friends. Kenneth Gross, a former

Federal Election Commission attorney now at Skadden, Arps, Slate, Meagher & Flom

LLP in Washington, says there is a friendship exemption but anything valued at more

than $250 must get written approval from the House ethics committee and in most cases

be publicly reported.

Documents make clear that the government found some of eTreppid's work valuable. In a

letter to Mr. Montgomery's lawyer earlier this summer, after the breakup with Mr. Trepp,

a top Air Force lawyer asked that Mr. Montgomery urgently return to work on technology

he had been developing for the military, even as the parties in the suit bitterly argued

over who owned the technology.

In the civil suit, Mr. Montgomery says he was pushed out of the company by Mr. Trepp in

January of this year when he refused to provide his source code to Mr. Trepp. Mr.

Montgomery was using the code on highly classified government work, the suit says. Mr.

Trepp, in turn, charged that Mr. Montgomery stole classified tapes from eTreppid when

he left. Agents in the local office of the Federal Bureau of Investigation began to look into

the matter.

On March 1, FBI agents raided Mr. Montgomery's home. They seized computers and

disks, but didn't find any classified material, court records in the civil suit show. Mr.

Montgomery has sought the return of his property, alleging that Mr. Trepp used his

political influence in the state to get local FBI agents to intervene in what was essentially

a private business and copyright dispute. Mr. Trepp denies Mr. Montgomery's claims and

says he will fight the lawsuit.

Court proceedings on the theft allegation and the FBI raid have taken place in secret. The

case is described in broad terms in the pending civil suit, which the government has

asked to seal as well.






EXHIBIT 6




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http://www.wsj.com/articles/SB117150946219909515

Federal prosecutors are investigating whether Nevada Gov. Jim Gibbons accepted

unreported gifts or payments from a company that was awarded secret military contracts

when Mr. Gibbons served in Congress.

The Federal Bureau of Investigation is examining whether any gifts or payments violated

federal contracting rules or were offered in exchange for official acts by Mr. Gibbons,people briefed on the investigation said. Mr. Gibbons, a Republican, represented Nevada

for five terms in Congress, where he served on the House Intelligence and Armed

Services committees. He was sworn in last month as governor of the nation's fastest-

growing state.

The close ties between the congressman and the contractor, Warren Trepp, were

disclosed in a Nov. 1 Wall Street Journal article, which revealed that Mr. Gibbons

accepted private jet flights and a Caribbean cruise from the software-company owner.

Mr. Gibbons says accepting the cruise and flight didn't violate House ethics rules.

New evidence has emerged that includes emails to Mr. Trepp -- the majority owner of

eTreppid Technologies LLC and the former chief trader for convicted junk-bond dealer

Michael Milken -- discussing a payment or gift to then-Rep. Gibbons. They also show Mr.

Gibbons repeatedly using his congressional office to help the firm seek classified military

and civilian contracts.

LEADER (U.S.)

Nevada Governor Faces FBI Probe IntContractsFocus Is Gifts Gibbons Got While in Congress; 'Black Budget' Missions

Updated Feb. 15, 2007 12:01 a.m. ET

By JOHN R. WILKE

Page 1 of 5evada Governor Faces FBI Probe Into Contracts - WSJ





The emails show that since at least 2003, Mr. Trepp

maintained close ties to Mr. Gibbons, who helped eTreppid get

no-bid software contracts from the Air Force, U.S. Special

Operations Command and Central Intelligence Agency. The

software was used in video tracking of military targets and

other, classified applications.

Messrs. Trepp and Gibbons have denied any wrongdoing, and

no charges have been filed; indeed, such investigations

sometimes end without official action.

'Hit the Ground Running'

In a Sept. 25, 2003, email to Mr. Trepp after Mr. Gibbons had

been particularly helpful on a recent contract, eTreppid

executive Len Glogauer reports that "Jim really hit the ground running on that one." He

adds, "we need to take care of him like we discussed." It isn't clear what Mr. Glogauer

meant, and he declined to comment.

A second email, cited in court filings by Mr. Trepp's former partner, was more explicit.

On March 22, 2005, days before Mr. Trepp and his wife embarked on the Caribbean

cruise with the congressman and his family, Jalé Trepp sent a reminder to her

husband. "Please don't forget to bring the money you promised Jim and Dawn," referring

to Mr. and Mrs. Gibbons.

Minutes later, Mr. Trepp responds, "Don't you ever send this kind of message to me!

Erase this message from your computer right now!" Mr. Gibbons failed to disclose the

cruise and travel on Mr. Trepp's leased private jet, as required by House ethics rules. He

later asked the House Ethics Committee for an exemption, but left office before any

action was taken.

The eTreppid emails include dozens to and from then-Rep. Gibbons. In one of the first

such exchanges, on Sept. 23, 2003, Mr. Gibbons said he was "greatly impressed" with the

technology and that he asked a military aide on his staff to set up a meeting with the

National Security Agency to demonstrate the company's products. "No doubt, the Agency

will be just as impressed," Mr. Gibbons wrote. He also tells an eTreppid executive to

begin using a private email address that is "a direct link to my desk and does not go

through anyone else."






In later exchanges, Mr. Gibbons discusses his efforts to set up meetings with the

Department of Homeland Security, and arranges meetings with several Pentagon

officials, including a top defense intelligence official. An eTreppid executive responds,

"now if we can get into the Navy, it would be great."

In a statement yesterday, a spokesman for the governor said Mr. Gibbons has"consistently stated that he and Warren Trepp have a longstanding friendship." Mr.

Gibbons, the statement continued, is proud of his efforts "to highlight the good work of

Nevada companies as part of his duties to represent his constituents. However, he held

no special power in awarding defense contracts, which go through a multilevel approval

process."

Mr. Trepp didn't return phone calls or emails seeking comment. His attorney, Steven

Peek, said yesterday, "Warren has had no inquires or questions from any federal officials

about his relationship with Jim Gibbons." Mr. Peek said Mr. Trepp continues to talk tothe FBI "about the theft of his company's intellectual property" by his former partner, the

crux of continuing legal disputes between the two men. Mr. Peek also said Mr. Trepp

"unequivocally denies that he wrote any emails regarding any payments to Jim Gibbons,

and questions their authenticity."

Preliminary Stage

The FBI declined to comment on the investigation, which appears to be in a preliminary

stage. The bureau has stepped up its pursuit of public-corruption cases, and says it now

has about 620 agents working on federal, state and local cases, compared with 260 in

2002. On Tuesday, former senior CIA official Kyle "Dusty" Foggo was indicted on fraud,

conspiracy and money-laundering charges for allegedly accepting jet flights and a

vacation from a contractor, Brent Wilkes, who was indicted on related charges. Both

pleaded not guilty yesterday. The indictments arose from a continuing FBI investigation

of former Republican Rep. Randy "Duke" Cunningham of California, who last year began

serving a prison sentence for accepting bribes.

The Cunningham case and claims made against Mr. Gibbons have drawn attention toalleged congressional abuse of the classified or "black" portion of the federal budget,

which covers CIA, NSA and other secret government activities and has grown to at least

$30 billion. New limits on special-interest spending known as earmarks were enacted by

Congress last month, including rules meant to restrict earmarks in the classified budget.






The Nevada case is being watched closely in Washington: John Negroponte, former

director of national intelligence, warned in a court filing of "exceptionally grave damage"

to national security if details of the secret contracts are disclosed.

The new federal probe follows a Nevada investigation of the dispute over ownership of

eTreppid software used in secret government programs. That investigation was initiallyfocused on Dennis Montgomery, the former partner of Mr. Trepp who designed the

software on which eTreppid was founded in 1998. The men have accused each other of

trade-secret theft, among other claims, and have been battling in court for more than a

year.

The new emails and internal documents would appear to support some of the claims

made in legal proceedings filed by Mr. Montgomery, who in court papers has alleged that

Mr. Trepp gave at least $100,000 in cash and casino chips to Mr. Gibbons. Public records

show Mr. Trepp gave $90,000 to the governor's campaign through a series of separatecompanies, avoiding a $10,000 limit on individual or corporate contributions.

Defamation Suit

In court filings, Mr. Trepp has denied Mr. Montgomery's claims. He also filed a

defamation suit against the chairman of the Nevada Democratic Party, Tom Collins, over

published comments about the business dispute before last year's election. He cites "false

testimony" by Mr. Montgomery, who he says "engaged in a campaign to spread

falsehoods...which led up to a story published in the Wall Street Journal." The Journal

isn't a defendant in the libel suit, which is pending in state court in Reno.

The Nov. 1 page-one story in the Journal reported that Mr. Gibbons and his family

accompanied Mr. Trepp on a Caribbean cruise and that the congressman had helped Mr.

Trepp win federal contracts. Mr. Gibbons at the time said his assistance to Mr. Trepp's

company was simply intended to promote promising technology, and that the cruise and

et flights didn't violate House ethics rules because of his "close personal friendship" with

Mr. Trepp.

Mr. Montgomery has accused Messrs. Trepp and Gibbons of using their political clout to

get local FBI agents to raid his home and investigate him. In December, a federal

magistrate found flagrant constitutional violations in the FBI raid, according to people

briefed on her ruling, which remains under seal. The court found that the local FBI and

U.S. attorney's office had effectively acted as armed enforcers for eTreppid's wealthy

owner in a private business dispute with a former partner.






EXHIBIT 7




Then-Congressman Jim Gibbons, seated, toasts with Dennis Montgomery during a March 2005 cru

the trip.

ByLisa Myers, Jim Popkin & the NBC News Investigative Unit

updated 5/11/2007 6:46:38 PM ET

The key facts are familiar. A politician gets a fancy vacation and

perhaps other lucrative benefits. And a defense contractor gets multi-

million-dollar government contracts. The question now: Was any of it

criminal?

The new governor of Nevada, Jim Gibbons, is being investigated by the

FBI because of alleged gifts and payments from Warren Trepp, a

defense contractor whose Nevada firm received tens of millions of

dollars in federal contracts.

The FBI wants to know if Gibbons, while a member of Congress,

improperly used his influence to help Trepp get those contracts.

Sources close to the investigation say a key focus is a lavish week-long

Caribbean cruise in March 2005 by Gibbons, his wife and son, and

Trepp, who paid for almost everything. In photos obtained by NBC

News, Gibbons is seen hamming it up — kicking back with a drink and

posing with his wife, Dawn, Trepp and Trepp's other guests.

Software designer Dennis Montgomery was also on that cruise with Gibbons. He estimates the trip cost "probably $20,000 a person," claiming he

saw the invoice. Montgomery says his former business partner Trepp chartered a 727 to fly guests from Nevada to Florida and back and picked up

the tab for penthouse rooms, private meals and expensive wines.

In an exclusive interview with NBC, Montgomery — who's now at war with his former partner — makes an explosive charge. He says that near the

end of the cruise, he saw Trepp pass money to the congressman.

Dennis Montgomery : There was a lot of alcohol and a lot of drinking. And that's when I first saw Warren give Jim Gibbons money.

Lisa Myers: How much?

Montgomery : Close to $100,000.

Myers: How can you know?

Montgomery : Because he gave him casino chips and cash.

Myers: Are you sure about what you saw?

Montgomery : I'm absolutely, positively sure.

So sure that Montgomery has made the same allegations in federal court. Montgomery's

wife also says she saw Trepp pass casino chips to Gibbons. In addition, Montgomery

provided NBC with hundreds of e-mails, he says, from Trepp's computer.

Days before the cruise, Trepp's wife e-mails her husband: "Please don't forget to bring the money

you promised Jim and Dawn on the trip."

Hours later, Trepp e-mails back: "Don't ever send this kind of message to me! Erase this message

from your computer now!"

There also is a paper trail showing Gibbons helped Trepp's company, eTreppid, get government

contracts.

Did Jim Gibbons accept cash and gifts in exchange for defense contracts?Below: Video Discuss

Jump to video

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In a 2003 e-mail, an eTreppid executive tells Trepp that Gibbons helped secure a contract and

"we need to take care of him like we discussed." Two years later, the same executive writes, "He

[Gibbons] has always been really good to us."

Gibbons, a Republican, says he would help any Nevada company, and strongly denies all wrongdoing.

"I'm not the kind of congressman or governor that would ever accept any kind of payment or bribe or gift or whatever it is!" he says.

Gibbons says Trepp has been a friend for nearly 20 years, that he reimbursed him $1,654 for the trip and that he only flew one-way on the 727.

Trepp also strongly denies any wrongdoing, and suggests the e-mails were doctored. Both men also question Montgomery's credibility, arguing

he's involved in a vicious legal battle with Trepp over ownership of their company, with millions of dollars at stake.

Montgomery admits he's no angel, that he's been known to gamble and he was sued for sexual harassment. Montgomery is now cooperating with

the FBI in the criminal investigation of Gibbons and Trepp. In court, and in our interview, Montgomery claims that Trepp gave Gibbons cash twice,

the second time allegedly was in Trepp's office at eTreppid.

Montgomery: He took a hundred thousand out of h is desk, two $50,000 bundles, and asked me to get a briefcase, which I did. 15 minutes later,

Jim came in, picked it up and left.

Myers: Did you see the Congressman with the briefcase?

Montgomery: Yes.

Myers: And you're sure the money was in there?

Montgomery: Yes

Montgomery, a registered Republican, says he never reported the alleged payments to the FBI. He says he did tell the Air Force official who was

handling their contracts as had been instructed.

Myers: Why didn't you go to the police?

Montgomery: Because I've been informed, because of the nature of the work that we do, this is the only person I am to go to.

Myers: Because you do classified work for the government?

Montgomery: We do work for the government.

NBC News called Montgomery's Air Force contact and asked whether he ever knew about or reported any alleged payments to the congressman.

The official said "no comment" and hung up. Montgomery also says he confronted Trepp, to no avail.

Myers: Did you raise the possibility that this was improper?

Montgomery: Yes.

Myers: And he said?

Montgomery: Stay out of it.

Montgomery's credibility will be put to the test, but so will Trepp's. He was chief broker for junk-bond trader and convicted felon Michael Milken.

The Securities and Exchange Commission tried to bar Trepp from the industry for what a judge cal led "egregious, recurring and intentional"

misconduct. The case against him eventually was dismissed because the government waited too long to bring charges.

Myers: Some people are going to look at this and say, "'This is just one angry, disgruntled man. Why should we believe him?'"

Montgomery : Because I know what happened for the last five years and I can prove it.

The FBI now is trying to sort out who's telling the truth. It's always possible that no charges will be brought. But grand-jury subpoenas have gone

out and a governor's reputation hangs in the balance.

Gibbons, fifth from left in the back row, poses with fellow cruise mate

2005.

6

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EXHIBIT 8




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Attorney: Nevada Gov. Gibbons cleared inFBI probePosted 11/3/2008 7:55 AM | Comment | Recommend E-mail | Print |

By Matt Apuzzo, Associated Press Writer

WASHINGTON — Nevada Gov. Jim Gibbons, whose first term has been marred by an FBI corruptioninvestigation, has been cleared of wrongdoing and will not be charged in the probe, his attorney said Sunday night.

Gibbons, a former Republican congressman, has been under investigation into whether he improperly received

gifts from a software company that received military contracts while he was in Congress. Gibbons steadfastly

denied any wrongdoing and said the Justice Department could look as hard as it wanted and wouldn't find anything

inappropriate.

Defense attorney Abbe Lowell said the Justice Department told him that Gibbons would not be charged. Such

assurances are commonplace when prosecutors have completed a case.

"The prosecutors in the case confirmed what the governor has been saying for the past two years -- that he did

nothing wrong and there was no basis for any allegations against him," defense attorney Abbe Lowell said in a

prepared statement.

The Justice Department had no comment on Lowell's assertion Sunday. But a law enforcement official close to the

case, speaking on condition of anonymity because authorities have not even officially acknowledged the

investigation, confirmed the substance of Lowell's statement.

The investigation arose from allegations by a former employee at eTreppid Technologies LLC, who said company

founder Warren Trepp lavished Gibbons with money and a Caribbean cruise in exchange for help winning defense

contracts for the company. But the credibility of the employee, Dennis Montgomery, was put in doubt after a

computer expert questioned the authenticity of e-mails he claimed proved Gibbons was accepting freebies.

"It should be crystal clear that the only persons who should be investigated or charged are those who made false

allegations of wrongdoing and who tried to fuel this investigation for their own private purposes," Lowell said. "The

people of Nevada should be proud to know that their governor is the hardworking, honest and ethical man they

elected in the first place."

Gibbons met with the FBI two weeks ago in Washington to discuss the case, and said afterward that he hoped for

"a positive outcome."

The conclusion of the FBI investigation eliminates one major distraction for Gibbons, whose first term has been

beset by problems. He has seen his approval ratings drop following a budget crunch, a messy divorce and lawsuits

involving his private and public activities.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewrittenor redistributed.

Posted 11/3/2008 7:55 AM E-mail | Print |

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EXHIBIT 10




Taking Stock

◾

More Podcasts

Yellowstone Club Divorcee Entangled in

Terrorist Software Suits

By Anthony Effinger - August 29, 2008 00:14 EDT

Edra Blixseth

Aug. 29 (Bloomberg) -- Edra Blixseth has come a long way since she and her husband, Tim,declared bankruptcy in rain-soaked Roseburg, Oregon, in 1986. He traded timberland. She hadowned a chain of four restaurants called Choo-Choo Willy's.

Neither business could support their debts.

Today, Edra lives in a 30,000-square-foot (2,800-square-meter) mansion on an estate near PalmSprings, California, called Porcupine Creek. The house, complete with servants, is surrounded

by a private golf course.

Porcupine Creek, a Gulfstream II, a 2004 Rolls-Royce Phantom and a BMW 760 are some ofthe spoils of Edra's July divorce from Tim. After a 19-month long fight, she also got control ofone big source of their wealth: a private Montana ski- and golf resort called the YellowstoneClub, where the likes of Microsoft Corp. founder Bill Gates, News Corp. President PeterChernin and hotelier Barry Sternlicht have erected supersized chalets on lots that until the realestate crash sold for $2 million and more.

The divorce is just one of a long list of legal skirmishes for Blixseth. She's battling to keep theYellowstone Club afloat, and in August settled a two-year-old claim by club investors that sheand Tim failed to fairly distribute the proceeds from a $375 million business loan toYellowstone from Zurich-based Credit Suisse Group.

Edra, 54, is also embroiled in a Reno, Nevada, lawsuit that makes the Montana case look like amissed putt on the Yellowstone Club's 7,200-yard (6,600-meter) golf course.

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Decoding Terrorists

She's dueling in court with Warren Trepp, once a top trader for Michael Milken, who allegesthat Edra and a former partner of Trepp's in a software company stole computer code that

purportedly could sift through broadcasts from Qatar-based news network Al-Jazeera and findembedded messages from terrorists. Edra tried to use connections to the Republican party to sell

the software to the government for $100 million, according to Michael Flynn, a lawyer who wasonce on Edra's payroll.

