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Fund Exec Sues to Get Bonu$

Date: Wednesday, April 30, 2008
Author: Mark DeCambre, New York Post

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A former hedge fund portfolio manager is suing his former employer claiming he was stiffed on his compensation at a time when he needed cash to care for his cancer-stricken son.

Stephen Czech claims that Jonathan Bauer, who runs the roughly $4 billion Contrarian Capital Management in Greenwich, Conn., is withholding Czech's regular base pay and bonus "arbitrarily," according to a lawsuit filed in state court in Stamford.

The teeth of the complaint centers on an approved personal leave of absence that Czech had taken from Jan. 6 to Feb. 16 to seek medical attention for his 11-year-old son, who had been diagnosed with an inoperable brain tumor.

Czech alleges that during his leave his already shaky relationship with Bauer became contentious as Bauer became increasingly unreasonable about paying more than $1 million in total compensation owed to him.

Czech was racing to gather funds for pre- and post-operative medical attention to save his son's life and treat a plum-size tumor at the base of his brain stem.

Calls and an e-mail to Bauer requesting comment were not returned, and Czech declined to comment about the lawsuit.

A former Credit Suisse banker, Czech had been employed at Contrarian for about five years and was hired to jump-start a lending-focused investment fund known as Contrarian Capital Finance.

Bauer's main argument for withholding his former portfolio manager's compensation was that a portion of it (about 25 percent after taxes) needed to be reinvested into the roughly $220 million investment vehicle or a yet-to-be-formed fund.

Communicating mostly via e-mail and BlackBerry, Czech had made attempts to settle the matter amicably over the past two months, but excerpts of e-mails filed along with the lawsuit depict Bauer as freezing up his employee's access to much-needed capital.

"Sorry for the confusion. Never meant to suggest that we had any intention of waiving the 25 percent requirement," read one e-mail Bauer sent to Czech on Feb. 16.

Bauer has since disbanded the fund Czech ran and has not launched a new lending fund, the lawsuit notes. Czech was let go by Contrarian early last month.

Meanwhile, successful medical treatment has helped Czech's son's brain tumor shrink to the size of a pea.

At this point, Stamford, Conn.-based Zeldes, Needle & Cooper and Manhattan-based Liddle & Robinson represent Czech in the suit.

Czech also has kicked off his own financing fund, SJC Capital Partners, which aims to raise some $1 billion in cash, according to people familiar with the matter.