On December 20, 2010, one of the top performing hedge fund managers of 2010, Structured Portfolio Management, LLC (SPM), as well as its affiliates, sued their former Portfolio Manager, Jeffrey Kong, in the District of Stamford, Connecticut Superior Court.  SPM’s complaint, which painted Kong as a disgruntled former employee who merely had access to its confidential investment strategies, sought to enjoin Kong from joining and disclosing SPM trade secrets to Passport Capital LLC, a rival global macro hedge fund manager, and to recover over $10.8 million in distributions and bonuses given to Kong prior to his resignation.  On February 4, 2011, Kong filed counterclaims against SPM.  In his cross-complaint, he took credit for putting SPM “on the map,” hiring its top portfolio team members, and spearheading and adjusting its most successful investment strategies, including those that resulted in the notable returns generated by SPM funds in 2009 and 2010.  Kong also protested SPM’s failure to pay him the industry standard performance fee as a cash bonus, which for those two years, allegedly should have totaled $49 million more than he had received.  Kong also demanded an accounting of his remaining equity stake in SPM, which he believed had a value of more than $25 million.  While the matter has settled, the complaints provide unique insight into high-level compensation arrangements at a successful hedge fund management company, as well as the types of legal allegations that disputes over such compensation arrangements may involve.  As the pace of talent mobility in the hedge fund industry picks up, managers face compensation structuring decisions with increasing frequency, and the stakes of those decisions are considerable.  To get compensation decisions right, it is critical to understand what can go wrong.  Accordingly, this article provides extensive detail on the factual and legal allegations in the SPM and Kong complaints.