Montgomery V Risen #203 Risen Decl With Exhibits

Case 1:15-cv-20782-JEM Document 203 Entered on FLSD Docket 12/14/2015 Page 1 of 14
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 Montgomerys 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
Reporting in 2006, and received seven New York Times Publishers 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.
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 Wasnt 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 articles exclusive interview with Tom Ridge, former
Secretary of the Department of Homeland Security at the time. I found support in Ridges
statement that the intelligence was bizarre, unique, unorthodox, unprecedented; that he
wonder[ed] whether or not it was credible, and that we werent certain about this
intelligence at the time. I also found support in Ridges 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.
9.
a November 1, 2006 front-page story in the Wall Street Journal titled Congressmans 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, Montgomerys former business partner at eTreppid Technologies (eTreppid).
10.
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 Montgomerys software.
11.
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 Montgomerys
exclusive interview with Lisa Meyers of NBC News in which he repeated the explosive charge
against Trepp and Gibbons.
12.
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 Montgomerys then unsealed
declaration, he claimed that his technology warned of and thwarted terrorist attacks around the
world.
13.
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.)
14.
an August 29, 2008 Bloomberg News article by Anthony Effinger titled Yellowstone Club
4
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 Trepps allegations in
court records that Montgomery stole eTreppids 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 Montgomerys 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 Montgomerys 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.)
15.
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 articles 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 articles quote of Sloan
Venables, Montgomerys co-worker, who stated that he doubted Montgomerys software existed.
I found support in the articles 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 Montgomerys software to see if
5
there was anything there. I found support in a quote of an Air Force spokesman who said that
the results of the Air Forces evaluation of Montgomerys 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 highlyplaced government sources, added that the White House had considered shooting down
transatlantic flights based on Montgomerys intelligence and focused on the U.S. governments
invocation of the state-secrets privilege to cover up Montgomerys misdeeds and the
governments gullibility. For the Chapter, I relied on our quote of Liberatore, the former Air
Force official who later realized Montgomerys 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 Liberatores
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 Montgomerys 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 Obamas 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 CIAs Counterterrorism Center when
Montgomery was providing the Al Jazeera intelligence, who said the Counterterrorism Center
was very skeptical of Montgomerys 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.)
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.
19.
RELIANCE ON PUBLIC RECORDS
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 Governments 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 Montgomerys 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 Montgomerys 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 its [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 demonstrate
eTreppids 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, including
Department 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-bk18510 (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, Montgomerys former lawyer, to
Montgomery: I know you conned me and you conned the U.S. Government.... Youre a
computer hacker and youre a fraud, Mr. Montgomery. (Ex. 16, Tr. 230:2-11.) I relied on
Montgomerys testimony in his deposition in which the attorney asked if his software was a
complete fraud and he answered, Im 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 Flynns 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
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 Montgomerys 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. Montgomerys 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 Montgomerys 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 contractors information, but nonetheless, you passed it to the White House and alert
levels ended up being raised unnecessarily. I relied on Brennans response that confirmed that
Montgomerys purported software was determined not to be a source of accurate
information. (Chapter at 47) (quoting Ex. 19 at 9).
III.
26.
RELIANCE ON SOURCES
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
9
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 most
important 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 intelligence
would 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 of
the 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 the
company 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 couple
kinds of bar codes, and there are not enough pixels there for either one.
The French technology company said there is just nothing there. There
was no way there were hidden messages in the Al Jazeera broadcast. It
was 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 or
anything like that. Murray believed they were caught up in trying to get
this intelligence. And Tenet was letting it go straight to President Bush
10
without being vetted. Nobody was ever held accountable for the bogus Al
Jazeera intelligence. Later, officials all acted like it never happened.
28.
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, we
could do that. Murray said, I couldnt 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.
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 CIAs 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 CIAs statement that [a]s youd expect, the CIA looked at what Montgomery
claimed he could do but determined that his threat detection tools werent exactly as billed.
(Id.)
30.
February 2011, I interviewed Frances Townsend, a former White House counterterrorism official
11
on the National Security Council (NSC) who dealt with Montgomerys 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
Townsends 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 its 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
Montgomerys 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
Lichtblaus January 21, 2011 email to Spitler is attached hereto as Exhibit 25. A true and correct
copy of Spitlers return email to me containing a statement from the Air Force is attached hereto
as Exhibit 26. I relied on the Air Forces statement that the Air Force awarded a contract to
Montgomerys company in 2009 but that the contractor did not perform in accordance with the
terms of the contract. (Ex. 26 at 1.)
12
34.
February 2011, I reached out to a spokesman for United States Special Operations Command. I
relied on the spokesmans statement that The technology did not meet our requirements,
referring to Montgomerys 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,
Montgomerys 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 Montgomerys former business
partner. Blixseth gave me and Lichtblau information about Montgomerys interactions with
Edra Blixseth and his observation of a demonstration of Montgomerys 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 Montgomerys point of view and denials in the Chapter. (Chapter at 33-34, 37, 51,
53.)
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Government Tries to Keep Secret What Many Consider a Fraud - NYTime... Page 1 of 7
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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 dealmaking 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 claiming
that software he had developed could help stop Al Qaedas 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. Montgomerys former lawyer, Michael Flynn who now describes Mr.
Montgomery as a con man says he believes that the administration has
http://www.nytimes.com/2011/02/20/us/politics/20data.html?_r=0&pagewa... 3/12/2015
been shutting off scrutiny of Mr. Montgomerys 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 governments 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 bogus
Somali terrorism plot on the day of President Obamas inauguration, according
to previously undisclosed documents.
It Wasnt Real
Dennis would always say, My technology is real, and its 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, Im convinced
it wasnt 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. Montgomerys technology was
fake in 2003, but their conclusions apparently were not relayed to the militarys
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, even
though 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.
Weve seen so many folks with a really great idea, who truly believe their
technology 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
militarys 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 top
trader 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
Nevadas governor and was a longtime friend of Mr. Trepps, 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 militarys
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 the
crawl 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 federal
aviation 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 to
suspect 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 companys systems. In interviews, several employees claimed that Mr.
Montgomery had manipulated tests in demonstrations with military officials to
make it appear that his video recognition software had worked, according to
government memorandums. The investigation collapsed, though, when a judge
ruled that the F.B.I. had conducted an improper search of his home.
Software and Secrets
The litigation worried intelligence officials. The Bush administration declared
that some classified details about the use of Mr. Montgomerys software were a
state secret that could cause grave harm if disclosed in court. In 2008, the
government spent three days scrubbing the home computers of Mr.
Montgomerys lawyer of all references to the technology. And this past fall,
federal judges in Montana and Nevada who are overseeing several of the
lawsuits issued protective orders shielding certain classified material.
The secrecy was so great that at a deposition Mr. Montgomery gave in
November, two government officials showed up to monitor the questioning but
refused to give their full names or the agencies they worked for.
Years of legal wrangling did not deter Mr. Montgomery from passing supposed
intelligence to the government, according to intelligence officials, including an
assertion in 2006 that his software was able to identify some of the men
suspected of trying to plant liquid bombs on planes in Britain a claim
immediately disputed by United States intelligence officials. And he soon found
a new backer: Edra Blixseth, a onetime billionaire who with her former
husband had run the Yellowstone Club in Montana.
Hoping to win more government money, Ms. Blixseth turned to some
influential friends, like Jack Kemp, the former New York congressman and
Republican vice-presidential nominee, and Conrad Burns, then a Republican
senator from Montana. They became minority stakeholders in the venture,
called Blxware.
New Pitches
In an interview, Mr. Burns recalled how impressed he was by a video
presentation that Mr. Montgomery gave to a cable company. He talked a hell
of a game, the former senator said.
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 governments use of the Blxware software, officials said. She was
noncommittal.
Mr. Flynn, who was still Mr. Montgomerys 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. Montgomerys 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 Force
contracting 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 Force
declined to make Mr. Liberatore available for comment.)
The day after Mr. Obamas inauguration, Mr. Liberatore wrote that government
officials were thanking Mr. Montgomerys 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 companys 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, Im
going to assert my right under the Fifth Amendment.
Barclay Walsh contributed research.
EXHIBIT 4
Bogus analysis led to alert in 2003 - NBC Nightly News with Brian Williams - NBC New... Page 1 of 2
Recommend
Bogus analysis led to terror alert

