WHEN THE 260 EMPLOYEES OF HIGHLAND CAPITAL MANagement gathered at the Lake Las Vegas resort in southern Nevada on August 9 for their annual company retreat, few felt like celebrating. The markets for high-risk loans and bonds, the Dallas-based firm's investment specialties, were in turmoil, and deep losses were spreading throughout the financial world. Even the posh venue -- a 3,600-acre complex featuring three championship golf courses, two world-class spas and a giant, man-made lake carved into the desert -- offered an eerie reminder of market troubles: Highland had gotten a sweet deal on the place after buying a big piece of a $540 million loan that the developers, Texas investors Lee and Sid Bass, had taken out in June to keep the resort afloat. But if many of their staffers were jittery, the senior managers of the firm, founded in 1993 by James Dondero and Mark Okada, were determined,...