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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

June 25, 2008 at 8:00 PM

Billionaire divorcee suing ex-Microsoft manager’s Bellevue startup

It’s too bad Edra Blixseth and Michael Sandoval couldn’t settle their business differences over a bottle of wine — without any lawyers, judges or accountants.

But instead, a feud over Blixseth’s investment in Sandoval’s ventures is unfolding in King County Superior Court.

Blixseth and her ex-husband, Tim, are billionaire real estate investors embroiled in one of the country’s highest profile divorces. It was profiled on the front page of the Wall Street Journal in a January 2007 story headlined “A Billionaire Divorce — and not a lawyer in sight.” An excerpt:

When they decided to divorce, they spent a single afternoon in the Beverly Hills Hotel, dividing it all up. With just two notebooks and a bottle of wine, the Blixseths — California real-estate tycoons and founders of the famed Yellowstone Club — finished the job in a matter of hours.

No attorneys. No accountants. No judges.

That didn’t last long. It’s now a hugely complicated case in California and Montana, with lawyers, accountants and judges to spare.

Edra Blixseth did receive the couple’s investments in Sandoval’s companies, which are now the subject of the suit filed in Seattle on June 16.

Sandoval spent 10 years at Microsoft, ending as director of partner strategy, before he started Atigeo in 2005. The mobile social networking venture started in his Kirkland home and is now based in Bellevue.

The suit alleges that Sandoval and his companies — Bellevue mobile social networking venture Atigeo and a related company called xPatterns — misused the $10 million she invested in xPatterns. Blixseth also invested $8 million in another related company called Opspring.

Blixseth became concerned about her investment, the suit says, after Sandoval borrowed $5.75 million of the money to buy real estate in Kirkland. She moved to withdraw her $10 million and split Opspring into a separate company, and the parties reached a repayment agreement in March 2007 that she now believes has been undermined.

Atigeo received around $12 million in additional funding last year that could be used to repay Blixseth, according to her attorney, Larry Locker, at Summit Law Group.

“We think that we’re probably going to have to get it from that,” he said. “As long as we get the money, how they do it really isn’t our concern.”

Don’t angel investors lose money on startups all the time? Locker said this is different.

“This was an instance where she invested her money and the money didn’t go into all this software development — about the first thing that happened was they loaned $5.75 million of her $10 million to the CEO of this small company … so he could go out and buy real estate. This was for his house and he put it in a family trust.”

Sandoval, reached at his office today, denied the allegations and specifically said “no” when asked if he used her money to buy himself a house. He said it will be sorted out in court.

“The reality of the situation is that I’m very confident that we lived up to our side of the agreement and that will become clearly evident in a very short period of time,” he said.

Sandoval said he’s going to respect the confidentiality pact over the March 2007 agreement. He said a response should be filed in about 10 days.

“I don’t know what her logic is — the allegations are pretty shocking,” he said.

Sandoval said Atigeo is doing fine and has actually grown since parting ways with Blixseth.

“We’re privately funded; we’re in good shape,” he said.

A lot of money is at stake, but it pales next to the assets in the divorce case. The biggest is the Yellowstone Club, a private golf and ski resort in Montana that reportedly includes members such as Bill Gates.

For the latest on the Yellowstone spat, here’s a story that appeared Tuesday in the Bozeman Daily Chronicle. Apparently she’s seeking an emergency restraining order to put her in charge of the club because she thinks her ex-husband is running it into the ground, but a judge said he can stay in charge for a while.

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