in Dec. 2003
0
CIA experts saw a secret code on Al-Jazeera that wasn't there
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 AlJazeera, 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.
http://www.nbcnews.com/id/8380365/ns/nbc_nightly_news_with_brian_williams-nbc_ne...
12/9/2015
Bogus analysis led to alert in 2003 - NBC Nightly News with Brian Williams - NBC New... Page 2 of 2
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 NBCs senior investigative correspondent and Aram Roston is an NBC investigative producer.
http://www.nbcnews.com/id/8380365/ns/nbc_nightly_news_with_brian_williams-nbc_ne...
12/9/2015
EXHIBIT 5
Congressman's Favors for Friend Include Help in Secret Budget - WSJ
Page 1 of 9
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http://www.wsj.com/articles/SB116234941031409783
BUSINESS | UNDER COVER
Congressman's Favors for Friend

Include Help in Secret Budget
With Rep. Gibbons's Backing, An Ex-Trader for Milken Wins Millions in
Contracts
By JOHN R. WILKE
Updated Nov. 1, 2006 11:59 p.m. ET
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 from
scrutiny. 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.
3/11/2015
Page 2 of 9

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 Republican
primary 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
junk-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."
3/11/2015
Page 3 of 9

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."
3/11/2015
Page 4 of 9

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 codenamed 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 for
picking 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 highresolution 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 publiccorruption 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.
3/11/2015
Page 5 of 9
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 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 vague
descriptions. 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.
3/11/2015
Page 6 of 9

"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 Operations
Command. 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 plusups 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 the
proceeding against him, noting that the allegations were old and he had left the securities
business years earlier.
3/11/2015
Page 7 of 9

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 datacompression 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.
3/11/2015
Page 8 of 9

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 was
among 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 Street
Journal. 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.
3/11/2015
Page 9 of 9

10
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.
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3/11/2015
EXHIBIT 6
Nevada Governor Faces FBI Probe Into Contracts - WSJ
Page 1 of 5
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LEADER (U.S.)
Nevada Governor Faces FBI Probe Int

Contracts
Focus Is Gifts Gibbons Got While in Congress; 'Black Budget' Missions
By JOHN R. WILKE
Updated Feb. 15, 2007 12:01 a.m. ET
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 fastestgrowing 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.
3/11/2015
Page 2 of 5

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."
3/11/2015
Page 3 of 5

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 to
the 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 to
alleged 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.
3/11/2015
Page 4 of 5

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 initially
focused 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 separate
companies, 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
jet 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.
3/11/2015
Page 5 of 5