Flynn, 64, who spent much of the 1980s fighting the Church of Scientology on behalf of formermembers and journalists, says in court filings that he quit her employ after learning that thesoftware was a sham.

The Trepp case is all cloak-and-dagger. The Federal Bureau of Investigation had a team ofinvestigators working on it. Judges have sealed documents at the behest of U.S. intelligenceagencies. Trepp says an e-mail was faked to make it appear that a U.S. congressman was bribed.A business associate of Edra's says he warned the U.S. government about an August 2006 plot

to blow up jetliners over the Atlantic Ocean.

`Distraction'

Blixseth declined to discuss any of the legal squabbles in detail. In an e-mail to Bloomberg News, she said she's unfazed by the software controversy, calling it a ``distraction.'' She appearsin public now and again with new boyfriend Jack Scalia, 56, a one-time professional baseball

player and Jordache jeans model who starred on the soap opera All My Children.

Blixseth's focus these days, she says, is the Yellowstone Club. `Ì am excited about the future ofthe Club, and working toward restoring it is my No. 1 business priority,'' she said in the e-mail.

Blixseth spent the summer trying to calm members who were irked that she and Tim, 58, hadfought so publicly over the club and had drawn out the legal fight with investors. `Ì havealways felt that the Yellowstone Club is 'my baby,''' Edra wrote to members in a July 6 letterannouncing that she had vanquished Tim and taken control. `Ì make a personal pledge to neverlet us waver again.''

Fishing the Gallatin

The Blixseths started the Yellowstone Club in 2000 on 13,400 acres (5,400 hectares) of oldlogging land in the Madison Range north of Yellowstone National Park.

It's tucked into a valley adjacent to two other, less-exclusive ski resorts, Big Sky and MoonlightBasin. Yellowstone members -- most of whom remain anonymous -- play golf and fish in theGallatin, a river featured in the Robert Redford film `À River Runs Through It.''

The Blixseths have lived large off the Yellowstone Club. The rich thronged to the resort, payingout $205 million for 72 properties in 2005 alone -- most of them empty lots spread acrosswooded slopes.

Page 10 of 21Yellowstone Club Divorcee Entangled in Terrorist Software Suits - Bloo...





That year, when high-end real estate looked like a sure thing, Credit Suisse gave the club a $375million loan to repay old debt and ``fund a return of capital to the company's owners,'' accordingto a document describing the loan obtained by Bloomberg News.

LeMond Irked

Champion cyclist Greg LeMond, an early investor in the club, says the Blixseths took $209million of the money as their return of capital and that other investors should have gotten areturn, too. He filed suit in Montana state court in nearby Virginia City in May 2006.

During the Blixseths' divorce fight last year, Tim settled with LeMond, 47, and three otherinvestors. He paid $18 million, then missed a Jan. 31 deadline for a second and final $20 million

payment. The sides returned to court. After taking over the club, Edra settled the matter anew inAugust, paying another $8 million and pledging $13.5 million more by Nov. 15, according tosettlement documents obtained by Bloomberg News.

Edra neither admitted nor denied wrongdoing.

LeMond and the three other investors have done well. They put up a $750,000 down paymenteach in 2000 for an empty lot, a family membership and a 1 percent equity stake in the clubitself.

In his complaint against the Blixseths, LeMond says he believes part of the Credit Suisse moneywent to help Tim Blixseth buy a 16-bedroom chateau in France for $28 million, a golf resort onthe Pacific coast of Mexico for $40 million and property in St. Andrews, Scotland, for $12million.

High-End Network

They were to be part of a network of high-end time-share resorts called Yellowstone ClubWorld. Members would pay $3 million plus annual dues of $37,500 to use them.

Yellowstone Club World is dead. The French chateau was listed for sale by Mint Real Estate inLos Angeles for $60 million earlier this month, until Edra won it in the divorce and took it offthe market for the time being, says Tracey Broadman, a broker at Mint. Another YellowstoneClub World property, a 30,000-square-foot mansion on a private island in the Turks and CaicosIslands, is still listed for $55 million.

Tim declined to comment on the properties. Credit Suisse spokesman Duncan King said the firm

had no comment on the loan.

Edra Crocker Blixseth says she's accustomed to conflict. Her first husband beat her, she says ina 1987 book called ``Uncharged Battery'' (Portland Entertainment Publishing), which was billedas a self-help guide for battered women. She describes how he pulled her around the house bythe hair and, literally, walked on her.

Meeting Tim






Blixseth doesn't name her first husband and says she didn't press charges. Instead, she left himand met Tim Blixseth, who grew up poor in Roseburg. He worked in lumber mills during highschool, developed a keen eye for timberland and made his first fortune buying and selling thewooded slopes of the Cascades. They married on May 21, 1983.

In her book, Blixseth describes another life trauma. She was in a hotel in Palm Springs shortly

after marrying Tim. ``I was laying on my bed watching TV, drinking a Coke and eatingsunflower seeds (three of my favorite things to do),'' she wrote.

A man knocked on the door, she opened it and he grabbed her by the neck. She fought her wayoutside and then punched, scratched and screamed as he tried to drag her back into the room. Heran off.

She and Tim prospered in the early 1980s. Then interest rates soared, and lumber pricestumbled. Continental Foodservice Co. sued Edra and Choo-Choo Willy's for an unpaid food billof $27,219.82. The Blixseths declared bankruptcy in 1986.

Threatened Bears

Tim then began accumulating land in southwestern Montana, just north of Yellowstone NationalPark , intending to develop it. The U.S. Forest Service, eager to protect the elk and bears, offeredto swap Blixseth's land for property it owned farther north. That land became the YellowstoneClub.

People who know Edra say she's decisive and analytical. Tim had the vision for the YellowstoneClub, and Edra made it a reality, the people say. She can be charming, though she swears like aWall Street trader.

``F@*#N A!!!!!!!!!!!!!!!!!!!!!,'' she wrote to Flynn after a victory in the software case.

Blixseth also has a crude sense of humor, the people say. She once gave vibrators to the wivesof male business partners as Christmas presents, a person whose wife got one says. Edradeclined to comment on the matter.

Code Warrior

Now that Tim and Edra have stopped tussling over the Yellowstone Club, life there may returnto normal. The software fight, though, is still raging.

The computer code in question compresses digital video so it can be transmitted moreefficiently. It also purportedly picks out patterns, such as targets for missiles or secret messagesembedded in broadcasts. Its inventor, Dennis Montgomery, 55, says in court filings that the U.S.Air Force used the software on the Predator , a drone aircraft used to track terrorists inAfghanistan and Iraq and sometimes fire missiles at them.

The two original actors in the drama were Trepp, the former trader at Drexel Burnham LambertInc., and Montgomery, a software designer and avid science-fiction-movie fan. Before meeting






Trepp, Montgomery had worked at 3Net Systems Inc., a Sacramento, California-based firm thatmade software to help hospitals run their laboratories.

In 1997, a casino host at the Eldorado hotel in Reno introduced the two men. Montgomery toldTrepp he had software that could compress video images and search them and that he wanted toform a company. They planned to sell the software to casinos for video surveillance. Trepp and

Montgomery formed a company in 1998 that later became eTreppid Technologies LLC,headquartered in Reno.

Right Hand of Milken

Both men had tangled with the law in the past. Trepp went to work for Milken as a trader in1979. A year later, he became head of high-yield-bond trading and sat at Milken's right hand athis X-shaped trading desk in Beverly Hills.

Drexel paid a $650 million penalty for securities law violations and went bankrupt in 1990, andTrepp left for Lake Tahoe. The Securities and Exchange Commission in 1995 accused him of

executing fraudulent bond trades back in 1986.

``Trepp's violations were egregious, recurring and intentional,'' Administrative Law Judge CarolFox Foelak wrote in 1997. Even so, she dismissed the case, saying the SEC had waited too longto file it and that Trepp had done nothing else wrong in the interim.

Montgomery ran into trouble while working at 3Net, where a woman he supervised namedPenne Page alleged in a suit against the company that Montgomery twice masturbated in frontof her and asked if it ``turned her on'' to watch him, according to a summary of her complaint inCalifornia Superior Court in Sacramento. The case was resolved without any admission ofwrongdoing, according to Page's attorney, Chris Whelan.

No Comment

Montgomery declined to comment for this article. ``Talk to my attorneys,'' he said in atelephone call, then hung up.

Four years after it was incorporated, eTreppid got traction. In 2002, General Electric Co.licensed eTreppid's videotape search software to use in a product to be sold to casinos.

Two years later, the U.S. government awarded eTreppid a $30 million, five-year contract todevelop the code for what they termed ``automatic target recognition.''

To demonstrate his product, Montgomery would set up a video camera in a field behind theeTreppid office in Reno. Then he'd hold up a replica of a bazooka. A computer running his codewould pick out the weapon and highlight it on a monitor showing the feed from the camera.

Big Fan

One of eTreppid's biggest fans was U.S. Representative Jim Gibbons, a one-time airline pilotwho's now governor of Nevada. In September 2003, Gibbons was shown a demonstration of






eTreppid's technology at the Lake Tahoe home of a member of the Yellowstone Club, accordingto Flynn.

The following June, Gibbons, 63, put out a press release saying that he had voted for a defenseappropriations bill that, he noted, included $3 million for eTreppid.

In September 2005, Trepp told Montgomery that the U.S. government was ready to spend $100million on the video technology, according to a statement Montgomery filed in federal court inReno in October 2006. Montgomery doesn't say which branch of the government was interested.

Edra Blixseth had no connection to eTreppid. She only got involved after 2005, when Trepp andMontgomery had a falling-out. According to a transcript of an FBI interview with Trepp inFebruary 2006, one cause of the split was that Trepp had begun to question the extent ofMontgomery's computer programming skills.

`Big Money'

Montgomery in December 2005 took disk drives containing eTreppid source code from theoffice and deleted copies of the code from all of the company's servers and workstations,according to eTreppid. To get it back, Trepp ``needs to give me big money,'' Montgomery toldanother eTreppid employee, the company claims.

Montgomery left eTreppid for good that January. ETreppid filed a report with the FBI and suedMontgomery in state court, winning a preliminary injunction preventing Montgomery fromaltering or transferring the code. That injunction was still in effect in late August. Blixseth andMontgomery are violating it, eTreppid says, by trying to sell the code.

In March 2006, then-U.S. Attorney Daniel Bogden became concerned that Montgomery might

have taken classified data provided to eTreppid by the Department of Defense. FBI agentsraided Montgomery's house. Two days later, they searched his lockers at a local storage unit,carting off two dozen computer hard drives and almost 100 compact discs.

Countersuit

In January 2006, Montgomery hired Flynn, who countersued eTreppid, saying Trepp hadinfringed copyrights that Montgomery had on the code and that he had obtained them long

before joining eTreppid. Flynn also went to federal court to claim the FBI raids violatedMontgomery's Fourth Amendment right against unreasonable search and seizure. Federal JudgeValerie Cooke agreed and, on Nov. 28, 2006, overturned the search. Montgomery got his hard

drives and CDs back.

Blixseth met Montgomery as a result of an investment she made in early 2006. A friend hadintroduced her to former Microsoft executive Michael Sandoval, who had just started acompany called AziMyth LLC in Bellevue, Washington. AziMyth, now called Atigeo, plannedto build software to deliver targeted advertising and link users in social networks.






``I told Edra what we were doing, and Edra said, 'Hey, let's do a deal,''' Sandoval, 44, says.Blixseth invested $10 million in an AziMyth subsidiary called xPatterns LLC, Blixseth says incourt documents.

Microsoft Connection

Sandoval knew Montgomery from his Microsoft days. In 2004, he had traveled to Reno to talkto Trepp about a partnership. Trepp called in Montgomery to explain the technology, Sandovalsays. Sandoval says the next time he heard from Montgomery was in early 2006, when he calledSandoval looking for work.

Sandoval introduced him to Blixseth, and the three of them decided to start another AziMythsubsidiary called Opspring LLC. Blixseth and her family members, excluding Tim, were thesole investors, contributing $8 million.

She has since taken control of the company after a falling-out with Sandoval, whom she sued inWashington state court for allegedly misappropriating the money she invested in xPatterns.

Sandoval denies any wrongdoing. Judge Joan DuBuque dismissed Edra's complaint on Aug. 22,saying it failed ``to state claims upon which relief can be granted.''

Two days after the FBI searches, Montgomery asked Flynn to come to a meeting at Blixseth'sPorcupine Creek estate. Sandoval says the meeting was to finalize Montgomery's employmentcontract.

Flynn says in court documents there was more involved. He was introduced to Blixseth andSandoval at the meeting for the first time, and Montgomery told them about the $100 millioncontract that was in the offing for eTreppid, Flynn says in an April 24 court filing that has since

been sealed. Blixseth said she would use her Republican contacts to sell Montgomery's software

to the government.

Donors

Since 2000, Edra Blixseth has given more than $30,000 to Republican candidates, according tothe Federal Election Commission. Tim has given about $120,000. They've given through theclub, too. In 2003, Yellowstone Development LLC, one of the two Blixseth-controlled

partnerships that own the club, gave $100,000 to a group called ̀ `Arnold Schwarzenegger 'sTotal Recall Committee, Vote Yes to Recall Gray Davis.''

Blixseth pushed hard in Washington. Flynn says she told him she talked to Vice President Dick

Cheney, then-Defense Secretary Donald Rumsfeld, then-Montana Senator Conrad Burns andIndiana Representative Dan Burton about the software.

James Hennigan, a spokesman for Cheney, says, ``We do not comment on pending legislation.''

Rumsfeld and Burns didn't return phone calls. Burton says he knows the Blixseths, but that Edranever asked him for help selling software.

Terrorist Warning






``Those are dummied-up, fake e-mails,'' says Gibbons's lawyer, Abbe Lowell of McDermottWill & Emery in Washington. No criminal charges have been filed against Gibbons orMontgomery.

Natalie Collins, a spokeswoman for the U.S. Attorney's Office in Nevada, says she can'tcomment on whether Gibbons is or isn't the target of an investigation.

Flynn says in pleadings that he stuck by Montgomery and Blixseth because he believedMontgomery's contention that Trepp was out to get his code.

Unsealed

Then, on April 9, 2007, U.S. District Judge Philip Pro in Reno unsealed all of the records in thecase to the attorneys involved. Before doing so, Pro ordered the Department of Defense toredact items it wanted kept secret.

If Montgomery's software was valuable for tracking terrorists, the government wouldn't disclose

it, Flynn says. In September, the judge opened the records to the public, and the world got itsfirst look at evidence the FBI had gathered before searching Montgomery's house. It paints anunflattering picture.

One document is a report from an Air Force investigator on his interview with eTreppidemployee Jesse Anderson on Jan. 24 and 25, 2006. Anderson says Montgomery asked him onabout 40 occasions to help with the demonstrations of the company's software in which itidentified the bazooka. Each time, Montgomery told Anderson to watch a video on his computerscreen and when he saw a bazooka, to hit the A key. Another employee, James Bauder,described the same process, except he was instructed to hit the space bar.

Bazooka Fakery

Flynn's conclusion: The demonstration was faked, and his clients had been lying to him.Montgomery's software couldn't pick out the bazooka, or anything else, in a stream of video.

Flynn says in pleadings that his doubts about Montgomery were bolstered further by the factthat the FBI allowed documents to be released describing Montgomery's assertion that hissoftware could detect ``noise'' in Al-Jazeera broadcasts indicating terrorist attacks wereimminent -- suggesting they didn't believe it.

On July 9, 2007, after 17 months, Flynn filed a motion with the court to withdraw as

Montgomery's attorney. He also sued for unpaid fees. The judge ruled that Montgomery --whose legal costs, according to Flynn, have been paid by Blixseth -- owed him $629,000. He isseeking another $380,000 in sanctions.

Blixseth declined to comment on the software's usefulness or on Flynn's accusations.

``Because litigation is pending, I cannot respond to these spurious and inflammatoryallegations,'' she wrote in an e-mail. ``I also will not speculate on the motivations of those whomay be furthering these inaccurate and counterproductive rumors. What I can tell you is that I






and my business associates have and always will operate with the highest legal and ethicalstandards as our priority.''

Violated Order

The legal merry-go-round keeps spinning. ETreppid is pressing its case that Blixseth,Montgomery and Sandoval violated the Nevada court's preliminary injunction by trying to sellthe software. Montgomery maintains through his lawyers that the software is his alone and veryvaluable. Few people know for sure because Montgomery has refused to produce the code incourt.

Montgomery's lawyers at Liner Yankelevitz Sunshine & Regenstreif LLP in Los Angeles saythe computer code can't be made part of any court record. ``The source code to be produced isamong the very most sensitive of such material -- worth millions or tens of millions of dollarsand easily copied if not protected,'' they wrote to the court on Aug. 4.

Judge Pro on Aug. 18 ordered Montgomery to pay $2,500 a day in sanctions until he produces

the code in court.

In her book for battered women, Blixseth paraphrases U.S. President Calvin Coolidge:``Nothing in the world can take the place of persistence. Talent will not, genius will not andeducation will not.''

Blixseth fought for control of the Yellowstone Club and won. Now, she's fighting to protectMontgomery's software, even as he faces contempt charges. That may not be the kind of

persistence that Coolidge had in mind, yet it may get her where she wants to go. It has so far.

To contact the reporter on this story: Anthony Effinger in Portland, Oregon, at

[email protected]

To contact the editor responsible for this story: Laura Colby at [email protected]

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EXHIBIT 11




5 of 24 DOCUMENTS

Copyright 2010 Gale Group, Inc.

All Rights Reserved

ASAP

Copyright 2010 Playboy.com, Inc.

Playboy

January 1, 2010

SECTION: Pg. 70(9) Vol. 57 No. 1 ISSN: 0032-1478

ACC-NO: 219177486

LENGTH: 5978 words

HEADLINE: The man who conned the pentagon: Dennis Montgomery claimed he could intercept satellite

transmissions being sent to Al Qaeda agents. for a while he had the U.S. government believing he was right.

BYLINE: Roston, Aram

BODY:

The weeks before Christmas brought no hint of terror. But by the afternoon of December 21, 2003, police stood

guard in heavy assault gear on the streets of Manhattan. Fighter jets patrolled the skies. When a gift box was left on

Fifth Avenue, it was labeled a suspicious package and 5,000 people in the Metropolitan Museum of Art were herded

into the cold.

It was Code Orange. Americans first heard of it at a Sunday press conference in Washington, D.C. Weekend

assignment editors sent their crews up Nebraska Avenue to the new Homeland Security offices, where DHS secretary

Tom Ridge announced the terror alert. "There's continued discussion," he told reporters, "these are from credible

sources--about near-term attacks that could either rival or exceed what we experienced on September 11." The New

York Times reported that intelligence sources warned "about some unspecified but spectacular attack."

The financial markets trembled. By Tuesday the panic had ratchetedup as the Associated Press reported threats to

"power plants, dams and even oil facilities in Alaska." The feds forced the cancellation of dozens of French, British andMexican commercial "flights of interest" and pushed foreign governments to put armed air marshals on certain flights.

