There has always been a Wall St. trend for the spotlight to shine on the smartest guy in the room at any given time. Whether they be one hit wonders or masters of marketing, once the incessant promotional nature of business related networks, print and websites start to churn out the adulation, there is no stopping it until some form of disaster strikes. In the case of Bill Ackman, the founder and CEO of Pershing Square Capital Management, disaster may be at the door, and demanding a way in.

Graduating magna cum laude from Harvard in 1988, and receiving his MBA from Harvard Business School in 1992, Ackman fits the East Coast, buttoned-down hedge fund manager style. Prematurely gray and always impeccably dressed, he has a calm demeanor that often has seemed to further his investment thesis and strategy. Nevertheless, Ackman has thrived on drama, and he has never been shy about using the media to his advantage.

His first hedge fund, Gotham Partners, was wound down in 2002 after a big bet on a golf course venture turned sour and investors asked for their money back. An attempt to salvage the investment failed when shareholders won a lawsuit preventing Ackman from merging a real estate company with the bleeding golf course company. Gotham Partners had gained notoriety in an attempt to purchase New York City landmark Rockefeller Center.

In 2002, Ackman began the herculean task of determining, and then proving, that bond insurer MBIA (NYSE: MBI) was guaranteeing untested asset-backed securities. Combing through almost three-quarters of a million pages of financial statements and other documents, Ackman persisted in challenging MBIA’s AAA credit rating for more than five years. So sure of his case against the giant insurer, he got disgraced former New York Attorney General Eliot Spitzer (who was, at the time, investigating Ackman’s own dealings), to look into MBIA. Eventually Ackman was proven right and MBIA’s stock went down in flames at the height of the mortgage crisis, falling from more than $70 in January of 2007 to less than $3 by February of 2009. Ackman’s large position in credit default swaps proved to be a huge winning trade.

With his reputation as an activist shareholder investor gaining momentum, Ackman formed Pershing Square Capital Management in 2004 with $54 million in personal funds and an investment from his former business partner, real estate firm Leucadia National. Since that time, Ackman has taken large and sometimes very successful positions in Wendy’s Corp. (NASDAQ: WEN), Target Corp. (NYSE: TGT), Borders Group (which filed for bankruptcy in 2011) and Canadian Pacific Railway Ltd. (NYSE: CP).

Ackman reemerged in the public eye with a research report in December of 2012 that was extremely critical of network marketing company Herbalife Ltd. (NYSE: HLF). Herbalife sells weight management, healthy meals and snacks, sports and fitness energy, targeted nutritional products and personal care products worldwide through a network of individual salespeople, many of whom work out of their homes. Founded in 1980, Herbalife has been a controversial company for years, and Ackman was not the first person to assail their multilevel marketing strategy. Calling it a “pyramid scheme” and disclosing a large short position, Ackman got into a well-publicized argument on CNBC with legendary investor Carl Icahn. Icahn chastised Ackman for the practice called “talking your own book,” which literally means discussing your investments in public. Despite Icahn’s protests and outrage, it is a common Wall St. practice. Icahn has since disclosed a large long position in Herbalife, as had hedge fund manager Dan Loeb before him.

The biggest challenge Bill Ackman and his credibility face is the current and looming debacle at iconic American retailer J.C. Penney Co. Inc. (NYSE: JCP). In 2010, in conjunction with Vornado Realty Trust (NYSE: VNO), Ackman began amassing an almost 13% stake in the company. He successfully ousted CEO Mike Ullman and installed former Apple Inc. (NASDAQ: AAPL) executive Ron Johnson, who had directed the successful introduction and roll-out of the Apple Stores. His attempt to duplicate the Apple store model in making J.C. Penney a “fun place to hang out” where customers would buy items at a full but fair price failed miserably.

For almost three years, Ackman has touted not only the vast value of the J.C. Penney real estate holdings, but also how Ron Johnson would be able to increase overall store sales and make the company a retail powerhouse. The value of the real estate is undeniable. However, the reemergence of J.C. Penney as a force in the retail world looks next to impossible. This past Monday, Ron Johnson was dismissed by the board of directors and replaced by his predecessor Mike Ullman, a strategy investors are very leery of as Ullman was at the controls when the company began its long decline.

Bill Ackman declared early on that Pershing Square Capital could make “15 times its money” if Ron Johnson’s turnaround plans succeeded. It is estimated that the current paper losses for the hedge fund are almost half a billion dollars. Ackman’s multiyear bet on the J.C. Penney turnaround may prove to be one of his costliest blunders ever. With his reputation tarnished and the hedge fund losses mounting while short sellers exploit the debacle, Ackman most likely is looking for an exit strategy. The thought of putting the J.C. Penney investment in a side pocket at Pershing Square is unlikely (side pockets are often used at hedge funds to place poor performing investments).

At the end of the day, Bill Ackman most likely survives this embarrassing episode. Even with the J.C. Penney implosion, Pershing Square returned 6.1% to investors in the first quarter of 2013. John Meriwether, the one-time Wall St. genius who almost collapsed the financial markets when his Long Term Capital Management lost $4.6 billion in less than four months in 1998, still attracts investor money to this day. John Paulson, who made billions shorting the subprime mortgage market, has seen his flagship Advantage Fund hammered by a host of ill-timed investments, yet still has a tremendous amount of investor capital under management.

Wall St., and so-called “sophisticated” investors, seem to forgive and forget pretty quickly. This may be because they are usually in charge of investing other people’s money and not their own. Since you are only as good as your last investment, a wary eye may be cast towards Bill Ackman. Do not think for a moment, though, that the last has been heard from him.

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