Mr. Peek, Mr. Trepp's attorney, said, "If the magistrate decided the search was improper,
I'm disappointed in the decision, but without knowing the basis, I can't comment."
In his court filings, Mr. Montgomery alleges that Mr. Gibbons himself called in local
federal officials at the behest of Mr. Trepp, who is one of Mr. Gibbons's biggest campaign
contributors. In an interview last year with The Wall Street Journal, Mr. Gibbons's wife,
Dawn, acknowledged that Mr. Trepp's wife had called her about the dispute. In response,
Mr. Peek said: "Any citizen has a right to report a crime like a theft of intellectual
property and computer equipment, and the government should rightfully act on the
report of a crime regardless of who reports it."
Write to John R. Wilke at john.wilke@wsj.com
Copyright 2014 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by
copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.
3/11/2015
EXHIBIT 7
FBI probes Nevada governor for corruption - NBC Nightly News with Bria... Page 1 of 2
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Nevada governor under investigation

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Discuss
Did Jim Gibbons accept cash and gifts in exchange for defense contracts?
By
Lisa 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 multimillion-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
Then-Congressman Jim Gibbons, seated, toasts with Dennis Montgomery during a March 2005 cru
the trip.
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.
http://www.nbcnews.com/id/18613647/ns/nbc_nightly_news_with_brian_wil... 4/9/2015
FBI probes Nevada governor for corruption - NBC Nightly News with Bria... Page 2 of 2
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, fifth from left in the back row, poses with fellow cruise mate
2005.
[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 his 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 called "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.
http://www.nbcnews.com/id/18613647/ns/nbc_nightly_news_with_brian_wil... 4/9/2015
EXHIBIT 8
EXHIBIT 9
Attorney: Nevada Gov. Gibbons cleared in FBI probe - USATODAY.com

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Attorney: Nevada Gov. Gibbons cleared in

FBI probe
Posted 11/3/2008 7:55 AM | Comment
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By Matt Apuzzo, Associated Press Writer

WASHINGTON Nevada Gov. Jim Gibbons, whose first term has been marred by an FBI corruption
investigation, 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.
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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.
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"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, rewritten
or redistributed.
Posted 11/3/2008 7:55 AM
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EXHIBIT 10
Yellowstone Club Divorcee Entangled in Terrorist Software Suits - Bloom... Page 9 of 21

14
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 had
owned 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 Palm
Springs, 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 of
the spoils of Edra's July divorce from Tim. After a 19-month long fight, she also got control of
one big source of their wealth: a private Montana ski- and golf resort called the Yellowstone
Club, where the likes of Microsoft Corp. founder Bill Gates, News Corp. President Peter
Chernin and hotelier Barry Sternlicht have erected supersized chalets on lots that until the real
estate 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 the
Yellowstone Club afloat, and in August settled a two-year-old claim by club investors that she
and Tim failed to fairly distribute the proceeds from a $375 million business loan to
Yellowstone from Zurich-based Credit Suisse Group.
Edra, 54, is also embroiled in a Reno, Nevada, lawsuit that makes the Montana case look like a
missed putt on the Yellowstone Club's 7,200-yard (6,600-meter) golf course.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aehZLi13aTPI 3/11/2015
Yellowstone Club Divorcee Entangled in Terrorist Software Suits - Bloo... Page 10 of 21

14
Decoding Terrorists
She's dueling in court with Warren Trepp, once a top trader for Michael Milken, who alleges
that 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 find
embedded 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 was
once on Edra's payroll.
Flynn, 64, who spent much of the 1980s fighting the Church of Scientology on behalf of former
members and journalists, says in court filings that he quit her employ after learning that the
software was a sham.
The Trepp case is all cloak-and-dagger. The Federal Bureau of Investigation had a team of
investigators working on it. Judges have sealed documents at the behest of U.S. intelligence
agencies. 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 appears
in 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 of
the 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, had
fought so publicly over the club and had drawn out the legal fight with investors. `Ì have
always felt that the Yellowstone Club is 'my baby,''' Edra wrote to members in a July 6 letter
announcing that she had vanquished Tim and taken control. `Ì make a personal pledge to never
let us waver again.''
Fishing the Gallatin
The Blixseths started the Yellowstone Club in 2000 on 13,400 acres (5,400 hectares) of old
logging 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 Moonlight
Basin. Yellowstone members -- most of whom remain anonymous -- play golf and fish in the
Gallatin, 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, paying
out $205 million for 72 properties in 2005 alone -- most of them empty lots spread across
wooded slopes.

14
That year, when high-end real estate looked like a sure thing, Credit Suisse gave the club a $375
million loan to repay old debt and ``fund a return of capital to the company's owners,'' according
to 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 $209
million of the money as their return of capital and that other investors should have gotten a
return, 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 other
investors. 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 in
August, paying another $8 million and pledging $13.5 million more by Nov. 15, according to
settlement 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 payment
each in 2000 for an empty lot, a family membership and a 1 percent equity stake in the club
itself.
In his complaint against the Blixseths, LeMond says he believes part of the Credit Suisse money
went to help Tim Blixseth buy a 16-bedroom chateau in France for $28 million, a golf resort on
the Pacific coast of Mexico for $40 million and property in St. Andrews, Scotland, for $12
million.
High-End Network
They were to be part of a network of high-end time-share resorts called Yellowstone Club
World. 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 in
Los Angeles for $60 million earlier this month, until Edra won it in the divorce and took it off
the market for the time being, says Tracey Broadman, a broker at Mint. Another Yellowstone
Club World property, a 30,000-square-foot mansion on a private island in the Turks and Caicos
Islands, 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 in
a 1987 book called `Ùncharged Battery'' (Portland Entertainment Publishing), which was billed
as a self-help guide for battered women. She describes how he pulled her around the house by
the hair and, literally, walked on her.
Meeting Tim