Air France flight 68 was canceled, as was Air France flight 70. By Christmas the headline in the Los Angeles Times

was SIX FLIGHTS CANCELED AS SIGNS OF TERROR PLOT POINT TO L.A. Journalists speculated over the basis

for these terror alerts. "Credible sources," Ridge said. "Intelligence chatter," said CNN.

But there were no real intercepts, no new informants, no increase in chatter. And the suspicious package turned out

to contain a stuffed snowman. This was, instead, the beginning of a bizarre scam. Behindthat terror alert, and a string of

contracts and intrigue that continues to this date, there is one unlikely character.

Page 1




The man's name is Dennis Montgomery, a self-proclaimed scientist who said he could predict terrorist attacks.

Operating with a small software development company, he apparently convinced the Bush White House, the CIA, the

Air Force and other agencies that Al Jazeera--the Qatari-owned TV network--was unwittingly transmitting target data to

AI Qaeda sleepers.

An unusual team arrived in Reno, Nevada in 2003 from the Central Intelligence Agency. They drove up Trademark Drive, well south of the casinos, past new desert warehouses. Then they turned into an almost empty parking lot, where

a sign read ETREPPID TECHNOLOGIES. It was anattractively designed building of stone tile and mirrored windows

that had once been a sprinkler-head factory.

ETreppid Technologies was a four-year-old firm trying to find its way. Some of its employees had been hired to

design video games. One game under construction was Roadhouse, based on the 1989 movie in which Patrick Swayze

plays a bouncer in a dive. bar. Other programmers worked on streaming video for security cameras.

When the liaison team stepped into eTreppid's office, the CIA man in charge introduced himself as Sid but didn't

give his last name. Hewas tall and in his 50s, with a well-ironed shirt, a paunch and a mildly robotic politeness. "We

called him Sid Vicious," one eTreppid technician explained, "because he was anything but."

Sid's team set up on the first floor in an unused office and had special cipher locks installed. Workers carted, in a

heavy-duty paper shredder that could transform classified documents to dust in seconds. They set up impenetrable safes

with combination locks protected by privacy screens so bystanders couldn't steal the code.

The CIA team was there to work with Dennis Montgomery, at the timeeTreppid's chief technology officer and part

owner. Then 50 years old, with a full head of gray hair, the street-smart Montgomery stood at about five feet eight

inches. Other eTreppid workers, hearing the buzz about the spooks in town, peered through their blinds and watchedas

Montgomery worked at his desk at the north end of the building. He wore his usual jeans and Tommy Bahama shirt.

He could be seen handing off reams of paper to Sid and the CIA. "They would sit in the room and review these

numbers or whatever the heck Dennis was printing out," one former eTreppid employee, Sloan Venables, told me. "We

called them Sid's guys, and no one knew what the hell they did."

Montgomery called the work he was doing noise filtering. He was churning out reams of data he called output. It

consisted of latitudes and longitudes and flight numbers. After it went to Sid, it went to Washington, D.C. Then it found

its way to the CIA's seventh floor, to Director George Tenet. Eventually it ended up in the White House. Montgomery's

output was to have an extraordinary effect. Ridge's announcement, the canceled flights and the holiday disruptions were

all the results of Montgomery's mysterious doings.

He is an unusual man. In court papers filed in Los Angeles, a former lawyer for Montgomery calls the software

designer a "habitual liarengaged in fraud." Last June Montgomery was charged in Las Vegas with bouncing nine checks

(totaling $1 million) in September 2008 and was arrested on a felony warrant in Raricho Mirage, California. That

million is only a portion of what he lost to five casinos in Nevada andCalifornia in just one year. That's according to his

federal bankruptcy filing, Where he reported personal debts of $12 million. The FBI has investigated him, and some of

his own co-workers say he staged phony demonstrations of military technology for the U.S. government.

Montgomery has no formal scientific education, but over the past six years he seems to have convinced top people

in the national security establishment that he had developed secret tools to save the worldfrom terror and had decoded

Al Qaeda transmissions. But the communications Montgomery said he was decrypting apparently didn't exist.

Since 1996 the Al Jazeera news network had been operating in the nation of Qatar, a U.S. ally in the war on terror.

Montgomery claimed he had found something sinister disguised in Al Jazeera's broadcast signal that had nothing to do

with what was being said on the air: Hidden in the signal were secret bar codes that told terrorists the terms of their next

mission, laying out the latitudes and longitudes of targets, sometimes even flight numbers and dates. And he was the

Page 2The man who conned the pentagon: Dennis Montgomery claimed he could intercept satellite transmissions being sent to

Al Qaeda agents. for a while he had the U.S. government believing he was right. Play




only man who had the technology to decrypt this code.

As strange as his technology appeared to be, it was nevertheless an attractive concept. Montgomery was as

persuasive as some within theintelligence community were receptive. Al Jazeera was an inspired target since its

pan-Arabic mission had been viewed with suspicion by those who saw an anti-American bias in the network's coverage.

In 2004Secretary of Defense Donald Rumsfeld accused Al Jazeera of "vicious,inaccurate and inexcusable" reporting.Will Stebbins, Al Jazeera's Washington bureau chief, told The Washington Post, "There was clearly an attempt to

delegitimize Al Jazeera that came during a period of a lot of national hysteria and paranoia about the Arabic world." ("It

is unfortunate," an Al Jazeera spokesperson told playboy when asked for comment, "that a select few people continue to

drag up these completely false conspiracy theories about Al Jazeera, which were generatedby the previous U.S.

administration.") Over the years Montgomery's intelligence found its way to the CIA, the Department of Homeland

Security, Special Forces Command, the Navy, the Air Force, the Senate Intelligence Committee and even to Vice

President Dick Cheney's office.

Back in 2003, just before the terror alert caused by Montgomery's technology, eTreppid held a Christmas party in a

ballroom at the Atlantis Casino in Reno. Employees gathered at round tables to dine and drink. Even a CIA man showed

up, a lanky fellow wearing a button-down shirt with an oxford collar. By the end of the night, employees noticed

Montgomery and eTreppid chief executive Warren Trepp talking closely. A photo snapped by an employee showsMontgomery with his jacket off and a Christmas ribbon wrapped around his head like a turban with a rose tucked into it.

He was hugging Trepp, who sobbed into his shoulder. The festivities were a rare break for Montgomery, who had been

busy churning out terrorist target coordinates for the CIA.

On Sunday, January 4, 2004 a British Airways flight out of Heathrow was delayed for hours for security reasons,

and FBI agents demandedthat hotels in Vegas turn over their guest lists. It was also the day a top CIA official flew to

the eTreppid office in Reno. There, on eTreppid letterhead, the CIA official promised the company's name would not be

revealed and that the government would not "unilaterally useor otherwise take" Montgomery's Al Jazeera technology.

Back in Washington, few insiders in government knew where the intelligence was coming from. Aside from Tenet

and a select few, no one was told about eTreppid's Al Jazeera finds. Even veteran intelligence operatives within the CIA

could only wonder. "These guys were trying to hide it like it was some little treasure," one former counterterrorist

official told me.

The reason the whole thing worked was because Montgomery's CIA contact was with the agency's Directorate of

Science and Technology. That's the whiz-bang branch of the intelligence service, where employeesmake and break

codes, design disguises and figure out the latest gadgets. S&T was eventually ordered by CIA brass to reveal its source

tosmall groups from other parts of the agency. And when some experienced officers heard about it, they couldn't believe

it. One former counterterrorism official remembers the briefing: "They found encoded location data for previous and

future threat locations on these Al Jazeera tapes," he says. "It got so emotional. We were fucking livid. I was told to shut

up. I was saying, 'This is crazy. This is embarrassing.' They claimed they were breaking the code, getting latitude and

longitude, and Al Qaeda operatives were decoding it. They were coming upwith airports and everything, and we were

just saying, 'You know, this is horseshit!'" Another former officer, who has decades of experience, says, "We were told

that, like magic, these guys were able to exploit this Al Jazeera stuff and come up with bar codes, and these barcodes

translated to numbers and letters that gave them target locations. I thought it was total bullshit."

The federal government was acting on the Al Jazeera claims withouteven understanding how Montgomery found

his coordinates. "I said, 'Give us the algorithms that allowed you to come up with this stuff.' They wouldn't even do

that," says the first officer. "And I was screaming, 'You gave these people fucking money?'"

Despite such skepticism, the information found its way to the top of the U.S. government. Frances Townsend, a

Homeland Security advisorto President George W. Bush, chaired daily meetings to address the crisis. She now admits

that the bar codes sounded far-fetched. And, she says, even though it all proved to be false, they had no choice butto






pursue the claim. "It didn't seem beyond the realm of possibility," she says. "We were relying on technical people to tell

us whether or not it was feasible. I don't regret having acted on it." The feds,after all, had a responsibility to look into

the technology. "There were lots of meetings going on during the time of this threat," says Townsend. "What were we

going to do and how would we screen people? If we weren't comfortable we wouldn't let a flight take off." Eventually,

though Montgomery continued to crank out his figures, cooler heads prevailed. The threat was ultimately deemed "not

credible," as Townsend puts it.

A former CIA official went through the scenario with me and explained why sanity finally won out. First,

Montgomery never explained howhe was finding and interpreting the bar codes. How could one scientist find the codes

when no one else could? More implausibly, the scheme required Al Jazeera's complicity. At the very least, a technician

at the network would have to inject the codes into video broadcasts, and every terrorist operative would need some sort

of decoding device.What would be the advantage of this method of transmission?

A branch of the French intelligence services helped convince the Americans that the bar codes were fake. The CIA

and the French commissioned a technology company to locate or re-create codes in the Al Jazeera transmission. They

found definitively that what Montgomery claimed was there was not. Quietly, as far as the CIA was concerned, the case

was closed. The agency turned the matter over to the counterintelligence side to see where it had gone wrong.

Born in Mena, Arkansas, Dennis Montgomery graduated in 1971 from Grossmont College near San Diego with a

two-year associate's degree inmedical technology. He worked a few years as a hospital medical technician. And then, it

appears, he shifted gears. He says he designed technology to analyze blood gas and became a consultant to some of

thebiggest companies in America. He maintains he invented and secured copyrights for various technologies related to

"pattern recognition," "anomaly detection" and "data compression." Montgomery had attained some success with his

media-compression software.

By the late 1990s Montgomery was in Reno, where he had a meeting at the Eldorado Hotel Casino downtown with

a financier named Warren Trepp. Trepp had been head trader at Drexel Burnham Lambert in the 1980s, when it was led

by junk-bond fraudster Michael Milken. During thattime Trepp was a big spender, riding around in his white

Rolls-RoyceCorniche. He sat at Milken's right hand and eventually earned $25 million a year. In a 1997 SEC decision,

an administrative law judge described Trepp's "violations" as "egregious, recurring and intentional." But the case

against Trepp was dismissed, and by the time he met Montgomery, he was legally in the clear.

Montgomery convinced Trepp he had invented a remarkable technology. He could compress data, he said, a whole

movie to just a fraction of the space it took up on a drive. He impressed his patron with his demonstration, using

software to highlight images from the 1939 film Gunga Din. It was enough for them to launch their operation.

Montgomery contributed his technological breakthrough, and Trepp invested $1.3million to start. Montgomery soon

hired Sloan Venables, a video-gamedesigner, as one of his first employees. Venables had helped design the Ted Nugent

Wild Hunting Adventure video game. From the beginning,Venables realized things were odd and doubted Montgomery

knew much about software programming. One day at a Chinese restaurant at the same Eldorado Hotel Casino,

Montgomery told him about the time he'd beenabducted by a UFO. "He told me about his encounter with aliens,"

Venables says. "He went to his uncle's or grandfather's or great uncle'sbarn in the middle of the night, and a spaceship

descended on him. They wanted him to go with them, and he was abducted. Then he came back with extra knowledge."

Venables started laughing at the story, he says.

Montgomery was prone to temper tantrums, according to Venables. Once he hurled a steak at a waitress. As

volatile as he was at times, Venables says, he was at other times warm and confiding. When Venablesthreatened to quit

after Montgomery threw a can of grape soda at him, Montgomery took Venables's dying mother to dinner. Every Friday

he would take all his employees skeet and trapshooting at a desert range.

Venables brought in a childhood friend to work at eTreppid. Jim Bauder, who was in his 20s, was soon working on

the video games eTreppid was trying to design. Bauder and Venables say Montgomery ran the place, and they saw little






of Trepp but were aware of his background. They also say they saw Milken at eTreppid. "I saw him come in once, and

he had this entourage of five or six people with him," says Bauder."They came walking down the hallway, and he

looked at me and smiled,introduced himself and then went on down the hall."

ETreppid landed its first big contract from General Electric in 2002 for use of its video compression technology in

gaming surveillance. The company eventually got a contract with the Air Force dealing with aspects of video shot byunmanned Predator drones. Montgomery claimed his software could automatically recognize weapons and faces. In

2004 the U.S. Special Operations Command gave eTreppid a $30 million no-bid contract for "compression" and

"automatic target recognition."Venables and Bauder acknowledge they can't be certain that no "anomaly detection" or

"pattern recognition" software existed, but they doubt it did. In fact, eTreppid workers later told the FBI they thought

Montgomery had developed little if any original software.

Montgomery and eTreppid did, over time, receive five patents for various inventions and theoretical methods

related to video and data. These included a "method and apparatus for storing digital video content provided from a

plurality of cameras" and a "method and apparatusfor detecting and reacting to occurrence of an event." But

Montgomery said these patents had nothing to do with his government work, and they never seemed to lead to business

or profit.

FBI reports indicate Montgomery rigged tests to make government officials think his software could detect

weapons in video streams. Apparently it was all part of Montgomery's claim to have developed "automatic target

recognition" software. Imagine how useful it would be ifa computer could pick out AK-47s in enemy hands. That's how

eTreppidgot at least one contract. One former employee told agents he helpedfake as many as 40 demonstrations.

Bauder says he helped once, unwittingly. He told his story to the FBI, and he told it to me. In his demonstrations

Montgomery often used a plastic toy bazooka that he said a computer could recognize as a weapon. He would do the

demonstration in scrubland behind eTreppid's offices. "Some military guys were walking around the office," says

Bauder. Montgomery suddenly came to him, he says, "and takes me back tohis office. He closes the door and closes the

blinds and was like, 'Need you to do something for me. Don't worry; we are just doing a demo. It's all good.'" Bauder

was concerned about the secrecy. "I was like, 'But what's with the doors and blinds?'" Montgomery looked up at Bauder

and told him it was okay. They would communicate via an open cell phone line. He told Bauder to listen to the phone.

'"When you hear the tone, I want you to hit the space bar on the keyboard.'" Bauder, in other words, would be secretlycommunicating with Montgomery while the military guys watched the supposed software demo on another computer.

Montgomery ran off to do his demonstration outside. Bauder watchedthe computer screen, seeing what the camera

saw. Montgomery held thetoy bazooka in one hand while his other hand was hidden. When Bauderheard the tone, he

says, "I hit the space bar. A little square encircled his image through the camera on the screen. He was running around

with the fake plastic bazooka." Bauder figured Montgomery had rigged the computer screen so it seemed as if the

square was tracking the bazooka. In reality, the square was brought up on the screen when Bauder hit the space bar.

ETreppid needed security clearances to get classified contracts. In 2004 Venables was selected as the firm's

facilities security officer. He flew to Baltimore for Department of Defense training. It was anarduous process, with the

Defense Security Service probing everyone's background.

Montgomery received an "interim secret" clearance in May 2003, according to records later released in a federal

case. In February 2004 he got a top-secret clearance from the Defense Industrial Security Clearance Office. At

eTreppid, Montgomery appears to have taken a curious approach to secrecy. Venables and Bauder say Montgomery had

his own way of classifying items at the company. "He had rolls of classified stickers," Bauder says, "and he would just

put them on random garbage."

The CIA was an eTreppid customer, as was SOCOM and the Air Force. Soon the Navy started coming by.

Montgomery said he had another "filter" to identify underwater submarines by scanning a giant satellite photo of the






ocean. Although Montgomery claimed he was using his software, Bauder and Venables say he appeared to be doing it

by eye.

The pattern recognition, anomaly detection and compression work were nice, but it was the Al Jazeera stuff--the

"noise filtering"--thathad cash potential. Even though the CIA had abandoned Montgomery in 2004 after determining

the bar codes didn't exist, he and eTreppid continued to try to sell it.

Trepp later told a judge in a federal lawsuit that he'd asked the government for $100 million. Montgomery has also

cited that figure insworn declarations--though he also claimed Trepp wanted $500 millionfor the "decoding

technology." He would tell his lawyers and investors that the money was "appropriated" as part of the "black budget."

ETreppid did have powerful friends and lobbyists on Capitol Hill. It had strong connections on the House Permanent

Select Committee on Intelligence. The local congressional representative, Republican Jim Gibbons--soon to be

governor of Nevada--was on the committee. But by late2005 things were falling apart between Montgomery and Trepp.

There were indications Montgomery was losing big at the blackjack tables. According to an FBI investigation, he

borrowed $275,000 from Trepp "to pay down casino and other debts." Trepp told FBI agents he'd made himsign a note

that he'd pay it back--Trepp had loaned him more than $1.3 million over the years.

One eTreppid employee told the FBI that she notified Trepp about the faked bazooka tests. Evidently Trepp hadn'tknown. She informed Trepp she didn't think Montgomery had written "any significant software" for the company.

Trepp heard from others that Montgomery didn't have the technical skills he claimed to have.

For his part, Montgomery was grumbling. Trepp had not adequately shared the tens of millions in government

funds he had made. "Warren is screwing me out of the money," Montgomery said to Venables. In January 2006

Montgomery left eTreppid. He asked Bauder to help load his big Chevy twin-cab truck on a Saturday. When he left,

according to eTreppid, the company's software had been deleted and the source code wiped out. Even the surveillance

videotapes were blank. If eTreppid wasa store, its inventory was gone. It couldn't do government contracts, video games

or compression.

Trepp believed he had backup. After all, Montgomery had assured him he'd give him daily backups of his material.

So Trepp went to his outside safe where he kept whatever Montgomery had given him. He gave the material to his

security officer, Sloan Venables. Venables says the entire backup for the multimillion-dollar eTreppid operationconsisted of three CDs and two hard drives. Venables looked at the disks and drives and turned back to Trepp. '"In

seven years, that's all? Three CDs and two hard drives?' I said, 'Don't you think that's weird?'"

Venables ran the supposed backup files through his computer. "There was nothing on them," he says. "There were a

couple of zip files, and the hard drives had some source codes for an interface." It wasn'tanything that could run as a

program.

Trepp called the FBI. Not only was the company software gone and its tapes erased, but, he told them, classified

tapes were missing. InJanuary 2006 the U.S. government suspended Montgomery's security clearance. (Montgomery,

however, later stated he was unaware his clearance had been suspended.)

