Can someone fail an ATP check ride and still exercise 135 fo privileges before completing the ATP successfully.

Sure can,....

Yep unless they failed so bad they got their commercial jerked.

I wonder if that's ever happened... scary to think someone might get so far...

Yes, it happens. I know of a guy who went from ATP/CFI/CFII to PPL (Day/VFR Only).

Lots of ways to fail a ride if the examiner feels u deserve to. Happens all the time, some reasons better than others.

Ouch - sounds like my portfolio Can you elaborate and still protect the party? Just curious what egregious fouls caused such a fall.

If you boot the ride badly enough, they can revoke your driver's license, library card, and APC membership!

I heard of that happening as well, but in this case the instructor administering the guy's ATP discovered his logbook was largely a work of fiction and turned him in. The logbook search was prompted by his having such poor flying skills.