14
Blixseth doesn't name her first husband and says she didn't press charges. Instead, she left him
and met Tim Blixseth, who grew up poor in Roseburg. He worked in lumber mills during high
school, developed a keen eye for timberland and made his first fortune buying and selling the
wooded 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. `Ì was laying on my bed watching TV, drinking a Coke and eating
sunflower 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 way
outside and then punched, scratched and screamed as he tried to drag her back into the room. He
ran off.
She and Tim prospered in the early 1980s. Then interest rates soared, and lumber prices
tumbled. Continental Foodservice Co. sued Edra and Choo-Choo Willy's for an unpaid food bill
of $27,219.82. The Blixseths declared bankruptcy in 1986.
Threatened Bears
Tim then began accumulating land in southwestern Montana, just north of Yellowstone National
Park, intending to develop it. The U.S. Forest Service, eager to protect the elk and bears, offered
to swap Blixseth's land for property it owned farther north. That land became the Yellowstone
Club.
People who know Edra say she's decisive and analytical. Tim had the vision for the Yellowstone
Club, and Edra made it a reality, the people say. She can be charming, though she swears like a
Wall 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 wives
of male business partners as Christmas presents, a person whose wife got one says. Edra
declined to comment on the matter.
Code Warrior
Now that Tim and Edra have stopped tussling over the Yellowstone Club, life there may return
to normal. The software fight, though, is still raging.
The computer code in question compresses digital video so it can be transmitted more
efficiently. It also purportedly picks out patterns, such as targets for missiles or secret messages
embedded 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 in
Afghanistan and Iraq and sometimes fire missiles at them.
The two original actors in the drama were Trepp, the former trader at Drexel Burnham Lambert
Inc., and Montgomery, a software designer and avid science-fiction-movie fan. Before meeting

14
Trepp, Montgomery had worked at 3Net Systems Inc., a Sacramento, California-based firm that
made software to help hospitals run their laboratories.
In 1997, a casino host at the Eldorado hotel in Reno introduced the two men. Montgomery told
Trepp he had software that could compress video images and search them and that he wanted to
form 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 in
1979. A year later, he became head of high-yield-bond trading and sat at Milken's right hand at
his X-shaped trading desk in Beverly Hills.
Drexel paid a $650 million penalty for securities law violations and went bankrupt in 1990, and
Trepp 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 Carol
Fox Foelak wrote in 1997. Even so, she dismissed the case, saying the SEC had waited too long
to 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 named
Penne Page alleged in a suit against the company that Montgomery twice masturbated in front
of her and asked if it ``turned her on'' to watch him, according to a summary of her complaint in
California Superior Court in Sacramento. The case was resolved without any admission of
wrongdoing, according to Page's attorney, Chris Whelan.
No Comment
Montgomery declined to comment for this article. ``Talk to my attorneys,'' he said in a
telephone 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 to
develop the code for what they termed `àutomatic target recognition.''
To demonstrate his product, Montgomery would set up a video camera in a field behind the
eTreppid office in Reno. Then he'd hold up a replica of a bazooka. A computer running his code
would 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 pilot
who's now governor of Nevada. In September 2003, Gibbons was shown a demonstration of

14
eTreppid's technology at the Lake Tahoe home of a member of the Yellowstone Club, according
to Flynn.
The following June, Gibbons, 63, put out a press release saying that he had voted for a defense
appropriations bill that, he noted, included $3 million for eTreppid.
In September 2005, Trepp told Montgomery that the U.S. government was ready to spend $100
million on the video technology, according to a statement Montgomery filed in federal court in
Reno 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 and
Montgomery had a falling-out. According to a transcript of an FBI interview with Trepp in
February 2006, one cause of the split was that Trepp had begun to question the extent of
Montgomery's computer programming skills.
`Big Money'
Montgomery in December 2005 took disk drives containing eTreppid source code from the
office 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 told
another eTreppid employee, the company claims.
Montgomery left eTreppid for good that January. ETreppid filed a report with the FBI and sued
Montgomery in state court, winning a preliminary injunction preventing Montgomery from
altering or transferring the code. That injunction was still in effect in late August. Blixseth and
Montgomery 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 agents
raided 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 had
infringed 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 violated
Montgomery's Fourth Amendment right against unreasonable search and seizure. Federal Judge
Valerie 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 had
introduced her to former Microsoft executive Michael Sandoval, who had just started a
company called AziMyth LLC in Bellevue, Washington. AziMyth, now called Atigeo, planned
to build software to deliver targeted advertising and link users in social networks.