Montgomery's phone rang on February 16. The voice on the other endwas someone he trusted: Paul Haraldsen, an

agent of the Air Force Office of Special Investigations. For years Haraldsen had reassured himthe government was stillinterested in the Al Jazeera intercepts. "Hey, Dennis--Paul, how are you?" What Montgomery didn't know was that

Haraldsen was working with the FBI on the investigation and was recording the call. Montgomery railed against Trepp

and bragged about his bizarre intelligence work. "I did something very good for this country," he said. Montgomery

boasted that even if the CIA didn't believe in him, the work he did was "100 percent accurate--more accurate than

people will ever know." (The agency's name is blacked out in the court transcript, but it is clear what he means.)

Haraldsen apparently tried to lure him in. Money might be available, he said. "You know, we had money loaded in a

pipeline," Haraldsen said to Montgomery. He could go back to his bosses in Washington and let them know whether to






home was near the gambling tables at the Agua Caliente Casino, where he lost $422,000 in one day.

Blxware, the company through which Blixseth was doing business, had lofty connections. With the aid of Nevada

senator Harry Reid's office, Montgomery's technology found its way to the Senate Intelligence Committee staff. This is

no routine achievement: The committee staff,operating in a special office of the Dirksen Senate building, constitutes an

elite sector in Washington. Normal lobbyists cannot walk in to see staffers because their offices are protected, withspecial access and guards. When intel staffers talk, the intelligence community listens because they hold the reins--they

control oversight.

Montgomery claimed he was reading secret messages about three Americans who had been grabbed in the Sunni

triangle. Signals were comingout "related to the recent hostage-taking of our three soldiers," Montgomery told the

staffers. He warned them that something was up. Thestaffers didn't know what to make of it.

In 2007 things were looking up for Montgomery. He finally got someinterest, this time from an agency he couldn't

name in public. Reading between the lines, one can presume it was the National Security Agency. But then

Montgomery had a strange reaction. He had just "purged" the software, he said, and it would take time to redo it. He

wanted$4 million from the U.S. government to get started.

The FBI investigation of Montgomery went nowhere. First, his new lawyer challenged the FBI searches, and the

judge found in his favor. Then Montgomery went on the offensive, accusing his accuser. He went public with

allegations that Trepp had committed bribery by paying off Nevada congressman Jim Gibbons. NBC News did an

exclusive interviewwith Montgomery at Blixseth's house. He was dressed in a suit and tie and said he saw the bribe take

place. He claimed Trepp had given Gibbons "casino chips and cash" worth about $100,000. Montgomery backedthis up

with e-mails he said he'd taken off the eTreppid server. Trepp and Gibbons found themselves under a grand jury's

scrutiny. They, not Montgomery, were targeted. But Montgomery's allegations fell apart after a forensic expert for

eTreppid alleged in court papers that one crucial e-mail had been doctored. The Department of Justice later dropped the

case, and Gibbons was cleared.

By 2008 things seemed to have resolved themselves in the epic litigation between Montgomery and his old

moneyman Warren Trepp. There was a glitch at first: Montgomery was supposed to produce a key CD withthe

breakthrough software he claimed he'd invented, the very heart of this case. But he couldn't find the disk, he said, and heclaimed he couldn't re-create the lost and precious secret. He lashed out at the FBI in a court document. It was the

agents who had ruined everything anyway, he said. The FBI had "damaged and in some cases destroyed"his property.

That backfired, but the parties all seemed to come to a temporary agreement. By the fall, Montgomery settled his

long-standing suit with Warren Trepp. Terms weren't released at the time, but Trepp let Montgomery and his new

financier, Edra Blixseth, keep the "software." Court records indicate Montgomery and Blixseth would now owe $26.5

million to Trepp.

One can only assume it hit Montgomery hard: Four days after the settlement he spent his day at Caesars Palace on

the Las Vegas Strip. He was a blackjack player by preference, according to all accounts, and so he presumably sat at the

high roller's blackjack tables on September 27. He was, in the parlance of the gambling hall, a "whale." He took out his

checkbook and tore out check after check, making them out to Caesars Palace Hotel and Casino, and buying cash and

chips. The first check was for $10,000, then $100,000 and on and on. That's blackjack for you. In fact, Montgomery

bought a cool million dollars' worth from the casino that day. Caesars won't comment on individual players, but

prosecutors say Montgomery's checks later bounced. (In October 2009 Montgomery came up with $250,000 in

restitution, which kept him from being prosecuted.)

But Montgomery and the U.S. government were apparently still working together. The CIA had discredited the

embarrassing Al Jazeera technology, but it was all still secret, still classified. Few people even in the government knew

about the old scandal. Montgomery and his patron somehow found a new federal buyer willing to hand over taxpayer






funds. In this case it was $3 million for "research, development, test and evaluation." It was written in the dense

language of federal procurement law and revived all the terms Montgomery had bandied about.The contract was so

heavily redacted that even the name of the Air Force office is blacked out. I read through a version of the document,and

at the end I found the nondisclosure agreement. "This agreement is entered into between the United States Air Force and

Dennis Montgomery." He signed it January 29, 2009.

Montgomery did not cooperate with this story, but I managed to reach the Air Force program manager, Joseph

Liberatore. "How do I want to say this?" he said. "We were testing some of the software. We were just looking at it to

see if there was anything there. If there is anything there we wanted to make sure there was due diligence and it was

looked at by the U.S. government."

I asked the Air Force how this could have happened. The chief of the Air Force press desk, Andrew Bourland, said

Blxware represented its software as "innovative and transformational." But the results of the evaluation were

"inconclusive" and discussions were over. The first taxpayer transfer to Edra Blixseth's company was a $2 million

payment on February 5, 2009. That same month, Blxware paid Dennis Montgomery $600,000.

In June, four months after collecting all that money, Montgomery and his wife declared personal bankruptcy. One

of his assets, he claimed, was the $10 million value of his "copyrights"--all that software.His bankruptcy lawyer tells methe technology Montgomery claimed to have invented is an asset in the bankruptcy proceedings. "It'll be between the

government authorities and Dennis," he says.

So in the end, was there ever any software designed by Montgomery?Sloan Venables and Jim Bauder say they

doubt it. They shrug and laugh. "I never saw it," says Venables. But if it's all bogus, why is it still classified? And if

Montgomery's claims have any truth, why can't anyone else find what he found? Did that $100 million

appropriationever exist? And who will Dennis Montgomery reach out to with his next scheme?

"The aliens who stripped you naked--did they say which planet theywere from?"

"Ours was okay. How did your office holiday party go?"

"It's been done."

LOAD-DATE: February 20, 2010






EXHIBIT 12




An Obama administration official does not dispute that Brennan

distributed the intelligence during the Bush era but said Brennan

passed it along because that was his job.

Brennan’s role has never been previously disclosed, though it has

previously been reported that the bogus CIA intelligence was

generated by a computer software contractor based in Nevada. The

contracting company claimed to intercept al-Qaida targeting

information encrypted in the broadcasts of TV news network Al

Jazeera. In reality, experts later said, the broadcasts contained no

such information.

At the CIA, the information was controversial from the beginning,

and many agency officials said at the time that it should not have

been distributed. Jose Rodriguez, who was directing the CIA’s

Counterterrorism Center, said the CTC viewed the intelligence as

“crazy.”

“We were very skeptical,” Rodriguez recalled.

Other former CIA officials said the information was confirmed as

fake within months. It eventually became the intelligence

community’s version of a scandal: unknown to outsiders, but an

embarrassment at the CIA.

Yet the Bush administration used the intelligence to justify the

December 2003 orange alert and the cancellation of dozens of

international flights. Rodriguez and another former CIA official said

that the reason the intelligence had impact was that Brennan

pushed it all the way to the White House.

“It was briefed by John. He was the guy who was bringing it there,”

said Rodriguez, who added that he believes Brennan was trying to

build up his own profile. “My own view is he saw this, he took this,

as a way to have relevance, to take something important to the

White House.”

Rodriguez is a controversial figure in his own right. After he became

the director of the CIA’s National Clandestine Service, he drew

criticism for destroying tapes of a CIA interrogation site. This year,

he published a book called “Hard Measures: How Aggressive CIA

Actions After 9/11 Saved American Lives,” which defends the CIA’s

“enhanced interrogation” program and criticizes the Obama

administration for killing but rarely capturing terrorists.

He did not mention Brennan or the bogus intelligence in that book.

But he says the incident was a major problem.

“Brennan was a major factor in keeping it al ive,” he says. “We

thought it was ridiculous.”

Another former CIA official, who asked that his name not be

revealed, agreed that without Brennan, the intelligence wouldn’t

have had wide distribution.

“It was Brennan who decided to take this to the White House,” he

said. “We heard that Brennan took it upon himself to bring it to the

White House.”

Page 2 of 4Obama’s Counterterror Czar Gave Bogus Intel to Bush White House | Defe...

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EXHIBIT 14




EXHIBIT 15




EXHIBIT 16




EXHIBIT 17




− 1 −

Michael J. Flynn, Admitted Pro Hac Vice One Central Plaza, Suite 240Boston, MA 02108Telephone: 858-775-7624Facsimile: 858-759-0711

Email: [email protected]

Attorney for Timothy Blixseth

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF MONTANA

In re: ) Case No. 08-61570-11)

Yellowstone Mountain Club, LLC, )

et al., ))

Debtors. ) _________________________________________________________________

AFFIDAVIT OF MICHAEL J. FLYNN__________________________________________________________________

I, Michael J. Flynn depose and state that I have personal knowledge of the facts

contained in this affidavit, unless stated to be based upon information and belief. Where facts

are stated to be based on information and belief, I believe them to be true and accurate to the best

of my knowledge.

1. I am an attorney licensed in Massachusetts appearing in this matter pro hac vice on

behalf of Timothy Blixseth.

2. Attached hereto as Exhibit 1 is a true and correct copy of a financial statement of

Edra Blixseth dated August 15, 2008, two days after CIP Yellowstone Lending, LLC, (“CIP

YC”) loaned Edra Blixseth $35 Million Dollars (“the Predatory Loan”) on August 13, 2008

represented by two 48 day promissory notes secured by “Community” assets she received from

09-00014-RBK Doc#: 473-1 Filed: 01/16/10 Entered: 01/16/10 12:48:30 Page 1 of 28Case 1:15-cv-20782-JEM Document 203-17 Entered on FLSD Docket 12/14/2015 Page 2 of 29



− 2 −

the Blixseth Marital Settlement Agreement (“MSA”) on August 13, 2008. The secured

Community assets are “Porcupine Creek,” (“PC”), and the “Family Compound” at the

Yellowstone Club, (“YC”). I first received Exhibit 1 from Gary Peters shortly before the

commencement of phase 1 of the AP 14 trial. I am informed and believe that this document

was subsequently recovered from the Edra Blixseth computers in the possession of Jory Russell,

(hereinafter the “Russell computers”). On said financial statement, Edra Blixseth (“EB”) records

the “current market value” of PC to be $207 M; the “Family Compound” at $40 M; Farcheville

at $63 M; and the YC to be $500 M, for a total of $ 810 M. EB states that except for the

“Family Compound” these assets are owned by “BGI.” EB states her “Net Worth”, based on her

sole ownership of BGI, on Exhibit 1 as $849.5 M, and her projected “net cash flow” for 12

months at $40. 4 M, derived from PC, YC, “Big Springs Realty”, “Blixware” and BFI”

revenues. As hereinafter recited, I believe that Exhibit 1 may be based, in part, both on the

“control” exercised by SB and his entities based on the “Predatory Loan; and the “lending

advisory control” exercised by SB in the planning and implementation of the Predatory Loan.

3. Attached hereto as Exhibit 2 is a true and correct copy of a “Post -Settlement”

financial statement dated July 15, 2008. I am informed and believe that Exhibit 2 was recovered

from the Russell computers and that the “Post-Settlement” reference relates to EB’s financial

status after the scheduled closing on the MSA based on the division of marital Community assets

based on the executed MSA on June 26, 2008, which closing was originally scheduled for July

3. 2008; and which closed on August 13, 2008. I am informed and believe based upon emails

recovered from the Russell computers that Exhibit 2 or a similar financial statement was given to

Samuel Byrne (“SB”), and or Cross Harbor Capital Partners, (“CHC”), and / or CIP YC, before,




− 3 −

on, or after July 15, 2008. I believe based on recovered documents from the Russell computers,

and inferences derived from said documents that there are deleted or destroyed documents from

the Russell computers that may be in the possession of SB or his entities, CIP YC and CHC; and

that said deleted documents may relate to Exhibit 2, or a similar version thereof, as part of the

“Deal” between EB and SB to use the $35 M Predatory Loan to plan, implement and transfer

“control” of the YC to SB and CHC. Exhibit 2 states an EB “Net Worth” of $1.3 B based on a

YC value of $900 M. I believe that the $900 M “Post- Settlement” value on the YC may be

based on the “Total Net Value” Credit Suisse appraisal method, previously condemned by the

court in its “Interim Order.”

4. Attached as Exhibit 3 is a “Discussion” Memo between “Edra/YC Entities and

Cross Harbor Capital Partners” dated August 1, 2008, approximately two weeks before the MSA

and Predatory Loan closing. Exhibit 3 states on p. 3 that CHC has “RECEIVED” “All divorce

settlement related documents”; required “Detailed, updated financial statements for EB” (the

inference is that EB had previously provided financial statements and “updates” were needed);

required “All underwriting materials provided to PEM, Archer and other “Potential Sources of

Capital” establishing that CHC required complete and thorough knowledge and possession of

“All” documents relating to EB’s financial status based on her submissions to other lenders -

(the inference, coupled with several emails, is that Exhibit 2 had been submitted to other lenders

and was also possessed by CHC before the closing). Significantly, CHC required “full

recognition of its existing rights through the execution of the previously agreed upon Letter

Agreement.” I am informed and believe that said “Letter Agreement” has not been recovered




− 4 −

from the Russell computers and remains concealed or destroyed. Exhibit 3 states on p. 4 that

“CH Will control distributions of YC working capital.” This establishes SB “control” over

the YC as a component of the Predatory Loan. Exhibit 3 also establishes SB and his entities

assumption of a position as a “Lending Advisor” to EB as contained in numerous statements in

their “Discussion” including: (i) who, why, the amount, and how to “Secure additional financing

from Archer Capital Management ($55.1MM,net)” and how it gets paid; (ii) the sale of

Farcheville and to whom and how to distribute the proceeds and make “Additional EB

Investment directly into YC with the CH “estimates” to “cover current accounts payable” and

projected “operations through 10/31/2008"; and the planning of a “YC Preferred Equity Offering

and YC Governance” based on a detailed joint venture essentially controlled by SB and his

entities with detailed provisions subsequently contained in the “Agreement to Form.” Exhibit 3

states that based upon the SB and CHC analysis, planning, and implementation control

mechanisms, “early stage analysis indicates future net cash flow to EB of $600 + MM.”

The compelling inference, particularly based upon the last representations of CHC is that SB /

CHC were using their “insider” “Predatory Loan” position as of August 1, 2008 to take

complete control of YC with full knowledge of EB’s financial position, and representing a $600

M “net cash flow to EB” in order to obtain control. I am informed and believe that based upon

existing case law, and related facts inferred from existing emails and documents recovered from

the Russell computers, that documents remain concealed or destroyed relating to said

representations by CHC; and that SB and CHC made said representations, specifically the “$600

M net cash flow to EB”, based upon concealed and / or destroyed documents with knowledge

of EB’s financial status based upon her liabilities disclosed in Exhibits 1 and 2; and contained in




− 5 −

the “UNDERWRITING MATERIALS” referenced in Exhibit 3. I am further informed and

believe that most of the emails between CHC lawyers and EB lawyers have not been found on

the Russell computers. I am further informed and believed that based upon recovered

emails and documents the “Letter Agreement” referenced in Exhibit 3 was analyzed by

EB’s lawyers in the context of mutual releases between EB, the YC and CHC, Said emails

and releases have not been produced to Tim Blixseth.

5. Attached as Exhibit 4 is an email chain between EB”s consultant Jim Goldfarb, Jory

Russell and EB lawyers from the Liner law firm handling the “Predatory Loan” transaction,

stating that as of July 21, 2008, ten days before the creation of Exhibit 3, CHC was able to

exercise “control” over EB’s lending status with “PEM” through the CHC mortgage on the

Family Compound, which is not reflected on the July 15, 2008 financial statement prepared with

Goldfarb and Liner just six days before. The only lien listed is “LeMond.” According to Exhibit

1, after the closing on August 13, 2008, CHC owned a first mortgage ($13 M), LeMond a second

($13.5 M) and CHC a third ($22 M) for a total of $48.5 M on the Family Compound then valued

at $40 M. The inferences are that there exist emails between either the Liner lawyers and / or

Goldfarb on the one hand, and the SB lawyers on the other, during the period between June,

2007 - the date of the LOI to sell the YC to SB and the present, particularly in the summer of

2008, which emails have not been recovered - or produced before phase 1 of the trial.

6. Attached as Exhibit 5 is a internal “MEMORANDUM” dated September 5, 2008,

by and among SB and CHC principals and lawyers, circulated just weeks after the CHC

Predatory Loan, based on an analysis of the Credit Suisse “Predatory Loan, and inferring that

said analysis predated the CHC Predatory Loan, based upon other emails and documents.




− 6 −

Significantly, the “MEMORANDUM” is dated just 4 days after EB had already defaulted on

September 1, 2008 on an interest payment inserted into the Predatory Loan thereby causing an

almost contemporaneous event of “default” on the promissory note and deed of trust. Exhibit 5

contains graphs planning and implementing total control over the YC and EB based on her

already defaulted loan status; but more importantly its control is based on their pre-planned

“default" of YC under the Credit Suisse loan by making their Predatory Loan to transfer control

and ownership from Tim Blixseth to EB. Paragraph number 2 on page 3 of Exhibit 3 states:

Restrictions on Change of Control (Sections 5.19) That Section refers to the Credit Suisse

Predatory Loan requiring that BGI or Tim Blixseth “must at all times directly or indirectly

control” the YC; “and own, directly or indirectly, 51 %” of the YC , and then references a

proposed “Executive Committee” controlled by CHC as being a breach of the Credit Suisse loan.

Exhibit 5 then states: “Note that while the 51% ownership test will be met as to YC and YD,

this is not the case now with respect to Big Sky Ridge, LLC.” I believe that the effect of CHC’s

own analysis is an admission that CHC knew when it made its Predatory Loan to EB it was

creating a default on the Credit Suisse loan permitting it to put the YC into bankruptcy; and

CHC knew that EB’s financial status was such based on Exhibits 1-3 and subsequent Exhibits

herein that she would default as of September 1, 2008 thereby obtaining complete control over

the YC. Mr. Blixseth requires the production pursuant to his subpoena to CHC and SB of all

emails and documents relating to Exhibit 5.

7. Attached as Exhibit 6 is the loan closing document reflecting complete control by

CHC of the use of virtually all of the Predatory Loan proceeds.




