Apparently, we reserved judgment on Highland Capital a little too quickly. Flooded with emails from the smartest hive mind in the business (our readers) we've had brushed, right before our eyes like watching a street performer with three cans of spray paint and a trancelike tune seeping out of an ancient boom-box, a picture of comic proportions. We were not convinced, frankly. Until we found a certain article about a certain someone in a September 2006 edition of The Dallas Morning News. The resulting sketch was best described by one of our readers as, "...a caricature of the worst of moronic hedge fund stereotypes, simply destined to be impaled with spectacular drama by its own laboriously honed hubris." How could we not investigate?

Things start of with the typical level of douchebaggery you would expect both from the subjects and author of such an article:

Highland's phenomenal growth has gone hand in hand with a tough work ethic, including a rigorous hiring process and mandatory 60-hour workweeks. The firm is also known for its aggressive legal tactics.

Named after the enclave where Mr. Dondero and many of his 75 investment professionals live, Highland makes money in a number of different ways, including earning fees for managing high-yield debt.

But it quickly gets nasty:

But interviews with Highland's executives, investors and others -- as well as a review of numerous lawsuits -- provide a rare look at Mr. Dondero and his 13-year-old firm. More than a thousand miles from Wall Street, Mr. Dondero and his longtime business partner, Mark Okada, have assembled a team of hard-charging financial analysts and portfolio managers who often can be found at their desks dressed in Hawaiian shirts, shorts and flip flops. Mr. Dondero cultivates a taste for the unusual. Pressed about rumors that he has hunted giraffes, he would only admit, "Giraffe makes very tasty jerky."

More Dallas dirt, after the jump.

Before turning downright (and wonderfully) mean:

At Highland, Mr. Dondero has fostered a culture that treasures hard work. Employment contracts mandate the extra-long workweeks. Caterers bring in meals so employees don't have to leave their desks. And everybody must log into a software program that tracks work hours.

"You have to be committed and passionate every day," said Paul Adkins, chief executive of Moll Industries Inc., a Dallas-based custom injection molder controlled by Highland.

"Nobody's thinking about compensation," he said. "You're in it because of ego, you're in it because of intellect, you're in it because your desire to win forces you to."

He works at least six days a week, sometimes seven. Even on Father's Day, Mr. Adkins, a father of one, was in Michigan visiting a customer.

Mr. Dondero credits hard work for the firm's growth.

"This business is populated by a fair number of our competitors who have more of a rock star approach and a vacation approach," he said. "We've had more of a 'try to work as hard as any of our investors would work' attitude.

"We make 15 to 20 employees a year millionaires," he added. "It's a high-intensity environment. It's not for everyone."

Highland gives job applicants a few days to complete a case study. The assignment enables the firm to assess candidates' analytical capabilities and writing and financial modeling skills, said Jack Yang, Highland's head of business development.

Highland views its Dallas location as a benefit, allowing it to attract a more diverse group of people than the average New York investment firm. Besides Wall Street finance whizzes, it has hired engineers, lawyers and military officers.

Like all good poison pen letters, the Dallas Morning News sprinkles some fantastic tidbits. To wit:

Both Mr. Dondero and Mr. Okada fiercely guard their privacy. For this story, both agreed to be interviewed only by telephone. They declined to be photographed and shied away from questions about their families.

Or:

Today Mr. Dondero works 70-hour weeks and sometimes goes months without leaving Dallas.

That is dedication.

"On the personality tests, I test out as the carpenter."

Highland displays a softer side outside the business world. It's been a sponsor of the American Cancer Society's annual Cattle Baron's Ball in Dallas and last year received the organization's "Caring Spirit Award." It also supports local fundraising races for the National Multiple Sclerosis Society and other groups.

Highland's chief investment officer sometimes arrives for Saturday breakfasts at a La Madeleine cafe on a skateboard.

Some of the lawsuits filed against Highland and Mr. Dondero also show how tough the firm can be. In one of them, Joshua Wheelock, a trader of collateralized debt obligations at UBS Securities, alleged that he lost his job because of Mr. Dondero.

According to the lawsuit, Mr. Wheelock wouldn't tell Mr. Dondero that UBS had won an auction for a collateralized debt obligation product. That allegedly prompted Mr. Dondero to tell UBS that it would pull its business unless Mr. Wheelock was fired.

The lawsuit also claims that Mr. Dondero told one or more of Mr. Wheelock's prospective employers that Highland would withdraw its business from them if they hired him.

We'll just close with this:

HIGHLAND'S MARKET PICKS Company Market value of Highland's stake

1. Leap Wireless International $222,307,000

2. Mirant $131,670,000

3. Horizon Offshore $37,547,000

4. Walgreen $33,630,000

5. Loral Space & Communications $25,078,000

6. NRG Energy $23,859,000

7. Gray Television $21,387,000

8. Trump Entertainment Resorts $17,969,000

9. Murphy Oil $16,803,000

10. Hess $15,564,000