14
`Ì 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 in
court documents.
Microsoft Connection
Sandoval knew Montgomery from his Microsoft days. In 2004, he had traveled to Reno to talk
to Trepp about a partnership. Trepp called in Montgomery to explain the technology, Sandoval
says. Sandoval says the next time he heard from Montgomery was in early 2006, when he called
Sandoval looking for work.
Sandoval introduced him to Blixseth, and the three of them decided to start another AziMyth
subsidiary called Opspring LLC. Blixseth and her family members, excluding Tim, were the
sole investors, contributing $8 million.
She has since taken control of the company after a falling-out with Sandoval, whom she sued in
Washington 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's
Porcupine Creek estate. Sandoval says the meeting was to finalize Montgomery's employment
contract.
Flynn says in court documents there was more involved. He was introduced to Blixseth and
Sandoval at the meeting for the first time, and Montgomery told them about the $100 million
contract 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 to
the Federal Election Commission. Tim has given about $120,000. They've given through the
club, too. In 2003, Yellowstone Development LLC, one of the two Blixseth-controlled
partnerships that own the club, gave $100,000 to a group called `Àrnold Schwarzenegger's
Total 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 and
Indiana 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 Edra
never asked him for help selling software.
Terrorist Warning

14
In the middle of 2006, Montgomery says he used his software to uncover a plot by terrorists to
use liquid explosives to blow up jetliners leaving London. He says he warned Cheney's office
before British authorities thwarted the attack that August.
Montgomery made his claims in court declarations dated Oct. 30, 2006, and Feb. 23, 2007.
Cheney's office declined to comment.
Even so, efforts to sell the software in Washington went nowhere, in part because the U.S. Air
Force preferred to work with eTreppid. So Blixseth and Montgomery set out to discredit Trepp
in the press, Flynn says.
Their method: an allegation by Montgomery that Trepp had bought support for eTreppid from
Gibbons through bribery.
``Blixseth designed, engineered and implemented the media plan using Montgomery and the
documents he took from eTreppid,'' Flynn says in a June 18 court filing.
The allegation was first reported by the Wall Street Journal on Nov. 1, 2006 -- just a week
before the gubernatorial election in which Gibbons was the Republican candidate. The
newspaper said that Trepp had given Gibbons unreported gifts and casino chips.
Ìntoxicated'
The source, the newspaper said, was testimony in the civil lawsuit brought against eTreppid by
Montgomery.
That testimony was unsealed by the federal court in Reno in late 2007. In a statement dated Oct.
30, 2006, Montgomery says, `Ì have observed Trepp, once heavily intoxicated on a cruise, give
Gibbons very large amounts of casino chips and cash.''
The allegations, which Trepp and Gibbons deny, were heavily covered by the Nevada media.
Gibbons won anyway.
The Wall Street Journal ran another story on Feb. 15, saying that federal prosecutors were
investigating Gibbons. It cited an e-mail from eTreppid executive Len Glogauer to Trepp after
then Representative Gibbons had helped with a contract.
Glogauer, the paper said, wrote: ``Jim really hit the ground running on that one. We need to take
care of him like we discussed.'' Three months later, NBC News aired an interview with
Montgomery on Today. NBC highlighted the same e-mail in its coverage.
Doctored E-mail
Trepp and Gibbons deny there was any bribery. In June 2007, after Montgomery submitted the
Glogauer e-mail to the Nevada court as evidence, eTreppid filed an affidavit from a computer
security expert named Jonathan Karchmer, who said he had examined traffic in eTreppid's
e-mail system and that the sentence ``We need to take care of him like we discussed'' wasn't in
the original record and had been added.

14
``Those are dummied-up, fake e-mails,'' says Gibbons's lawyer, Abbe Lowell of McDermott
Will & Emery in Washington. No criminal charges have been filed against Gibbons or
Montgomery.
Natalie Collins, a spokeswoman for the U.S. Attorney's Office in Nevada, says she can't
comment 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 believed
Montgomery'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 the
case to the attorneys involved. Before doing so, Pro ordered the Department of Defense to
redact 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 its
first look at evidence the FBI had gathered before searching Montgomery's house. It paints an
unflattering picture.
One document is a report from an Air Force investigator on his interview with eTreppid
employee Jesse Anderson on Jan. 24 and 25, 2006. Anderson says Montgomery asked him on
about 40 occasions to help with the demonstrations of the company's software in which it
identified the bazooka. Each time, Montgomery told Anderson to watch a video on his computer
screen 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 fact
that the FBI allowed documents to be released describing Montgomery's assertion that his
software could detect ``noise'' in Al-Jazeera broadcasts indicating terrorist attacks were
imminent -- 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 is
seeking 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 inflammatory
allegations,'' she wrote in an e-mail. `Ì also will not speculate on the motivations of those who
may be furthering these inaccurate and counterproductive rumors. What I can tell you is that I

14
and my business associates have and always will operate with the highest legal and ethical
standards 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 sell
the software. Montgomery maintains through his lawyers that the software is his alone and very
valuable. Few people know for sure because Montgomery has refused to produce the code in
court.
Montgomery's lawyers at Liner Yankelevitz Sunshine & Regenstreif LLP in Los Angeles say
the computer code can't be made part of any court record. ``The source code to be produced is
among the very most sensitive of such material -- worth millions or tens of millions of dollars
and 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 and
education will not.''
Blixseth fought for control of the Yellowstone Club and won. Now, she's fighting to protect
Montgomery'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
aeffinger@bloomberg.net
To contact the editor responsible for this story: Laura Colby at lcolby@bloomberg.net
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EXHIBIT 11

10
Page 1
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 and
Mexican 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.