− 7 −

8. Attached as Exhibit 7 is an email chain between EB, and SB and others, starting on

March 11, 2008, just two weeks before SB terminated the YC sale on March 26, 2008, and

while EB had her agent Gary Peters were negotiating with SB to make their own deal with SB.

EB writes: “Thanks so much for the follow-up. I will wait to hear from you what you come up

with both in regard to your (and group) interest in moving forward on something and/or

CrossHarbor/Sam.” The March 25, 2008 email between TB and SB references SB’s bankruptcy

plan. The Harris, Arenson, Kidd email dated October 15, 2008, a month before the YC

bankruptcy filing demonstrates CHC control with its agent, DLC, based on “DLC’s plan.” Two

days later, SB tells his agent, Joseph Harris that SB is “going to write the ‘plan tonight to solve

the entire YC debacle. It could be brilliant. Harris then says it is “possibly evil” and “it could be

worth over a billion dollars....I hope it includes the dip and filing by Friday.” There are no

emails and documents in which Byrne sent the “evil plan”. Just 4 days before said emails, on

October 21, Chris Wright, a present member of the ad hoc Committee, having votes on the

Liquidating Trust, emailed EB stating “But right now we aren’t even mentioning bankruptcy or

a DIP loan”. Upon information and belief, I believe said “not mentioning” refers to a plan

between CHC and SB not to disclose to the members the planned bankruptcy reflecting control

over all aspects of the planned filing by CHC; and the complete relinquishment by EB who

states: “thats a good point....i don’t care you all decide the when of this.” Based on this email

chain and other emails referencing emails that have been destroyed or concealed, including the

unproduced “Letter Agreement” referenced in Exhibit 3 hereto, I believe that both SB and CHC

are in possession of emails and documents relating to a separate deal between EB and SB and

CHC which occurred between March 11, 2008 and the CHC Predatory Loan. The compelling




− 8 −

inference is that EB gave up control and ultimately ownership to SB and CHC of over $700 M in

assets based on the values in Exhibit 1 of the YC and PC for a “Predatory Loan” of $35 Million

Dollars. In addition to the “$600M net cash flow to EB” representations made in Exhibit 3, the

compelling inference is that Samuel T. Byrne made undisclosed promises to “EB” for her to

forfeit over $650 Million Dollars of Blixseth marital Community assets.

9. Attached as Exhibits 8 through 11 are true copies of emails representing just a

sampling of numerous emails containing evidence that: (a) EB planned to falsely accuse Tim

Blixseth, and “hit him from all sides” and obtain “control of the YC in violation of Los Angeles

Superior Court Orders now merged into the final judgment of divorce; (b) EB and SB

misleading the B shareholders; (c) an email with an unrecovered attachment with EB stating

“never tell that I am sending you all this” as part of EB’s interference with Los Angeles Superior

Court orders now merged into the final judgment of divorce. To my knowledge we have not

recovered the missing attachment. These issues relating to “bad faith” collusion between EB and

SB are now on appeal.

10. Attached as Exhibit 12 is an email whereby Byrne and DLC are agreeing that EB

committed “perjury” before this court regarding issues relating to CHC and DLC control of the

YC. As seen above in Exhibits 1 - 3, SB and CHC did in fact obtain “control” over the YC

through the SB “Predatory Loan;” and thus, SB and DLC knew she was committing perjury in

order to have this Court approve their bankruptcy plan including the Liquidating Trust to sue

Tim Blixseth. SB’s knowledge of said post petition “perjury” by EB involves issues relating to

“bad faith” and exculpation, and Tim Blixseth’s rights to cross-claim against SB, CHC and

Credit Suisse, al of which issues are now on appeal.




− 9 −

11. Attached as exhibit 13 is an email EB sent to Gary Peters, “My Guy,” to negotiate

and make a separate deal with SB on March 21, 2008, five days before SB terminated the YC

sale, and in violation of Los Angeles Superior Court Orders and in contradiction of her sworn

testimony to said Court on that same date that she was not interfering with the sale. These issues

are now on appeal relating to SB exculpation and “bad faith.”

12. Attached as Exhibits 14 and 15 are two fabricated Grand Jury “Target Letters.”

Upon information and belief, these letters were fabricated by Dennis Montgomery acting in

collusion with his partner, EB; and used by EB with the media and SB after January 15, 2008,

the date the YC sales contract was signed. They were used by EB to interfere with and

ultimately to kill the YC sale in violation of Los Angeles Superior Court Orders, now merged

into the Final Judgment.

13. Upon information and belief, the following facts and events contained in the

following chronology are true. This chronology relates to the “Target Letters” and how they

were used to interfere with the YC sale by TB to SB. The chronology also relates to the EB and

Dennis Montgomery relationship and how that relationship impacts the current case issues,

including the computer hacking by Montgomery into Tim Blixseth’s and Michael Flynn’s

computers throughout these proceedings thereby interfering with the attorney client relationship

warranting dismissal of all of the claims against Tim Blixseth. This Court previously denied said

motion but new evidence is emerging relating to said computer hacking. Finally, the

chronology relates to the pattern of fraudulent loans procured by Edra Blixseth to finance a plan

to obtain control of the YC, including the fraudulent Wachovia loan as it relates to

Montgomery’s technology, now publicly exposed as involving a massive fraud on the U.S.




− 10 −

government. The fraudulent technology is owned by EB’s company, “Blxware.” The Blxware

valuation on EB’s financial statements is approximately $22 M. This is fraudulent. Based upon

personal knowledge, and information and belief, Blxware possesses no marketable technology,

the technology as represented does not exist, it was subject to an injunction when EB pledged it

to Wachovia; and Ms. Blixseth knew throughout the period in which she submitted loan

applications and financial statements to the various lenders that the purported Blxware

technology did not exist, and that Montgomery was engaged in computer hacking for her benefit

. EB paid Montgomery almost $6 Million dollars between April, 2006 and February, 2009 for

non-existent technology, which raises the inference that it was paid to perform computer

hacking.

March 1, 2006: The FBI raided Dennis Montgomery’s house searching for certain “noise

filtering” and “compression” software and hard drives he took from

eTreppid Technologies, and alleged classified information, involved in

then pending litigation in Reno, NV. Later, in June, 2007, when

Montgomery was subpoenaed to produce certain “bribery emails” before

a Washington D.C Grand jury, which he claimed proved that Warren

Trepp bribed NV Governor Gibbons, Montgomery took the boxes of

software and hard drives to EB’s residence, Porcupine Creek. The

compelling inference is that Montgomery took approximately 23 boxes

filled with hard drives from eTreppid to conceal his fraud on the U.S.

government over the previous several years, because the hard drives may

have proved Montgomery’s lack of “source codes” with respect to




− 11 −

purported “noise filtering” technology; and may have contained evidence

as to how Montgomery perpetrated the fraud through hundreds of

“parallel” web-sites and email addresses he used as part of his computer

hacking scheme. These matters are now at issue in the Nevada litigation.

EB and Montgomery confessed $26.5 M in judgments to avoid, inter alia,

production of the stolen hard drives.

March - April, 2006: EB and Montgomery, and Michael Sandoval concluded a deal for

Montgomery to turn over the software to their new company, Opsprings -

now Blxware. Edra paid Montgomery approximately $3.8 M including a

$100K per month salary between April 1, 2006 and July 1, 2007; and

continued to pay him $100,000 per month until July, 2008 when they were

concealing the hard drives from the Nevada court. Then, in February,

2009 for non-existent technology and after years of computer hacking,

she made a final “pay-off” to Montgomery of $753,000. EB also paid

Sandoval, who allegedly knew, according to his chief scientist, that the

technology did not exist; and that Montgomery was a con, approximately

$20 Million dollars. Much of this money came from the Credit Suisse

loan. The evidence supports an inference that EB paid Montgomery to

hack into TB’s computers, which has interfered with TB’s ability to

defend this case because of their interception of attorney client

communications; and to try to perpetuate the fraud on the U.S.

Government.




− 12 −

April, 2006 -

September , 2006: EB attempted to get the U.S. Gov to buy the software using her purported

political contacts with Cheney and others in the Bush Administration in

order to obtain a government contract. EB isolated Tim Blixseth from the

deal. Cheney and the Bush Admin rejected EB and Montgomery. EB

then planned and implemented a media campaign against Gibbons and

the “Republicans” through her contacts at the Wall Street Journal and

NBC in order to “pressure” the Bush White House using Montgomery’s

fabrication of two purported “bribery emails” allegedly evidencing

Warren Trepp’s bribery of Gibbons to get government contracts. These

are the same media contacts, EB and Montgomery contacted when she

used the fake Grand Jury “Target Letters” to kill YC sale in March, 2008.

The FBI in DC later concluded (in 2009) that Montgomery fabricated the

emails and dropped the investigation of Gibbons and Trepp. EB

employed the law firm of Skadden Arps to deal with the “bribery email”

Grand Jury and the required production of the bribery emails. The same

law firm represented Credit Suisse in the Montana bankruptcy

proceedings

September -

December, 2006: Montgomery gave the bribery emails and other documents to EB’s

contacts at the Wall Street Journal (“WSJ”) and to Lisa Meyers of NBC.

EB had NBC video tape an interview of Montgomery at Porcupine Creek




− 13 −

in early November 2006, the weekend before the elections. The WSJ

published a front page article on Nov. 1, 2006 just before November

elections in which Gibbons was running for Nevada governor. The WSJ

later published two more articles based on the alleged bribery using

Montgomery documents. Said evidence supports EB’s use of the media to

get what she wants. In March - April, 2008 as supported by the emails

attached hereto, she used the media to attack Tim Blixseth resulting in

damages to the YC.

December, 2006: EB and Tim Blixseth (“TB”) separated and filed for divorce. TB

attempted to distance himself from EB’s involvement with Montgomery;

and later gave EB the software company, Blxware, as a marital

Community asset, in which the marital Community had invested

approximately 20 million dollars much of which EB received from the

Credit Suisse loan.

January -

April, 2007: TB negotiated and planned the sale of Yellowstone Club to Sam Byrne

and Cross Harbor Capitol. EB hired Deborah Klar and the Liner firm to

kill the sale and take over Blixseth Group, Inc., (“BGI”), the owner of the

Yellowstone Club, (“YC”). TB also planned the sale of Porcupine Creek

in order to achieve an equal division of Community assets and to pay off

the Credit Suisse loan and other debts.

April, 2007: EB learned TB had made a tentative deal with Sam Byrne (“SB”) to sell




− 14 −

Yellowstone Club. EB and Deborah Klar, a purported bankruptcy

expert, began planning to kill the sale by first filing a law suit to control

BGI. There is evidence in April, 2007 that Montgomery was hacking

into TB’s computers and giving information to EB and Klar.

May 1, 2007: Klar filed a Cal. Civil action and subsequently numerous motions to

effectively take control of BGI, the owner of YC and Porcupine Creek in

order to undermine TB’s negotiations with SB. The case was dismissed

and motions denied.

June, 15, 07 -

August 08: EB borrowed 13 M from Western Capitol Partners through the Story

Mills project. There is evidence of fraud. While representing to the

lender that she had a separate net worth of almost a billion dollars, and

could pay her debts as they matured, and had never filed bankruptcy, she

was filing sworn, sealed affidavits in the divorce proceedings that she

was millions of dollars in long overdue debt which she was unable to

pay. In fact, EB had previously filed bankruptcy; and her net worth was

based on the “total net value” appraisal method condemned by the

Montana bankruptcy court.

June 28, 2007: TB signed “Letter of Intent” to sell YC bulk assets to Sam Byrne / Cross

Harbor Capital for $470 -510 million dollars. SB began due diligence.

July 2007: EB through Klar and Jaffee filed motion to enjoin sale of YC claiming

inadequate price and lack of knowledge of sale. The inadequate price was




− 15 −

based on their sworn affidavits that the YC was appraised at 1.2 Billion.

This was based on the “Total Net Value” appraisal method. Klar admitted

dealing with LeMond’s counsel, who was then suing Tim Blixseth and the

YC. Klar knew LeMond’s interests were adverse to the marital

community.

August 14, 2007: EB / Klar’s motion to enjoin sale was denied by divorce court judge. EB

was ordered NOT to interfere with sale. There is evidence that EB and

Klar began a “scorched earth” litigation scheme seeking to have TB

investigated and indicted while cooperating with LeMond; and which

“scorched earth” scheme was also pursued in the Nevada eTreppid

litigation to conceal the hard drives and “crush” EB’s opponents,

including the affiant. See Nevada “Sanctions Order.” at 2009 U.S. Dist.

LEXIS 35543 (D. Nev. March 31, 2009).

August -

November, 2007: EB borrowed approximately $7 M from American Bank based on

questionable financial statements. (TB has not yet received the American

Bank loan documents which have been delivered to the counsel for the

Liquidating Trust.)

January 15, 2008: TB and SB signed $455 M contract for sale of YC. SB claimed to have

spent $4 plus M in due diligence.

Jan. 15, 2008-

March 21, 2008: During this time frame, SB informed Robert Sumpter that he knew about,




− 16 −

and /or had seen, and /or had possession of the fake Target Letters.

Sumpter called TB and told him of the SB conversation relative to the fake

target letters. TB immediately called SB and demanded an explanation and

source of the letters. SB initially refused to disclose, and upon being

pressed, stated that EB has read them over the phone to SB. SB told TB

that this was a big problem as he was obligated to advise his lenders which

could kill the deal. SB sought adjustments and reduction in price. SB

advanced plan to put the YC into bankruptcy.

March, 2008: EB borrowed $5 Mil from Wachovia Bank; and $8 Mil from First Bank &

Trust. The Wachovia loan documents evidence extensive and intentional

fraud including affirmative falsehoods about her involvement in litigation

adversely impacting her financial status. EB also directly concealed the

fact that the collateral she pledged for the loan was in fact subject to a

preliminary injunction in the concealed litigation. EB and her lawyers and

bookkeeper, Jory Russell used financial statements claiming an $800 M

“net worth” based on the “TNV” appraisal method while negotiating with

Byrne to put YC into bankruptcy.

March 21, 2008: EB sent Gary Peters to meet with SB in his Boston office to make a separate

deal while she appeared in divorce court on that very day testifying that she

was not interfering with the sale; and was again ordered not to interfere with

the sale.

March 26, 2008: SB terminated the YC. Sale. Two days later EB planned a massive media




− 17 −

campaign and attempted to intervene in the LeMond litigation to oust TB

as Manager of the YC.. They failed BUT YC equity was devastated from

the media campaign, as admitted by SB. There is evidence that EB

orchestrated the media campaign; and submitted false affidavits to the

Montana court to oust TB and obtain control of the YC.

June, 2008: EB borrowed $3 M more from Wachovia. There is extensive evidence of

fraud, including concealment of litigation in which the security pledged

for the loans was then subject to an injunction. EB rewrote loan with

Western Capitol including fraudulent concealment of litigation. EB

rewrote and increased by $2.5 M the loan with American Bank. There is

evidence of fraud.

March -

August 13, 2008: EB and SB negotiated, made and consummated deal to have SB / CHC

loan her $35 M to take over YC in divorce proceedings and transfer

control of YC to SB and CHC. According to Montgomery, EB and SB

made a secret deal for EB to receive $3 M per year for 10 years. In YC

bankruptcy, SB stated under oath that the loan to Edra on Porcupine

Creek and the LeMond payment was unrelated to the YC bankruptcy, “Its

got nothing to do with me” and “had nothing to do with us” See April 9,

2009 deposition pages 96-104 attached hereto as Exhibit 16. There is

evidence that this testimony is false. See Exhibit 3 hereto wherein CHC is

not only controlling EB and the YC through the “Predatory Loan”, it is




− 18 −

actually acting as her “Lending Advisor.” In other words, all of these

matters had EVERYTHING to do with Mr. Byrne

November, 2008: EB and SB put YC in to bankruptcy subject to SB’s “brilliant” plan to act

as the DIP.

March, 2009: EB filed personal bankruptcy having effectively transferred the bulk of her

assets to Mr. Byrne in one form or another..

June 24 - July 8, 2009: EB’s bookkeeper, Jory Russell was caught under oath destroying Edra’s

files on two computers. Later, some of the files are forensically

recovered and provide evidence of concealed or destroyed documents.

See below.

September -

October, 2009: Montgomery informed TB that he has evidence against EB including the

fake Target Letters, the concealment of documents, the concealment of a

server containing all the documents, (not yet produced) and the

concealment of the secret deal between EB and SB .

October, 2009: On verge of going to jail for writing 1.9 M in fraudulent checks in

Nevada, Montgomery gave TB the target letters. Montgomery claimed he

also has a Kinko’s fax cover sheet and / or copies of the letters with an

unredacted fax header from Kinko's in Boston relating to SB’s possession

of the letters. Within a day of getting the letters, TB and I contact and

send them to the DOJ, the FBI, and the U. S. Attorney’s office in

Washington D.C. and Montana.




− 19 −

December, 2009: TB located numerous web-sites and email addresses that “parallel” or

“mirror” sites and addresses of EB’s opponents . Montgomery tells TB

that he has the same type of “parallel” sites for TB and the affiant. On

investigation by a computer expert, who determined that the sites are

registered to a domain company called Network Solutions all registered to

an entity owned or controlled by Montgomery called “Off Shore Ltd.”

with Porcupine Creeks address. Some but not all of these sites are:

“Cross Harbor Capital.net”; “Tim Blixseth.com”. “JessicaBlixseth.com”

to name a few. Based on statements of Montgomery, and my prior

knowledge of Montgomery’s fraud on the U.S. Government, the evidence

suggests that Montgomery used these sites and addresses to hack into

computers and as part of their technology scam to sell fake technology to

the U.S. Government.

December, 2009 -

January, 2010: TB and his technology expert continue to recover deleted emails from the

Russell computers, including Exhibit 3 to this Affidavit.

THE RUSSELL COMPUTER SPOLIATION

14. On May 14, 2009, on the motion of Western Capital Partners, this Court ordered

the 2004 exam of Jory Russell, Edra Blixseth’s primary financial assistant. Pursuant to said

Order, Russell was ordered to produce electronic and paper documents including “complete

copies of computer hard drives and other electronic storage media” relating to Edra Blixseth as




− 20 −

“described in the Motion for Rule 2004 Examination.”

15. On June 13, 2004 Russell was served with a subpoena requiring his attendance on

June 23, 2009 for examination under oath; and the production of all documents, emails,

financial records and statements, bank records relating to Edra Blixseth; and specifically

including “complete copies of computer hard drives and other electronic storage media which

contain any and all accounting, email, and financial information” relating to Edra Blixseth in

Russell’s possession as described in the subpoena and in the Order incorporating the Motion.

16. Within a “day or two” after receiving the subpoena, Russell spoke to both Gary

Deschenes, Ms. Blixseth’s personal bankruptcy lawyer, and to Edra Blixseth. (Tr. 11.1.09, p.

30, L. 18-20. He informed them that he had received the subpoena, that he possessed documents

stored on computers responsive to the subpoena; and that “ I was printing off the documents.”

