Maverick investor faces legal pressure

Two decades ago, he was one of three young traders who made $27 million in 22 days trading the stock of a bankrupt company on the Chicago Stock Exchange, becoming known as one of "the bad boys of arbitrage."

Assessing that deal, a federal appeals court judge said that Leon "Chip" Greenblatt and his associates "may be reckless gamblers, sharpies, wise guys, exploiters of loopholes, even violators of the letter or spirit of the rules." But, he added, they did not break a law.

Since then, Greenblatt has developed a complex and intertwined array of business ventures and investments, delving into real estate and an online startup as well as gas and alternative energy. But parts of his approach have not changed: He still takes creative risks while spawning lawsuits and recriminations.

In a financial world of order and tradition, Greenblatt, 54, remains proudly unorthodox.

He stamps his companies with quirky names, like Passing Gas Inc. and Rumpelstiltskin. He shuns dark suits and ties in favor of khakis and sneakers and the occasional outlandish outfit for a court appearance, according to friends, associates and attorneys familiar with Greenblatt. At a charity event, he once complemented his tuxedo with black sneakers with flashing lights.

"He's like the TV commercial character — he's the most interesting man alive," said Kevin Werner, who for years has worked with Greenblatt, referring to the ads for Dos Equis beer.

But Greenblatt does not always elicit such admiration. Judges have labeled him "evasive" and his testimony "incredible." A federal judge once noted his "well-earned reputation for sailing close to the wind" and another took him to task for his companies' "convoluted web of entities, insider transactions and sham loans."

Since the early 1990s, he or his companies have filed at least 70 lawsuits, while nearly twice that many have been brought against him and companies linked to him alleging investor losses, unpaid bills and loans, violations of bankruptcy laws and improper payments to his partners.

Legal pressures are only intensifying. Greenblatt has been threatened with contempt of court in Texas, and an appeals court recently affirmed a ruling making him personally liable for more than $1 million owed to a bank. As part of a criminal investigation, IRS agents are examining clean-energy tax credit deals he is involved with, according to court records.

Those tax credit deals also have prompted three Cook County lawsuits against a Chicago law firm that has long worked with Greenblatt. Almost two dozen retired and current NFL players — including former Bear Kyle Orton — allege fraud, saying they received bad advice on an investment that unraveled.

Greenblatt and his attorney, Thomas Durkin, known for his work in high-profile criminal cases, declined to comment for this story.

In interviews, friends and associates describe Greenblatt as an intelligent businessman and creative thinker who finds a way to triumph in court and in the business world.

"Mr. Greenblatt's a very smart gentleman and a very worthy adversary. Very smart — with a lot of money," said Jay Steinberg, once a trustee in a bankruptcy case involving Greenblatt. "The bottom line is, regardless of what happened, he's still walking around."

Unusual methods

The center of Greenblatt's business world is a maze of interconnected rooms, cluttered with papers and files, on the seventh floor of a historic Chicago office building at 330 S. Wells St. that a Greenblatt-linked company owns through a trust.

The building shows its age. Wallpaper is peeling; elevators run slowly or not at all. Lawrence Mikolajczyk, who managed one of the landfills where Greenblatt's energy company operated equipment, said pizza boxes littered the floor of Greenblatt's office.

"It was like a really bad Mickey Spillane movie," Mikolajczyk said. "They all had on those three pinch crown hats and just massive stacks of paper everywhere. It was dark, dreary."

Greenblatt, who is married and has three children, lives in a condo overlooking Lincoln Park, one of three vintage units he bought in the 1990s. He is a voracious reader and collects rare valuables like antique books, stamps and furniture, according to records and interviews with friends and associates.

But, they said, Greenblatt is not interested in the trappings of material success like swanky offices, luxury cars and fancy clothes.

"Those things don't matter to him as much as being right, being smart and being successful," said David Neuhauser, his former clerk who spent seven years working with him.