10
Page 2
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. Play
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

10
Page 3
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 shows
Montgomery 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

10
Page 4
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

10
Page 5
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 by
unmanned 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 secretly
communicating 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

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Page 6
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't
known. 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 operation
consisted 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 still
interested 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

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Page 7
spend it or not.
"Paul," Montgomery said, "why does it have to stop because [Trepp]is a prick?" The government money could flow
even if it went to him rather than to eTreppid. Haraldsen tried to egg him on with promises he'd tell Washington to buy
more of the Al Jazeera information. "Where do I go from here?" Haraldsen asked. "What do I tell the people back in
D.C.? Do I tell them to forget about the money and put it away?""Absolutely not," Montgomery said.
Montgomery and Trepp were soon in a no-holds-barred federal lawsuit. Each sued the other. Trepp obviously
believed Montgomery's technology was real because he pursued the lawsuit with a vengeance. Montgomery, on the
other hand, accused Trepp of trying to steal his inventions. Montgomery claimed he needed to bring the U.S.
intelligence establishment into the case. He went so far as to name the Department of Defense as a defendant.
Eventually Director of National Intelligence John Negroponte weighed in. What secrets--what
embarrassments--could be exposed if Montgomery and Trepp were to depose intelligence and military officials?
Negroponte issued a declaration that warned of "serious, and in some cases exceptionally grave, damage to the national
security of the UnitedStates." He invoked the state secrets privilege. The judge in the case issued a protective order; the
secrets of eTreppid's government business would remain untold.
Trepp had deep pockets and a collection of associates who could bankroll him, but Montgomery had a new patron,
someone with tremendous financial resources and connections in Washington, D.C. Her name was Edra Blixseth, wife
of billionaire developer Tim Blixseth. The Blixseths had made their reputations as founders of the exclusive
Yellowstone Club in Montana, a resort for the fabulously wealthy. Membership cost a quarter of a million dollars, but
once there, vacationers like Bill Gates or Dan Quayle could enjoy "private powder" in the company of other elites.
The Blixseths lived in a $200 million estate called Porcupine Creek in Rancho Mirage, California. It had a private
golf course and a 30,000-square-foot mansion set among manicured gardens. This is where Montgomery pursued the
next stage of his career as a software programmer.
A document in Superior Court in California--now unsealed--reveals how Montgomery explained his inventions and
intelligence work for theU.S. government to Blixseth, her lawyers and her partners. He would pull out his laptop,
demonstrate his software and brag how he was "decoding Al Jazeera broadcasts and using it for other 'top secret'
programs." He found a new lawyer for his case against Trepp. He told him he had been "intercepting Al Qaeda 'target
coordinates' for proposed terrorist attacks sent to its field operatives via digital Al Jazeerasatellite TV network
transmissions." Montgomery also told his lawyerthe Department of Defense "paid approximately $30 million in
contracts and appropriated another $100 million in their 'black budget.'"
In July 2006 Montgomery and Blixseth pitched their technology to an aide to Vice President Cheney. "I met for
several hours with Samantha Ravich, deputy assistant to the vice president in charge of national security," Montgomery
asserted in a sworn statement. His word may be suspect, but there is corroborating evidence. Ravich listened to
Montgomery and Blixseth, but she was--even in Montgomery's recollection--unimpressed by his claims.
Still, Montgomery hailed his meeting as a victory. He claimed he provided Cheney's office with new output data on
terror that would validate his work. He said the data, which had been encrypted in Al Jazeera, were the keys that
allowed investigators to crack the liquid-bomb plot in London. On August 9, 2006 British police rounded up two dozen
suspects and announced they'd halted a plan to bomb several transcontinental flights at once. Montgomery swore his
warning was "used inthe disruption of that threat." In another declaration he said he "provided the output from [his]
decoding programs, without compensation, to our government in order to stop terrorist attacks and save American
lives."
Montgomery was now making $100,000 a month as a software programmer. He worked for companies with
different names, but they all received funding from Edra Blixseth. Montgomery had a home in a serene
gatedcommunity in Rancho Mirage not far from Blixseth's estate. He drove a $70,000 Porsche Cayenne GTS, and his

10
Page 8
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, with
special 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 he
claimed 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

10
Page 9
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 me
the 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
EXHIBIT 13
Obamas Counterterror Czar Gave Bogus Intel to Bush White House | Defe... Page 1 of 4
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Obamas Counterterror Czar Gave Bogus Intel to Bush White

House
Oct. 1, 2012 - 07:59AM | By ARAM ROSTON |
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As head of the multi-agency Terrorist Threat Integration Center in 2003 and 2004, John Brennan, now counterterrorism
adviser to President Obama, disseminated to the Bush White House a stream of CIA intelligence from a bogus source,
former CIA officials say. Brennan is seen above in August. (Saul Loeb / AFP)
FILED UNDER
C4ISR
C4ISR01
More Headlines
President Obamas counterterrorism adviser, John Brennan, is the

White House point man for the war on al-Qaida and its affiliates.
Hes the key official coordinating the administrations targeted
killing of suspected terrorists with air strikes launched from drones
ADVERTISEMENT
flying over Pakistan, Yemen and Somalia. But Brennan is carrying