(Id p. 30 L. 11 to p. 33, L. 11). Russell testified that during the week before his attendance “I

would read the subpoena” and then print out responsive documents including emails. (Id p. 35 L.

8-15). He printed out about a “foot and a half” of responsive documents before he ran out of

paper. (Id. P. 36 L. 12-16). He had possession of two computers containing materials responsive

to the subpoena, a lap top and a desktop, but only printed from his desktop before the June 24,

2009 exam. (Id. P. 38 L. 8-12)

17. Mr. Deschenes did not file a motion to quash or for a protective order.

18. Mr. Deschenes did not represent Russell at any time in these matters. He represented

Edra Blixseth at all times material herein. Thus, at no time did his instructions to Russell as

recited herein fall within the attorney client privilege.

19. Russell first testified on June 24, 2009. That volume was designated Vol. 1 in the




− 21 −

Edra Blixseth bankruptcy proceedings. There are also two additional volumes of his testimony

in the Edra Blixseth bankruptcy dated July 8, 2009 and August 5, 2009; and designated Vol. II

through III. There is a fourth day of deposition taken on November 1, 2010 in AP 14. In this

Affidavit, each volume is designated by date. In the June 24, 2009 examination, as he later

admitted on July 8, 2008, neither he, nor Mr. Deschenes, nor Ms. Blixseth, disclosed his then

possession of either the lap top or the desk top, or the “foot and a half” of documents he had

printed out “from the desktop”, although he knew they were in his possession and responsive to

the Court’s Order. (Tr. 8.8.09, p. 13 L. 7 to p. 14, L. 16). He also knew there was a scheme in

place to conceal the computers and the responsive documents orchestrated by Mr. Deschenes.

Id. P. 13 - 30. See specifically Tr. 8.8.09 at p. 15, L. 21 to p. 18 L. 18 for the possession and

non-production of the subpoenaed documents. As hereinafter recited, Russell only produced

about 4" of documents from his wife’s computers which were virtually the entire subject of his

short 52 page deposition permeated with attorney client privilege assertions designed to conceal

the un-produced computers and documents.

20. On the night of June 23, 2009, in preparation for his deposition, Russell picked up

Mr. Deschenes at the airport and drove him to Ms. Blixseth’s estate, “Porcupine Creek.”

According to Russell, he informed Mr. Deschenes and Edra Blixseth that evening that he had in

his possession in the “trunk” of his car the lap top and a banker’s box with about a foot and a

half of documents that he had printed out during the previous week from his desktop. In his

July, 8 2009 testimony, he swore that there were different documents on his desktop and lap top

that were subject to the subpoena; that he only printed from his desktop; and the lap top and

desktop were not synched. Tr. 7.8.09, p. 23, L 14 - 22.




− 22 −

21. On the night of June 23, 2009, Mr. Deschenes then requested Russell to give them

the lap top and the printed documents because “I was told that was not my property.” Tr. 7.8.09,

p. 35 L. 3 -22. The desktop was still at his home; (Tr. 11.1.09, p. 51 L. 24-25; from which he

had printed about a “foot and a half” of documents that he knew were responsive but he gave to

Mr. Deschenes and Edra Blixseth the evening before his deposition on June 24th

; but now

wasn’t sure if the computers were synched; or who told him not to produce the documents and

computers, Mr. Deschenes or Ms. Blixseth. Tr. 11.1.09 p. 38 L. 8-15; p. 52, L. 4 to p. 54 L. 24.

22. Russell makes a series of remarkable admissions and contradictions in his

testimony between July 8 and November 1. He admits that he was at Porcupine Creek, one or

two days before Mr. Deschenes arrived printing off documents off Edra Blixseth’s printers that

were also not produced on June 24th, but were supposedly part of the “foot and a half.” Tr.

11.1.09 p. 55, L. 14-25. But in his November 1 testimony, he said that he had told Blixseth and

Deschenes on the night of June 23, 2009 before his deposition that the “stack of documents”

representing the “foot and a half” in the bankers box from his trunk were from the “lap top.”

Tr. 11.1.09, p. 54, L. 7 to P. 55 L. 13. In his three days of testimony after June 24, 2009, July 8,

August 5 and November 1, 2009, Russell gives conflicting testimony on what he destroyed and

when. On August 5, 2009, he testified that he destroyed “everything pertaining to Edra Blixseth”

on the desktop; and “I deleted copies of everything that were on Edra’s lap top—or — yeah,

Edra’s lap top, the lap top that I was using.” Tr. 8.5.09 280:10 to 282: 1.

23. The first mention of being accused of theft of the documents came up in Mr.

Deschenes’ presence. Tr. 11.1.09 , p. 56 L. 5-20. Russell testified he had no recollection of any

“plan” to shut down his deposition the following day being discussed but he remembers a “John




− 23 −

Roselli” showing up at his deposition to put his deposition “on hold.”. Tr. 11.1.08 p. 57, L. 14 to

p. 59 L. 5. The next day he deleted documents off his “desktop.” Tr. P. 59, L. 6-11. Mr. Russell

then asked for a break. Id at p. 61, L. 18.

24. Russell relied on Mr. Deschenes not to produce the documents or the computers

on June 24 at his deposition. Tr. 66 L. 3 to p. 67 L. 3. Neither Russell, nor EB, nor Mr.

Deschenes disclosed on June 24, 2009, that just a month before that, on May 19, 2009, five days

after the court order, EB’s business partner, Montgomery, delivered a “server” at Porcupine

Creek, called the “Blxware/Blixseth.com” and related domain names containing thousands of

emails, and with what Russell now claims contains “everything“ from both computers in his

possession. Tr. 11.1.09. That “server” has never been produced; and apparently, has

disappeared..

25. Russell also destroyed two USB hubs by throwing them in the “garbage”

containing “accounting software” provide by Pat Yarborough, EB’s bookkeeper, and also

documents responsive to the Western Capital subpoena that were on the lap top. Tr. 11.1.09 p.

70 L. 10 to p. 71, L. 13.

26. In his July 8th testimony, Russell admitted destroying documents off both the lap

top and desktop and that they were not synched. Tr. 7.8.9, p. 38, L. 11 to p. 39, L. 18.

27. He also stated that on the night of June 23, he then proceeded to print out more

documents from the lap top that evening while in the presence of Mr. Deschenes and Ms.

Blixseth, and after printing for some time, he stopped. At some time during this entire episode

of spoliation, he also put additional documents on a USB hub which he filled; and later threw in

the “garbage.”. Tr. 11.1.09 p.70, L. 10 top p. 81 L. 13. It is unknown what happened to the




− 25 −

The “other deal” is the Roselli charade. The compelling inference is that Mr. Deschenes knew

that the entire June 24th

charade with Roselli , and the 4" of documents produced after Russell

had produced everything the night before, was a cover for the violation of the subpoena and the

court order in order to give Blixseth and Russell time to destroy evidence, which he admittedly

did. The Western Capital lawyers heard Edra Blixseth state words to the effect that “Sam is ok

with the deal” inferring that Sam Byrne was the source of funding to buy out the Western

Capital note. Additionally, EB’s “partner”, Dennis Montgomery, apparently then in conflict

with EB, on June 25, 2009, the day after the deposition, called Tim Blixseth and told him that

the Roselli intrusion into the deposition was a “charade” to destroy evidence off the computers,

which Mr. Blixseth immediately reported to her trustee, Mr. Samson. Montgomery also texted

TB during that time frame that they engaged in the foregoing conduct so they could buy time to

erase emails. Without this tip from Montgomery, it is unlikely that the concealment of the

computers and subsequent destruction would have been uncovered.

30. The evidence suggests that the Rosselli / Byrne charade of buying off Western

Capital Partners was a scheme to buy time to conceal and destroy evidence. According to

Russell in a conversation with the affiant, and according to Montgomery in a conversation with

TB, Byrne’s Vice-president, Matthew Kidd was present at Porcupine Creek throughout the June

24, 2009 deposition and subsequent meetings. The inference and circumstantial evidence is that

there was no real intention to pay Western Capital Partners. Following the suspension of the

deposition, Russell admittedly spent the next day destroying documents on his desktop and

his lap top. (Tr. 7.8.08 p. 23 L. 14 - p. 24 L. 12; Tr. 8.5.09, supra). Contrary to his testimony on

November 1, 2009 that he only printed from his desktop, (see above), on July 8, 2009 he had




− 26 −

testified that he printed from his lap top. (Id p. 25 L. 4-24)

31. Beginning on at least June 18, and continuing on June 22, and 23, 2009, at least

three days after informing Mr. Deschenes and Ms. Blixseth of what he was doing to respond to

the subpoena, Russell may have also began deleting, concealing or destroying electronically

stored files.

32. Between the date of the Court’s Order on May 14, 2009 and June 24, 2009, Russell

had possession, custody and control of at least the lap top computer and the desktop computer

containing hundreds of thousands of electronically stored documents relating to Edra Blixseth

and required to be produced pursuant to the subpoena. Neither he, nor Mr. Deschenes, nor

Ms. Blixseth complied with the court’s order or the subpoena. At the time he only took

advice from Mr. Deschenes. And Ms. Blixseth.

33. According to his testimony, Mr. Russell was the “Vice President of Business

Development” for Ms. Blixseth’s software company, “Blxware,” and the “Director of Business

Operations” for Edra Blixseth personally, who “took direction from Edra Blixseth on all

matters.” (Tr. 11.1.09 p.25 L3-4). Russell had not worked for Ms. Blixseth for about “3 or 4

months” before the deposition; but he still possessed the lap top computer and the desk top

computer containing materials sought in the subpoena. (Id p.32 L. 3-20).

34. . Russell’s testimony as to who owned, and /or had the right to possess the lap top

computer as of June 24, 2009, and the instructions he received from Mr. Deschenes and Ms.

Blixseth on these issues evidences concealment, destruction and obstruction; ( Id 37-57).

35 . The Russell testimony is very specific that one or both of them told him not to

produce either the foot and a half of documents or the lap top for his deposition the following




− 27 −

day; (Id. 52 L. 9-25) ; and that the “documents” (Id 56 L. 9-12) “was [sic] no longer my

property and I shouldn’t have it.” (Id. L. 19-21). Gary Deschenes specifically told him that the

lap top was not Russell’s property the night before he was obligated by Court order to produce

“copies” of its hard drive. Mr. Deschenes knew that the Order to produce “copies” made both

the actual ownership and possession of the lap top irrelevant because “copies” were required,

and regardless of who had the right to possess the laptop - Ms. Blixseth or Russell, he obstructed

the discovery process. The fact that the destruction of material on the computers occurred the

next day nails the coffin shut on their collective intent.

36. Neither the desktop or lap top computers belonged to Ms. Blixseth. They

belonged to YCW and Blxware. No objection or motions to quash were filed by either entity.

Russell was properly in possession of both. They each contained material required to be

produced. . Russell printed out the entire foot and a half from the desktop which did not belong

to Ms. Blixseth. Russell’s conflicting testimony as to what computers from which he printed

unproduced documents evidences concealment and mens rea. Mr. Deschenes did not represent

either Blxware or YCW.

37. Prior to the night of June 23, 2009, neither Ms. Blixseth, nor Mr. Deschenes, nor

Blxware, nor YCW , or its Trustee, or anyone representing EB, had requested the turnover of the

computers, or any documents relating to Edra Blixseth, notwithstanding Russell’s direct, routine

and consistent assistance for the previous nine months in assisting Blixseth and her lawyers in

finding documents and providing them to her lawyers, including Mr. Deschenes, and also to Mr.

Byrne and his lawyers and to the lawyers in the YC bankruptcy. (Exhibits to Russell deposition

and emails sought to be destroyed by Russell which have been forensically retrieved from the lap




− 28 −

top and desktop will be produced at an evidentiary hearing.)

38. Given M. Blixseth’s critical role with Samuel Byrne in obtaining ownership of the

Yellowstone Club in the Blixseth divorce, and the subsequent control over the YC bankruptcy

proceedings by both Mr. Byrne and Ms. Blixseth through the $35 Million dollar Porcupine

Creek loan, as recently admitted by Mr. Byrne - but previously the subject of contradictory

testimony by Mr. Byrne, as herein recited, the aforesaid evidence relating to the concealment of

evidence before July 17, 2009, in and of itself should support a finding of bad faith in the YC

bankruptcy proceedings, prior to plan confirmation on July 17, 2009.

Signed under the pains and penalties of perjury this 13th day of January, 2010 under the

laws of the United States.

_____/S/ Michael J. Flynn_____________

Michael J. Flynn




EXHIBIT 18




1

Patrick T. Fox (#8071)DOUBEK & PYFER LLPPO Box 236Helena MT 59624406 442 7830 ph

406 442 7839 fax [email protected]

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF MONTANA

I, Timothy L. Blixseth, declare under penalty of perjury of the laws of the United States follows:

1.

I am a resident of the State of Washington.

2. I have personal knowledge of the facts testified to herein.

3. I make this affidavit to supplement the affidavit I have previously filed in support

of the Motion to Disqualify Judge Ralph Kirscher.

4. After reviewing the recent deposit

partner, Dennis Montgomery, who is out on bail for $2 million in check fraud and was referred

to the U.S. Attorney for perjury, and recently discovered emails forensically recovered from the

Jory Russell computers, I am certain that Montgomery and Edra Blixseth have engaged in an

extensive scheme to defraud the U.S. Government, other Governments, and Banks, and private

lenders;

YELLOWSTONE MOUNTAIN CLUB, LLC,

et al.,

Debtors.

Chapter 11

Case No. 08-61570

Also applicable to Adv. Case No. 09-64, 09-18, 09-14, 10-15, 10-88

SUPPLEMENTAL AFFIDAVIT OF

TIMOTHY L. BLIXSETH




3

procee

which has stopped Ms. Blixseth

Mr. Byrne - and others - in the bad faith filing of these bankruptcy matters. The Montana

bankruptcy proceedings have been used by them to effectively steal over $700 million of

Blixseth Marital Community assets divided up during the divorce proceedings, then seek

recovery from me of other Community assets and blame me for their blatant frauds.

Collectively, the evidence supports actual bias resulting in bankruptcy proceedings where the

appearance of impartiality is completely lost.

6.

In December, 2006, I separated from Edra Blixseth and she filed for divorce.

Before our separation, Edra Blixseth became involved with Dennis Montgomery and Michael

Sandoval in what is now a demonstrably fraudulent scheme to defraud the United States

government and its taxpayers. This scheme has continued from at least April, 2006 to the

present. In addition to her attempts, and actual frauds on our government, she also attempted to

defraud the governments of Bahrain and Israel, as well as private investors. Conclusive evidence

of this fraud is contained within the recent deposition of Dennis Montgomery taken on Nov. 18,

2010 and the exhibits attached thereto, as well as recently discovered documents and emails from

the Russell computers and third parties. See Exhibit 68 to Supplemental List of Exhibit.

Additionally, there are numerous emails contained on the Jory Russell and Edra Blixseth

computers evidencing this fraud all available to Mr. Samson and Mr. Cotner BEFORE the

October 12, 2010 hearing hereinafter discussed. The essence of the fraud is contained within the

draft complaint against the Sandoval parties (explained in detail together with the Nevada

litigation and U.S. Protective Order in February, 2010 to Mr. Cotner), and then the complaint

was given to Richard Samson, and his lawyer, David Cotner on February 1, 2010. See Exhibit




4

65 to List of Exhibits [filed under seal] Docket No. 2115-2. They both knew or had access to

extensive documentary evidence of both the technology fraud and the Bank fraud specifically

Wachovia Bank fraud involving the technology pledged as collateral long before the Sandoval

complaint was given to them. They had possession of the Russell and Blixseth computers and

had duties as Trustee of the Estate, and under Rule 11 to investigate these matters. The fraud

filte which was pledged

to Wachovia Bank in March, 2008 in violation of a Federal preliminary injunction which was

attended by Mr. Cotner . The technology

does not exist, yet has been used repeatedly by Edra Blixseth and Montgomery to commit

financial frauds including the $8 million fraud on Wachovia Bank. See Deposition of Edra

Blixseth, December, 17, 2009, attended by Mr. Cotner, particularly at page 124-135 at Docket

No. 486-8, Case No. 09-14. This Court had possession of this deposition as of January 22, 2010

when it was filed in support of the -14. See

Docket No. 486-8, Case No. 09-14.

7.

Documentary evidence of some of these financial frauds involving the fraudulent

technology, including the Wachovia fraud, is contained within the Edra Blixseth deposition

transcript. The exhibits attached thereto were available to Mr. Cotner, including the Wachovia

loan fraud documents immediatel

These facts were also available to Mr. Cotner in the Flynn affidavit filed in connection with Mr.

-14. See Docket Nos. 473-1, pp. 11-17, Case No. 09-14.

These facts are also set forth in the Statement of Undisputed Facts ¶¶ 123-124 (Docket No. 2042-

3, Case No. 08-61570 as well as Docket No. 309, Case No. 09-18) to the Motion to Disqualify.

And because the technology was pledged fraudulently as detailed in the documents referenced




5

herein and in Docket No. 204-2, Case No. 09-60452, then it is impossible for this technology to

have been subject to the States Secret privilege.

8. Notwithstanding this overwhelming evidence sufficient to support a criminal

referral by the Senior bankruptcy judge, a multi-agency federal criminal investigation now on-

going in Montana, of which I believe Judge Kirscher is informed, and conclusive documentary

evidence evidencing the bank frauds, the software frauds, the destruction of evidence in these

bankruptcy proceedings, bankruptcy fraud involving non-disclosure of millions in debt, the

procurement of over $50 million in fraudulent loans which Ms. Blixseth never intended to pay

based on her schemed intention to file bankruptcy proceedings with Judge Kirscher even though

she did not reside in Montana, Judge Kirscher appears to have improperly attempted to disrupt

the criminal investigation by ruling that he has NOT seen any of this evidence, and that Ms.

Blixseth did not have the requisite mens rea

proof Judge Kirscher improperly applied a criminal standard

to the bankruptcy civil proceedings then before him. Knowing of the pending criminal

investigation, WHY did Judge Kirscher do this? See Docket No. 40, p 25, Case No. 09-100.

9. Despite the fact that Edra Blixseth is being criminally investigated, her and Sam

inc

black budget defense contract based on fraudulent technology, and defrauded multiple creditors

of hundreds of millions of dollars in the process, Judge Kirscher has injected gratuitous or

unnecessary findings in his rulings which protect her and thus Sam Byrne. The Judge either

bankruptcy filing of the Yellowstone Mountain Club. See Docket No. 309, Case No. 09-18;




6

Docket Nos. 484, 532, Case No. 09-14, Transcript of April 29, 2009 Trial in Case No. 09-14, pp.