around some unpleasant baggage that has remained a secret.
As head of the multi-agency Terrorist Threat Integration Center in
2003 and 2004, Brennan disseminated to the Bush White House a
stream of CIA intelligence from a bogus source, former CIA officials
say. Ridiculed by some with the CIA, the bogus intelligence
nevertheless led to disruption in the U.S. and abroad, including an
orange terror alert and the cancellation of dozens of international
flights.
http://www.defensenews.com/article/20121001/C4ISR01/310010001
3/20/2015
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.
Brennans 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 CIAs
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
communitys 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 CIAs 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 CIAs
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 alive, 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 wouldnt
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.
3/20/2015
Another former intelligence official also confirmed that Brennan
pushed the information to the White House, even as intelligence
officials back at the agency were convinced the information was a
fraud.
Brennan declined a request for an interview for this story, but
Tommy Vietor, a spokesman for Obamas National Security
Council, conceded that Brennan had passed on the information,
since he was the head of the TTIC, but Vietor said Brennan was not
central to the incident.
Your story is completely wrong, he said.
Vietor said Brennan didnt believe the information himself but had
simply passed on information that the CIA had developed.
It is absolutely wrong to say Mr. Brennan believed in the veracity of
the information, he said.
A senior intelligence official who was involved in the issue pointed
out that tensions were high in the wake of 9/11.
It is really important to remember the context of this event, the
official said. The trauma of 9/11 was very fresh, and the potential
threat information surfaced during one of the busiest travel times of
the year. Treating the information as potentially credible before
determining otherwise was absolutely the only responsible
approach.
The Terrorist Threat Integration Center was renamed the National
Counter Terrorism Center in 2004. Brennan left government in
2005 and led a contracting firm that specialized in threat analysis
until he became a key counterterrorism adviser to Obama.
Brennan now is a powerful figure in Obamas counterterrorism
efforts and has received glowing reviews from his colleagues. One,
quoted in the New York Times, said Brennan was like a priest with
extremely strong moral values who was suddenly charged with
leading a war.
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EXHIBIT 17
Case
09-00014-RBK
1:15-cv-20782-JEM
Doc#: 473-1
Document
Filed:203-17
01/16/10
Entered
Entered:
on FLSD
01/16/10
Docket
12:48:30
12/14/2015
Page 1Page
of 282 of
29
Michael J. Flynn, Admitted Pro Hac Vice

One Central Plaza, Suite 240
Boston, MA 02108
Telephone: 858-775-7624
Facsimile: 858-759-0711
Email: mike@mjfesq.com
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
Case
09-00014-RBK
1:15-cv-20782-JEM
Doc#: 473-1
Document
Filed:203-17
01/16/10
Entered
Entered:
on FLSD
01/16/10
Docket
12:48:30
12/14/2015
Page 2Page
of 283 of
29
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 EBs 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,
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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 EBs 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
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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 EBs 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 EBs financial status based upon her liabilities disclosed in Exhibits 1 and 2; and contained in
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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
EBs 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 EBs 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 EBs 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.
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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 CHCs
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 EBs 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.
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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 SBs 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 DLCs 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 arent 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 dont 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
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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 EBs 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.
SBs knowledge of said post petition perjury by EB involves issues relating to
bad faith and exculpation, and Tim Blixseths rights to cross-claim against SB, CHC and
Credit Suisse, al of which issues are now on appeal.
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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 Blixseths and Michael Flynns
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
Montgomerys technology, now publicly exposed as involving a massive fraud on the U.S.
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government. The fraudulent technology is owned by EBs company, Blxware. The Blxware
valuation on EBs 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 Montgomerys 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 EBs 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 Montgomerys lack of source codes with respect to
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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 TBs computers, which has interfered with TBs 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.
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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 Montgomerys
fabrication of two purported bribery emails allegedly evidencing
Warren Trepps 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 EBs

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
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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 EBs 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 EBs 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
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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 TBs 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 TBs 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
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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 LeMonds counsel, who was then suing Tim Blixseth and the
YC. Klar knew LeMonds interests were adverse to the marital
community.
August 14, 2007:
EB / Klars 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 EBs 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, 2008March 21, 2008:
During this time frame, SB informed Robert Sumpter that he knew about,
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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
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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
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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 SBs 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: EBs bookkeeper, Jory Russell was caught under oath destroying Edras
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 Kinkos fax cover sheet and / or copies of the letters with an
unredacted fax header from Kinko's in Boston relating to SBs 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. Attorneys office in
Washington D.C. and Montana.
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December, 2009:
TB located numerous web-sites and email addresses that parallel or

mirror sites and addresses of EBs 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 Montgomerys 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 Blixseths 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
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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
Russells 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. Blixseths 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
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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 Courts 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 wifes 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. Blixseths 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 bankers 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.
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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
wasnt 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 Blixseths 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 Edras lap topor yeah,
Edras 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
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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, EBs 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, EBs 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
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printed documents printed out the evening of June 23, 2009; and the chain of custody of the
foot and a half is unknown..
28.
At the June 24, 2009 exam, Mr. Deschenes engaged in what can only be called an
intentional charade using Russell as a dupe. Neither Russell or Mr. Deschenes ever mentioned
the two computers, or the foot and a half of documents given to him the night before by
Russell, or the 3' of documents printed out the night before from the lap top given to Blixseth /
Deschenes that evening. Instead, Mr. Deschenes had Russell produce about 4 inches of
emails mostly relating to attorneys, which he claimed were from his wifes computer, which
Deschenes then asserted the attorney client privilege on. (Tr, 6.24.09 pp. 1-51). The production
of the 4" of printed documents from the wifes computer constitutes an admission that Russell,
Mr. Deschenes and EB had a duty to produce the other computers and printed documents.
29.
Mr. Deschenes then carried on this Roselli charade in the context of the 4" of
produced documents, the attorney client privilege, and a privilege log in what is shocking
deception relating to the subpoenaed computers, the subpoenaed foot and a half of documents
that Russell actually possessed, all given to him the night before while using the 4" of
documents as a cover, and the subsequent destruction of the contents of the computers the
following day. Tr. 6.24.09 p. p. 4o to 50. Specifically, under the cover of the 4" of emails
relating to the attorney client privilege and not providing the non- privileged documents, with
Western Capitals lawyer who were demanding that they be given to the court reporter at the
June 24th deposition, Mr. Deschenes stated at p. 46 L. 10-12:
No. Were not going to give them to you today because of the other deal. We dont
want to have these things produced if were....
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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, EBs 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, Byrnes 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
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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 Courts 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 courts 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. Blixseths 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. . Russells 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
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day; (Id. 52 L. 9-25) ; and that the documents (Id 56 L. 9-12) was [sic] no longer my
property and I shouldnt have it. (Id. L. 19-21). Gary Deschenes specifically told him that the
lap top was not Russells 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. Russells 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 Russells 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
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top and desktop will be produced at an evidentiary hearing.)

38. Given M. Blixseths 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
28

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EXHIBIT 18

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Patrick T. Fox (#8071)

DOUBEK & PYFER LLP
PO Box 236
Helena MT 59624
406 442 7830 ph
406 442 7839 fax
patrickfox@doubekpyfer.com
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MONTANA
Chapter 11
Case No. 08-61570
YELLOWSTONE MOUNTAIN CLUB, LLC,

et al.,
Also applicable to Adv. Case No. 09-64, 0918, 09-14, 10-15, 10-88
Debtors.
SUPPLEMENTAL AFFIDAVIT OF
TIMOTHY L. BLIXSETH
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;
1

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regardless of the evidence, including evidence showing that it is a fraudulent bankruptcy planned
bias and actual bias toward me because I have attempted to show the true cause of the
bankruptcy.
conduct
law permits, and more as recited in my Motion, not only appears to support an apparent bias
against me, and that he is not impartial, but that he also has an actual bias against me. His bias
has not only resulted in a violation of my right to have a fair and impartial judge, it has, so far,
effectively protected Edra Blixseth from criminal prosecution for her financial frauds of millions
of dollars; attempted to undermine the effectiveness of my lawyers, Michael Flynn, and C.J.
Conant, by advancing inaccurate issues involving the States Secrets Privilege resulting in the
cover up the frauds of Edra Blixseth on the U.S. government and others including myself and
creditors of her Estate, and continued concealment of ex parte communications with my
adversaries.
5.
Consistently, Judge Kirscher has employed ex parte communications, false
attacks on my credibility and character, distortions of the facts, and repeated deprivations of my
due process rights within multiple bankruptcy proceedings resulting in the protection of Edra
Blixseth and Samuel Byrne, and others, while seeking to undo specific Orders, the releases,
discovery and hearings matters in expansively contested divorce proceedings involving my
thousands of pages of discovery in connection with EVERY discovery request ordered by the
Court and given to Ms. Blixseth and her army of lawyers. He has effectively substituted himself
for the divorce judge in California which resulted in
use of the divorce

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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

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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. 20423, Case No. 08-61570 as well as Docket No. 309, Case No. 09-18) to the Motion to Disqualify.
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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 ongoing 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;

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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

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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 with
you: 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).
...
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[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
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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 some
dialogue 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 that
arise 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

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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 never
submitted 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 31:1032:8)
...
[DAVE COTNER]: And that's true if you are talking about the
Atigeo 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
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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 the
trustee 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.
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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
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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
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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-
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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:
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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, Cotner
chose 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 Cotner
astray. 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
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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
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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 to
filing 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 presented
for 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
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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
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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
before he ruled that Ms. Blixseth
debt;
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.
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(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. 115118; 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
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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.
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(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
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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
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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
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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
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- 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
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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. 0914). 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
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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. 18:2225 (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-
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preferred to enter a more definite Judgment, the Court did not have enough facts to determine
30.
From a re
its treatment of me is that it adjudicates matters against me based on affidavits, but if I seek relief
from Judge Kirscher, affidavits are insufficient. From my perspective, this is just one
manifestation of the pattern and practice Judge Kirscher has employed against me, which is to
effectively insulate those findings from appellate review, while at the same time ignoring all
undisputed facts that would favor a resolution of a disputed issue in my favor. For example,
Judge Kirscher employed this method in his 135-page memorandum of decision in AP-14
wherein he throughout states that he views me and my witnesses as not credible, while ignoring
the undisputed facts of the bad faith and Sam Byrne and Edra Blixseth, the undisputed fact that
my marital assets were not divided in collusion with Edra Blixseth but were divided after years
of contentious divorce proceedings, the undisputed fact that the releases I received from the
Yellowstone Club entities were a material consideration for me relinquishing my ownership of
those entities to Edra Blixseth (so that Ms. Blixseth, on behalf of the Yellowstone Club entities,
could receive a promised $100 million capital infusion from CrossHarbor, which of course never
happened).
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CERTIFICATE OF SERVICE
I, Patrick Fox, hereby certify under penalty of perjury that on the 17 th 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, I
hereby certify that I have mailed or served the document to the following non-ECF participants
in the manner indicated by the nonNo manual recipients.
By /s/ Patrick Fox
32

10
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EXHIBIT 20
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EXHIBIT 24
EXHIBIT 25
EXHIBIT 26
EXHIBIT 27

Montgomery V Risen #203 Risen Decl With Exhibits

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UNITED STATES DISTRICT COURT

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

I have reviewed Montgomerys Amended Complaint in this action.

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RELIANCE ON PRIOR MEDIA COVERAGE OF MONTGOMERY

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RELIANCE ON PUBLIC RECORDS

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FBI reports that:

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

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