20:11-29:25 filed at Docket No. 2110-7, Case No. 08-6157-. The Judge denied the introduction

of all evidence relating to the destruction and spoliation of evidence. Transcript of February 11,

2010 hearing, Case No. 09-14, pp. 119-136, attached as Exhibit 2 to Motion to Disqualify,

Docket No. 2042-2, Case No. 08-61570. And to top off all of this on-going cover-up, the Judge

has

the Nevada Federal Court which results in attempting to

and also attacks my counsel, Michael Flynn and C.J. Conant. See

Transcripts of October 12, 2010 Proceedings in Case No. pp. 30-42:7, 71-73, attached as Exhibit

1 to the Motion to Disqualify (Docket No. 2042-1) [hereinafter Oct. 12 Transcript].

10. On October 12, 2010, as recited in the Amended Motion to Disqualify, Judge

Kirscher invited David Cotner , sua sponte, in the absence of Mr. Flynn and Mr. Conant, and

with Mr. Park, counsel for Sandoval assisting, and Mr. Samson present, to attack the

Id . at pp. 30-33); and Judge Kirscher sua sponte challenged the

representation of me by Mr. Conant based on his representation of Western Capital Partners ( Id .

at pp. 71-73), again, resulting in the

these plainly biased tactics with full knowledge of all of the facts recited in the foregoing

paragraphs. The Judge intentionally used the tactic of blaming Mr. Flynn and Mr. Conant in a

scheme by Mr. Cotner and Mr. Samson to cover up the frauds of Edra Blixseth and Dennis

financial frauds and her deposition testimony on the bogus software, which was introduced in its

entirety at the trial of AP 14, Judge Kirscher assisted in creating a false record in favor of Ms.

Blixseth then made rulings depriving the creditors of her Estate of an estimated $100 million




7

claim against the Sandoval parties (which was plead in the Complaint and draft pleadings that

Judge Kirscher struck from the record in Case No. 09-105). It is likely that the Judge knew that

if Edra Blixseth was indicted or her Trustee pursued these claims, Montgomery would squeal on

Edra Blixseth and Edra entire charade would unravel. To create

this record, the Judge used the Nevada Protective Order. In the October 12, 2010 hearing, Judge

Kirscher and Mr. Cotner engaged in the following extended colloquy:

THE COURT: Okay, okay. I'll tell you, In reviewing these papers -

and I wasn't going to lead with this and let you state your

respective arguments on these matters, but let me start with this

because I think it's important - in reading through the briefs, the

replies, the responses, and the attachments, I'll be quite candid withyou: I'm very concerned about representations and filings that have

been made with this Court that maybe didn't have a sufficient

factual basis prior to their filing. (Oct. 12 Transcript a p. 6:4-12)

. . .

And I will have some questions for all of you as to what's going

on, why these things are happening, and if we have inappropriate

conduct being done. I'm very concerned. ( Id . at p. 6:18-21)

. . .[DAVE COTNER]: And in mid January, I interviewed her with

regard to the basis of the claims, as I understood them to be, and

understood from Edra that she believed that she had been duped

into the investment; and secondly, at one point in time she alleged

that Mr. Sandoval had wrongfully diverted money to his benefit.

Unfortunately for me, Judge, the focus of that discussion, because

it was early in the proceeding did not focus on a precise timeline.

( Id . at p. 16:11-19).

. . .[DAVE COTNER]: At the meeting, a great -- great detail was

provided to Mr. Samson and myself with regard to the nature of

the claims that existed and the validity of claims. That was

presented directly by Mr. Flynn. ( Id . at p. 17:21-24).

. . .




8

[DAVE COTNER]: And so from a factual perspective, I had heard

Edra tell me that she had been duped; from a factual perspective at

the time in my mind, I had nothing to disprove that at that time she

knew or did not know. ( Id . at p. 19:11-14).

. . .[DAVE COTNER]: Well, the details I had, and the details had

come from Mr. Flynn. And despite what I now see as, as a lack of

solid backing for it, the statements were continuing to be made that

it was factually based; and therefore, based upon that, attorneys in

our office, with my oversight, drafted the amended pleading. ( Id .

at p. 20:16-21)

. . .

[DAVE COTNER]: And the significance of the meeting that

developed was, I would say two principal issues that Edra had with

respect to the pleading that had been filed. The most important

from the trustee's perspective was: At the time she negotiated the

settlement document, she knew or believed that she had been

duped with respect to the capabilities of the technology being

marketed by Mr. Sandoval. ( Id . at pp. 21:22-22:4).

. . .

[DAVE COTNER]: And then the second issue that she had some

concerns about is that in the amended pleading, there were

allegations made with regard to Dennis Montgomery which she

believed to be false, and with regard to certain noise-filtering

technology which she also said was unrelated to the Atigeo

litigation. ( Id . at p. 22:8-13)

. . .

[DAVE COTNER]: Well, and this, too, has some bearing on the

kind of situation we were required to deal with. Immediately when

I announced that I was to amend the pleadings, Mr. Flynn

contacted the U.S. Attorney's Office and, in essence, was critical of

us for trying to amend our pleadings, for abandoning claims, for

abandoning the estate. ( Id . at p. 23:5-11)

. . .

[DAVE COTNER]: It was the same act of deception going on with

the U.S. trustee that had taken place with me. You're inundated

with paper, you're inundated with statements, you're given




9

deposition transcripts in which things are taken out of context. And

I know this now in hindsight. But based upon that, frankly, Mr.

Samson and I were being scrutinized as to whether we were taking

the right steps on behalf of the estate. ( Id . at 23:18-25)

. . .THE COURT: Mr. Cotner, I have a couple of questions for you.

MR. COTNER: Yes, Judge.

THE COURT: You had mentioned that you had been at a meeting

here in Butte with Mr. Blixseth, Mr. Flynn, and Mr. Conant. At

that time, I assume that Mr. Flynn was representing Mr. Blixseth.

Who was Mr. Conant representing?

MR. COTNER: Judge, I believed at the time he was representing

Western Capital. I've since learned that there was at least somedialogue in which Mr. Conant's relationship may have been more

than just representing Western Capital. I cannot tell you today that

I know. I do know today it's been represented that he represents, as

an independent contractor, Western Capital on some issues, Tim

Blixseth on some issues, and Mike Flynn on some issues. Whether

he was in that capacity at that meeting, I do not know.

THE COURT: Okay. Then another statement that was made, I

believe in your brief, 1S you make some reference to now you

know Mr. Flynn's reputation. What is that? What did you mean by

that? ( Id . at pp. 29:22-30:18)

. . .

[DAVE COTNER]: Because if you read the article, there's nothing

that's substantive In the article, and yet the media spin begins to

put Edra in a bad light; a person who, frankly, I find to be

forthright, straightforward, has nothing to win or lose in this

situation, and has been a person that has been, in my opinion, as

honest as she could be at all steps.

[DAVE COTNER]: I believe Mr. Flynn has his own biases thatarise out of certain prior relationships. It might have been from an

attorney relationship with a client that ended, it might have been

because of his son working for certain companies. But Mr. Flynn,

In my opinion -- and he did it with the U.S. trustee. He is a very,

very convincing individual. He's very articulate, he's precise with




10

the facts. My observation with him, though, is, especially now:

Listen, take it in, but confirm all before you rely on it.

And that was the mistake that I made, if any, between that January

and June date.

THE COURT: Okay. So the documents promised were neversubmitted and may not even exist?

MR. COTNER: There was multiple documents provided to the

U.S. Attorney's Office after I announced my motion to make this

most recent amendment.

Id . at 31:10-

32:8)

. . .

[DAVE COTNER]: And that's true if you are talking about theAtigeo technology; however, as spun in the pleadings that were put

together by Mr. Flynn, it is not true with regard to the Blxware

technology, the technology that -- in which was the subject of this

Playboy article, which was public. And I'm trying to be careful,

Judge, because I don't know what's protected and what's not, but

let's just put it like this: She has never questioned the validity of

the Blxware technology, but yet you see that statement. And the

conclusion made by Mr. Flynn from it is: See, Edra Blixseth is

stating under oath that she questions the Blxware technology.

That's not true. You could read it and, unless you have an

opportunity to meet with Ms. Blixseth and understand the

differences between the Blxware technology and the Atigeo

technology, you would draw that same conclusion. That's the kind

of allusions that I think I was being subjected to and the U.S.

Attorney's Office was being subjected to as well.

THE COURT: Could I have you move the mic away just a little bit

again? Thanks.

MR. COTNER: Sorry, Judge.

THE COURT: I guess the other thing - and maybe I need to refer

this to Mr. Tellis - but the other question I have that came up in my

reading of some of the documents is that there was, through the

attachment that you made to the motion on the complaint that was

the basis of the amended complaint that I believe was at Docket

109, was some of the material that may be contained within that is




11

in violation of a secrecy order out of the court in Nevada. You kind

of alluded to that, Mr. Cotner, I think, when you said you didn't

know that that really was covered by whatever orders might exist

in that court. I guess I just wanted to clarify that. Because my

concern is if, if there's a violation of some order, court order, and I

have knowledge of it, I'm not so certain I don't have a

responsibility to inform that Court of my knowledge of that and

what has occurred for that Court to do whatever it deems

appropriate if anything. So I guess I just wanted to kind of clarify

on that issue as to where we're at. ( Id . at pp. 33:2-34:16)

. . .

[BRIAN PARK]: The parties shall not discuss, mention, question,

or introduce as evidence any actual or proposed intelligence

agency interest in, application, or use of the technology. And

"technology" is defined as: The computer source code, software,

programs, or technical specifications relating to any technology

owned or claimed by any of the parties. When that language is

compared to the text of certain passages of Docket 109,

specifically at pages 18 to 19, 22, and 24, there seems to be a clear

violation. ( Id . at p. 35:10-20)

. . .

THE COURT: Okay. Mr. Park, A-2 that you referenced attached to

the motion, as I recall, that's the drafted complaint submitted to thetrustee by Mr. Flynn naming Mr. Blixseth as the plaintiff. ( Id . at p.

36:19-22)

. . .

MR. COTNER: Thank you, Judge. First of all, with respect to the

"secrecy order," as we're calling it, no, I had no knowledge of it

until it was brought to my attention by Mr. Park.

THE COURT: You need to speak a little louder. I'm sorry.

MR. COTNER: Okay. What I'm saying, Judge, is initially I had no

knowledge of the secrecy order. Mr. Parks brought it to my

attention. ( Id . at p. 36:19-22)

. . .

[MR. PARK]: As to the blame of a third party, Mr. Flynn, for the

predicament we're in, the trustee spends a substantial part of its

brief and its -- its opening brief and its reply explaining why Mr.




12

Flynn ultimately should bear responsibility for the allegations that

were improperly made and now seek to be retracted. According to

the trustee, it's Mr. Flynn's responsibility that an adequate Rule 11

investigation was not done in January or February, in June or July,

and ultimately not until shortly before this motion for leave to file

was made. With all due respect, that's not how it works. ( Id . at p.

53:4-14)

. . .

[MR. COTNER] If my brief is trying to pass the buck to Mr.

Flynn, I don't. I take responsibility for my own actions. Did Mr.

Flynn believe me -- mislead me? I think, yes. Does that make him

responsible for my actions? I'm not asking the Court to make that

decision. ( Id . at p. 60:14-20)

11.

After engaging in these tactics, Judge Kirscher then stated that he would be

issuing an order to show cause why the pro hac admission of C.J. Conant should not be revoked,

he struck from the docket all pleadings and documents submitted by Cotner that implicated Ms.

Blixseth and Mr. Montgomery in their software and financial frauds, and then sent a letter to

Judge Pro of the U.S. District Court for the District of Nevada informing Judge Pro that Mr.

Flynn potentially violated the Protective Order entered by Judge Pro.

12. While engaging in the foregoing tactics on October 12, 2010, Judge Kirscher

knew, as of January 2010--from the Spoliation Motion, and the Flynn affidavit in support thereof

and the exhibits attached to the Flynn affidavit (Docket No. 473-01), and the Edra Blixseth

deposition of Dec17, 2009, and the exhibits, thereto, and from the Russell depositions and Rule

2004 exams in Edra B in which the Russell computer destruction of

evidence was thoroughly explicated--Mr. Cotner had full access to these transcripts and to the

for the

Trustee, and that Russell and Blixseth had attempted to destroy evidence on the computers

including emails relating to the bogus technology (Judge Kirscher had conducted the spoliation




13

motion hearing on February 11, 2010 with full access to all of the documentary exhibits attached

thereto including the Edra Blixseth financial statements and documents relating to the bogus

technology, and he had denied my Motions for Summary Judgment and Reconsideration of the

Edra Blixseth/Sam Byrne Bad Faith frauds); that Judge Kirscher already had full access to all of

also includ

technology was bogus, introduced into evidence in AP 14 in February, 2010 together with all of

the exhibits); and most significantly, Judge Kirscher knew that Ms. Blixseth, Samson and Cotner

all knew that the bogus technology was NOT protected by the state secrets privilege because the

Nevada Court had entered rulings, orders and penalties that it was NOT protected by the

privilege (thus Mr. Park had not told the Court the truth when he said the technology was

likely knew on October 12, 2010

ot protected by any privilege, that the technology was

fraudulent and that Ms. Blixseth had engaged in yet more lies and concealment when she flip-

above colloquy -flop was designed

to protect Montgomery, and that if Ms. Blixseth exposed Montgomery, he would then expose her

and then all of the ex parte communications which have controlled these bankruptcy proceedings

would be exposed.

13. (Docket Nos. 2115-5 to

2115-21, Case No. 08-61570) and attendant assertion of the 5th amendment privilege against




14

self-incrimination which was attended by four representatives from the DOJ charged with

protection of the state secrets privilege who NEVER ONCE OBJECTED TO DETAILED

QUESTIONS CONCERNING THE TECHNOLOGY AND THE WAR ON TERROR FAR

SURPASSING ANY PURPORTED THE SANDOVAL

COMPLAINT WHICH JUDGE KIRSCHER ORDERED SEALED AND IN CONNECTION

WITH WHICH HE THEN COMMUNICATED WITH THE NEVADA COURT provides

conclusive evidence that: (a) the technology is bogus (a fact of which Mr. Cotner should have

been well aware, as opposed to accepting Edra Blixseth s lies as the truth); (b) that Edra Blixseth

and Montgomery attempted to sell it to the U.S., twice to Israel, to Bahrain as part of a $50M

loan scam by Ms. Blixseth (see Exhibit 1) and a fake wire transfer by Ms, Blixseth for another

$5 million fraud on Palm Desert National Bank (see Exhibit 2), both of which are attached

hereto; (c) that the technology is NOT protected by any protective order; and (d) that Judge

Kirscher continues to use the privilege and protective order to protect Edra Blixseth and cover

over her frauds. Judge Kirscher knew on October 12, 2010 that these facts have been given to

the multi-agency task force investigating Edra Blixseth; and he knew when he issued multiple

orders involving Ms. Blixseth that his orders would have the practical result of protecting her and

her criminal conduct.

14.

then used the state secrets privilege and the Nevada protective order to conceal and gloss over

-going frauds. Judge Kirscher then entered the following Findings and

Orders found in Exhibit 3 (Docket No. 147, Case No. 09-105):

(a) In connection d Counterclaim and

Amended Third Party-




15

Amended Counterclaim and Second amended Third Party Complaint and his Motion to

-spouse,

(b)

notes that Conant did not seek leave of the Court to appear pro hac vice in this adversary

counsel for Blixseth in the joint prosecution of claims against the Plaintiffs and Third Party

Boston, Massachusetts, was encouraging the Trustee to pursue certain claims against the

Plaintiffs and Third Party Defendants, making repeated representations and assurances that

Debtor had been fraudulently induced to invest money into or with the Plaintiffs and/or Third

Part Defendants, and that the fraudulent inducement was unknown to Debtor at the time she

(c)

nt

12, 2010 meeting with Edra Blixseth - SEVEN MONTHS AFTER THE JANUARY MEETING.

(d) Judge Kirscher then enters the following Findings (found on pp. 5-9 in

Exhibit 3):

At the July 12, 2010, meeting with Debtor, Cotner learned that his

Amended Counterclaim and Amended Third-Party Complaint

contained numerous inaccuracies, which Cotner outlines as

follows:




16

At the time of the execution of the Letter Agreement,

which included the Release, Debtor was aware that the

xPatterns technology did not perform as represented.

Therefore, any claim based on fraudulent inducement

would have been released by the terms of the document.

Allegations made with respect to Dennis Montgomery are

unrelated to the xPatterns technology. More importantly,

they were alleged not to be accurate.

Allegations provided by Mr. Flynn with respect to the

capability of the software did not relate to the software

technology of xPatterns. Additionally, such allegations

confirmed such representations through communications

with third parties. As a result of these disclosures, Cotnerchose to file a request to file a second amended pleading.

Since filing the present Motion to Amend on August 31, 2010,

Cotner received more troubling information consisting of a copy of

Blixseth, Flynn and Conant. Cotner attached a copy of the email

as Exhibit A to his Reply Brief filed October 5, 2010. In the email

dated February 20, 2010, Jeff Adams responds as follows to an

inquiry by Blixseth:

cannot over-ride our ownership of the

contract, only the Tort Claim. If we foreclose on the Claim, he can

still go after the tort but that money is also ours after he pays his

bills. If Mike can blow out the tort claims between Edra/Estate

and Sandoval/Atiegeo, then only Mike/Tim Claim and our

Cotner maintains that the forgoing exchange suggests an intention

by WCP, Blixseth and their counsel to lead the Trustee and Cotnerastray. Cotner explains that by doing so, WCP and Blixseth could

effectively remove the Trustee from this action so that the benefit

of claims against Atigeo/Sandoval would flow directly to WCP

and Blixseth.

WCP and Blixseth, and the Trustee and Cotner relied too much on




17

information supplied by WCP, Blixseth and Flynn. The alliance

between WCP, Blixseth and Flynn is demonstrated by the fact that

Conant represents not only WCP, but also Blixseth. Cotner further

contends that Conant represents Flynn personally in certain

of multiple parties raises an inference of impropriety. After such

expressing concern at the hearing on October 12, 2010, Conant,

immediately following conclusion of the hearing, withdrew as

proceedings.

proceedings, explaining that he would have pursued a different

course of action had he known Fly

Cotner characterized Flynn as articulate, precise and convincing,

and opined that when someone levies an attack on Blixseth, Flynn

effort to undermine the proce

because the truth is not always exactly as Flynn appears to

represent.

For example, Cotner asserts that he was convinced by Flynn and

Blixseth that certain facts existed showing Debtor had a valid tort

claim against the Plaintiffs and third-party defendants. To that

incomplete (have not finished claims 8-10 yet) draft of a complaint

in pdf and WP against Sandoval and his Board. This should give

purportedly provided Cotner with multiple documents that

supported the preliminary and incomplete drafted complaint.

According to Cotner, Flynn presented Cotner with a set of facts

that were detailed, consistent and seemingly credible. However,after carefully reviewing all the documents and following his

second interview with Debtor, Cotner discovered that facts he took

to be true were not necessarily true as against the Plaintiffs and

third-party defendants in this Adversary Proceeding.

reliance was not unreasonable

particularly where Flynn, a fellow attorney and officer of the




18

Court, had a historical relationship with Debtor and various of the

entities involved in this Proceeding. Upon learning the complete

truth, Cotner sought to do what he could by immediately amending

the inaccurate pleadings.

Cotner also explained that his failure to secure all the facts prior tofiling his amended pleadings on July 6, 2010, was due, in part, to

his decision to stay with a family member during a surgery in

Arizona in June. Cotner explains that absent that decision, he

would have met with Debtor and discovered the truth prior to filing

the amended pleading.

The Court recognizes that the Trustee and Cotner sought to retract

their inaccurate pleadings by filing the second amended

counterclaim and third-party complaint in a timely manner. The

Court agrees with Cotner that Plaintiffs will suffer little, if any,

harm if the Trustee is allowed to file the second amended

counterclaim and third-party complaint. Indeed, attempting to

correct the error was professionally responsible and was ethically

the correct step to take. Amendment of the pleadings clearly has

no prejudicial effect on the Plaintiffs as the Plaintiffs will no

longer have to litigate facts and circumstances arising prior to

In addition to Cotner being torn between the needs of both family

and work, the Trustee in this case is faced with a potentially

insolvent estate with little money available to pursue claims.

limited resources, Cotner acted reasonably under the

circumstances.

At the hearing, Cotner accepted complete responsibility for the

inaccuracies contained in his pleadings filed July 6, 2010. In his

defense, Cotner argued at the hearing that by signing the pleadings

he was only certifying to the best of his knowledge, information

and belief, formed after an inquiry reasonable under the

circumstances, that the claims were warranted, were not presentedfor any improper purpose, were not intended to raise or cause

unnecessary delay or result in a needless increase in the cost of

Court cannot and will not condone the filing of inaccurate

pleadings. The appropriate sanction in this case is denial of the




19

and because the parties have not yet engaged in any meaningful

to prohibit any future amendment

of the pleadings by the Trustee is denied. This Court allows liberal

amendment of pleadings, particularly where a trial date is not yet

set. For the reasons discussed above, the request for fees and costs

by the Plaintiffs and Third-Party Defendants are denied.

a secrecy order issued by a court in Nevada. The parties agree that

neither the Trustee nor Cotner knew of the secrecy order until the

Plaintiffs advised them of the secrecy order, but the Plaintiffs have

requested that the Court strike certain documents on grounds they

violation of the Nevada secrecy order, Cotner agreed that such

pleadings should be stricken from the record. By agreement of the

Amended Counterclaim and Amended Third-Party Complaint filed

-

1 and A-2 filed August 31, 2010, at docket entry no. 125. The

Court would note that Exhibit A-2 is a copy of the preliminary and

incomplete complaint provided to Cotner by Flynn. This Court

will inform the Nevada court of the issue so it can deal with the

matter as it deems appropriate.

15.

The foregoing Findings and Orders reflect actual bias towards myself and my

counsel, Mr. Conant and Mr. Flynn. We were never given any opportunity to be heard on these

issues (Mr. Conant was not at the hearing from which this order was derived, nor were he or Mr.

Flynn given notice that Mr. Cotner would be given free reign by the Court to malign their

reputation). Yet Judge Kirscher adopted as truth the representations of Mr. Cotner that Mr.

Flynn committed a fraud on him. I am a $20 million creditor of the Edra Blixseth estate. There

are numerous creditors owed in excess of $100 million dollars. As recited therein, as proven

from all of the evidence, as proven in the Montgomery deposition, as supported by the FBI

reports, as reflected in the on-going Grand Jury proceedings, the Sandoval Complaint is accurate

in all particulars. Incredibly, with no hearing or opportunity to present evidence, Judge Kirscher




20

maligned myself, my lawyers, and strongly suggested that Mr. Flynn violated the Nevada

Orders, and deprived the Blixseth Estate of an approximate $100 million claim against Sandoval

based on misrepresentations of Cotner, which the COURT KNEW WERE NOT ACCURATE.

16. In addition to the plain evidence of bias above, Judge Kirscher ignored the

, which are not only undisputed

but unrebutted and incontrovertible. No unbiased observer of the following facts could possibly

conclude that Edra Blixseth is credible and that I am not. Nor have any facts been raised by any

party that Edra Blixseth and Sam Byrne did NOT engage in a scheme in bad faith to use the

s and possible political agenda to turn over to Mr.

Byrne $700 million in Community assets by judicial fiat. All of the following facts were known

by Judge Kirscher to be true and accurate before he rendered his decision in AP 14, before he

issued his Order on October 21 attacking my counsel, before he ruled on

Summary Judgment in Case No. 09-100 seeking non-dischargability of debt;

before he ruled that Ms. Blixseth and before he ruled that Ms. Blixseth did not

banks of over $50 million. See Docket No. 40, Case No. 09-100. That is, the undisputed facts

regarding the genesis of the Yellowstone Club bankruptcy are as follows (see also Docket No.

309, Case No 09-18):

(a)

about August 12, 2008 in which Byrne agreed to make a $100 million equity investment into the

Yellowstone Club which would have precluded bankruptcy; and which Agreement coupled with

put it into bankruptcy in bad faith. Docket No. 309, Case No 09-18.




21

(b) On August 13, 2008, Mr. Byrne loaned Ms. Blixseth $35 million on a 48-

day note to consummate the MSA secured by Porcupine Creek and the Family Compound,

which was approved by Steve Brown as the Yellowstone Club lawyer. Mr. Byrne loaned Ms.

Blixseth these monies knowing that Ms. Blixseth had defaulted on over $50 million in

both direct quotes from Sam Byrne before and after he provided

control the Club, put it into bankruptcy, and remove Porcupine Creek and the Family

Compound representing over $250 million in assets that could have been used to satisfy the

BGI notes payable to the Club. Nonetheless, Mr. Byrne ended up owning all of these substantial

assets together with the Club for less than $40 million. See Docket No. 309, Case No 09-18, and

particularly ¶¶ 16-23, 42-100.

(c) For the purpose of interfering with the $455 million sale of the Club to

Byrne and to make her own deal with Byrne, and in violation of two court orders, Edra Blixseth

(Judge Kirscher had possession of Montgo

were immediately provided to the FBI and other investigative agencies investigating the Edra

Blixseth frauds and were quickly determined to be fakes. See Montgomery Deposition, pp. 115-

118; Docket No. 309, Case No 09-18 ¶ 34.

(d) That Edra Blixseth had in fact executed fraudulent loan applications and

fraudulent financial statements to defraud banks and lenders of over $50 million dollars. See




22

Exhibit 7 to List of Exhibits (Docket No. 2106-7, Case No. 08-61570; Docket No. 309, Case No

09-18, ¶¶ 112-124).

(e) That Edra Blixseth, Deborah Klar, and Dennis Montgomery had in fact

collateral, knowing that it was then subject to a preliminary injunction in the Nevada litigation

involving the Protective Order (in which Klar was representing both Edra Blixseth and

Montgomery). When Mr. Cotner and Mr. Park misrepresented facts to the Court on October 12,

privilege had been

Blixseth and Klar had lied to the Bank stating that Ms. Blixseth had an approved $100 million

contract with the U.S. Government. See Edra Blixseth, deposition particularly at page 127-135

at Docket No. 486-8, Case No. 09-14; see also Docket No. 204, and 204-2, Case No. 09-60452.

(f) When Judge Kirscher made the findings and Order that he did on October

25, 2010 (Exhibit 3) attacking Mr. Flynn and Mr. Conant, he knew from numerous documents

before him including the spoliation motion, the AP 18 SUF, the Wachovia Bank claim adversary

proceedings (Docket No. 204, Case No. 09-60452), and in numerous other pleadings, that the

of the Protective Order

could NOT possibly be a violation because: IT HAD BEEN PLEDGED AS COLLATERAL BY

EDRA BLIXSETH WITH WACHOVIA BANK; (NEITHER EDRA NOR THE BANK HELD

ANY SECURITY CLEARANCES) AND HAD BEEN SUBJECT TO PRODUCTION IN

NEVADA COURT ORDERS; WAS PART OF AN ONGOING SCHEME TO DEFRAUD HER

CREDITORS AND THE U.S. GOVERNMENT; AND HAD BEEN THE SUBJECT OF

WIDESPREAD MEDIA. See Exhibit 4; Docket Nos. 204 et seq., Case No. 09-60452.




23

(g) to

Wachovia in March 2008 and June 2008 to secure $8 million after representing that they had in

fact a $100 million contract with our government; (2) knowing they were subject to a DAILY

$2,500 penalty to produce the source codes in Nevada federal court (see Exhibit 5), thus,

obviating any possibility that such information was subject to the Protective Order, Ms. Blixseth

and Mr. Montgomery then schemed to defraud the government between September 2008 and

March 2009, JUST BEFORE SHE FILED BANKRUPTCY IN THIS COURT, with a scheme to

obtain a $3 million contract with the government to return archives Mr. Montgomery had stolen

to TEST the fake software. The Nevada Federal Court Sanctions Order, and the multiple court

orders and hearings relating to these matters in the Nevada cases, conclusively establish, contrary

that

the technology has never been protected by the U.S. Protective Order.

the software had been scheduled on numerous prior occasions but every time the testing was

scheduled Montgomery fled and tried to find another victim because he knew it was fake. See

emails and documents attached hereto as Exhibit 6.

(h) When Cotner made his false representations to the Court on October 12,

2010, and the Court entered its findings and Order on October 25, 2010, Cotner knew that the

foregoing facts were true because he had possession of documents, and had discussions with me

and Mr. Flynn, proving the truth of said facts. See emails referenced above. Judge Kirscher had

sufficient knowledge of all of these facts BEFORE he entered his Order on October 25, 2010.

(i) Edra Blixseth and Montgomery tried to sell the fake technology to Israel

(twice - first in December 2006 and again in 2010 when they were both in bankruptcy. This

raises the issues of who owns the technology (Edra Blixseth or Montgomery, or both), which




24

Estate owns this technology; and whether the two of them have engaged in bankruptcy fraud on

the ownership issues, notwithstanding Ms. Blixseth paying approximately $25 million for the

and Montgomery ) See Edra Blixseth deposition transcript at Docket No. 486-8, Case No. 09-14

at pp. 138-144. At the October 12 hearing, Cotner knew either that the Protective Order did

NOT protect the technology; and/or that Edra Blixseth and Montgomery were violating multiple

U.S. statutes involving classified technology, and/or

fraud.

(j)

technology to Bahrain as part of a $50 million loan fraud; and as part of a $5 million fabricated

wire transfer. See Exhibit 1.

17. Richard Samson, David Cotner and Edra Blixseth have used the bankruptcy

process to defraud her creditors of a $100 million claim as recited in the Sandoval complaint

sealed by Judge Kirscher. The evidence shows that Judge Kirscher had full knowledge of, or all

of the evidence at his disposal, before effectively destroying these claims, attacking my lawyers,

seeking to effectuate the discharge and exculpation of Edra Blixseth, all while seeking to use the

State Secrets Privilege to cover over these facts. The fact that Dave Cotner has stated that he

believed Edra, based on his interview with her, is dubious. Dave Cotner has had possession of

which corroborate the above facts. He appears to have refused to investigate and review all this

information, and instead chose to believe the statements and representations of Edra Blixseth,

who lied in loan applications, as recited in her December 17, 2009 deposition, and who has given

repeated testimony involving numerous instances of apparent perjury. Edra Blixseth repeatedly




25

attempted to assert the State Secrets Privilege in support of alimony requests involving the

technology and Blxware in the amount of approximately $36 million per year, but then attempted

to hide behind the privilege and evade discovery based on the privilege into the validity of the

technology. Ms. Blixseth refused to answer questions about the technology. The divorce court

judge, Sharon Waters, then ruled that if Ms. Blixseth continued to hide behind the privilege,her

CEO, Steve Crisman was deposed by my divorce lawyers, and he admitted there was no

r $25 million had been paid out by Ms. Blixseth, of which $23 million went

to Sandoval and others, and approximately $6 million went to Montgomery, who had just

asserted his 5th Amendment rights in connection with almost all aspects of these frauds. See

Montgomery Deposition and exhibits, Docket Nos. 2115-5 to 2115-21, Case No. 08-61570. Mr.

technology.

18. In preparation for the hearing on my Motion to Disqualify, my attorneys

subpoenaed the records of several people who I was informed would have documentary evidence

of ex parte communications between opposing parties and Judge Kirscher. The people who my

attorneys subpoenaed were Andy Patten (counsel for the Yellowstone Club debtors), Ross

Richardson (Chapter 7 Trustee for the Yellowstone Club World bankruptcy estate), John

Amsden (attorney for Ross Richardson) and Terry Healow (law clerk for Judge Kirscher).

19. Of these individuals, my attorneys received documents from Andy Patten and

Ross Richardson.

20. Andy Patten provided my attorneys with a host of email communications between

and Senior Bankruptcy Judge Peterson. These emails from Andy Patten are attached hereto as




26

Exhibit 7. As a whole, these emails reflect a close and confidential relationship between Mr.

Patten and the Chambers of the Montana bankruptcy court. More troubling for a party who

, is the fact that specific emails display a

relationship between Mr. Patten and the bench of the Montana bankruptcy court that a reasonable

person would view as preferential toward Mr. Patten.

21. In particular, on April 20, 2009, one week before Phase I of the trial in AP-14

million judgment against me, Senior Judge Peterson sent an email to Mr. Patten regarding this

trial and provided Mr. Patten with citations to two cases, apparently that Judge Peterson thought

would be helpful to Mr. Patten. This email is attached hereto as Exhibit 8.

22. -14] going forward on the

22nd? Also as to that you may want to see Schubent case at 554 f3d 382, appeal from 348 br 234

as well as 391 br 626, 631 (9 BAP) on non statutory insiders applying equitable subordination

[sic]. It was bought to my attention last week in a Vegas mediation dealing with lender conduct

such as Cs/Blixeth [sic]

23. This email demonstrates that the Montana bankruptcy bench has affirmatively

assisted my opposing party in AP-14 on the eve of trial. It is absolutely antithetical of due

process for the Montana bankruptcy bench to engage in ex parte communications for the purpose

of affirmatively advising, on the eve of trial, the party that has sought a $200 million judgment

against me and has obtained a bench verdict against me of over $40 million.

24. Also indicative of a preferential and confidential relationship between Mr. Patten

and Judge Kirscher is found in an email exchange of November 19, 2009 between Andy Patten

See Exhibit 9 attached hereto. In this




27

- if I give the court a heads up about a new

25.

This email demonstrates two things. First, that Mr. Patten enjoys a confidential

relationship with the Montana bankruptcy bench and presumably Judge Kirscher in particular.

This would lead any opposing party of Mr. Patten, as I am, to believe he or she will not be

afforded impartiality from Judge Kirscher or the Montana bankruptcy court as a whole. Second,

this email implies that Mr. Patten and Judge Kirscher had a private conversation wherein Mr.

ng as it would cause that party to

before Judge Kirscher? Has Mr. Patten had private conversations with Judge Kirscher regarding

AP-14? I, and I think anyone else in my position, would have these questions, and, as a result,

before him.

26.

My attorneys also received documents from Ross Richardson in response to a

subpoena my attorneys served on him. In my original affidavit, I discussed how, on or around

June 10, 2010, John Amsden told me that Ross Richardson had a phone conversation with Terry

the status of a settlement between myself and Mr. Richardson. Mr. Healow urged Mr.

Richardson to hurry up and finalize the settlement before I could renege or change my mind. In

the documents my attorneys received from Mr. Richardson, is an email dated June 10, 2010 from




28

Mr. Healow, confirming the fact that he and Mr. Richardson in fact had an ex parte phone

conversation that day. See Exhibit 10 attached hereto. Mr. Amsden and I discussed several

scenarios as to why Mr. Healow would have said this. Mr. Amsden said it must mean that Judge

Kirscher is about to rule in AP 14. Mr. Amsden and I discussed that, if Judge Kirscher was

about to rule, how that

RULED ON AUGUST 16, 2010 in a 135 page decision in an apparent attempt to protect and

insulate Ms. Blixseth while decimating my position in related proceedings (as described in detail

in the preceding paragraphs).

27.

As an additional grounds for perceiving that Judge Kirscher has a bias against me

are the facts and circumstances surrounding supplementing the record in my appeal of AP-14

with over 400 emails that Judge Kirscher purportedly reviewed when denying my motion to

dismiss AP-14 on the grounds that my former counsel, Stephen Brown, became my adversary in

2009 regarding the very matters for which he previously represented me (i.e., the Credit Suisse

loan and the waivers and releases associated with my division of marital assets with Edra

Blixseth). Judge Kirscher has twice stated that he reviewed these email communications

involving Mr. Brown in denying my motion to dismiss (see Docket Nos. 292, 626, Case No. 09-

14). When I asked that these emails be included in the record on appeal so that I could challenge

whether Judge Kirscher appropriately denied my motion to dismiss, he denied my request, even

though the request was unopposed. See Docket No. 626, Case No. 09-14. From my perspective,

from the first half of AP 14 when Judge Kirscher refused to allow me to look at the 400 emails

and thereby precluded me from reviewing relevant discovery to the continued protection of the

emails, a reasonable person would wonder what could possibly be in these emails that would

warrant Judge Kirscher refusing to allow even an appellate court to review them. It seems to me




29

that Judge Kirscher has purposefully insulated his rulings on these emails from appellate review

for some inexplicable reason that suggests bias. My question is WHY?? We have obtained

several emails suggesting that that meetings took place

with the governor of Montana; and that the state secrets privilege and government protection was

to be used. See Exhibit 11 attached hereto; see also Exhibit 67 to List of Exhibits [filed under

seal], Docket No. 2115-4, Case No. 08-61570.

28. Also indicative of bias is the objective double-standard that Judge Kirscher seems

to impose on me with respect to weighing evidence and judging credibility. At the December 2,

2010 status conference before Judge Kirscher, Michael Flynn, argued that under applicable law,

there should be no evidentiary hearing on my Disqualification Motion because my affidavit was

sufficient to

-- as you know from prior appearances, we

at p. 18:22-

25 (emphasis added) Exhibit 12.

29.

-14 based

solely on the affidavit of Charles Hingle and did so before my opportunity to oppose Mr.

pervasive bias against me, is that when Judge Kirscher entered the $40 million judgment against

on

judgment. See Docket No. 580, Case No. 09-




32

CERTIFICATE OF SERVICE

I, Patrick Fox, hereby certify under penalty of perjury that on the 17th day of January,2011, copies of the above document were served electronically by ECF notice to all persons/entities requesting special notice or otherwise entitled to same and that in addition, Ihereby certify that I have mailed or served the document to the following non-ECF participantsin the manner indicated by the non-

No manual recipients.

By /s/ Patrick Fox




EXHIBIT 19




EXHIBIT 20




EXHIBIT 21




EXHIBIT 22




EXHIBIT 23




EXHIBIT 24




EXHIBIT 25




EXHIBIT 26




EXHIBIT 27
