Drew Doscher is not afraid of the inside of a courtroom. His former partners at Seaport Group know this. After all, in addition to being former partners at a boutique investment bank, they are also former partners at the exquisitely trashy Sloppy Tuna in Montauk, in which capacity they have been involved in no fewer than 11 lawsuits over the future of that establishment.
Those lawsuits were preceded, unsurprisingly, by the circumstances under which Doscher became a former partner of the Seaport Group. Having become, in his own words “the top producer of commissions and revenue for the entire firm,” raking in more than the other three top men combined, and becoming “the face of Seaport,” the firm’s two official partners decided they should formalize what Doscher called “our already-existing partnership.” Suffice it to say, this did not go according to plan, and instead of formalizing the already existing, it extinguished it, with Doscher getting canned at the beginning of 2013, or as he more delicately but legally-importantly puts it, “improperly excluded from the business.”
This predictably led to a formal adversarial process, specifically a FINRA arbitration case in which Doscher sought the $15 million (or more!) he said his partnership was worth. But disappointingly, he chose not to get into detail about why, exactly, he’d been fired, simply saying that the other three “violated the applicable FINRA front-running policy at the time.”
Still, given Doscher’s growing litigiousness vis-à-vis a certain Montauk meat market, you’d think the remaining three partners at Seaport would like to keep it to that juicy but vague allegation, and would do what it took to avoid a full recitation of alleged misdeeds out of a publicly-available court filing. You know, perhaps by not continuing to scheme to screw him over, or appearing to do so. This is not the strategy they chose, leading Doscher to believe they conspired with his own lawyers (who were also Seaport’s lawyers) to hide 5,000 pages of evidence from him, which ensured that when the arbitrators made their decision, Doscher got only $2.3 million, and not $15 million (or more!).
No points for guessing what happens next.
Doscher discovered that the firm’s other partners were engaging in and sanctioning multiple illegal trading schemes. Among other things, Doscher discovered that his partner, Stephen Smith, with the other partners’ approval, was maintaining a secret “backbook” in which the firm was privately operating its own hedge fund in which it traded on its own account while at the same time misrepresenting to its clients that it was merely an “agency” firm that exclusively executed trades on behalf of its clients.
There’s more: Here’s the alleged “FINRA front-running” violation alluded to in the arbitration.
Worse, the firm was using this undisclosed “backbook” to illegally “front-run” and otherwise exploit its clients’ confidential information for its own benefit and for that of certain favored clients. For example, after being asked by clients to buy or sell certain securities, the firm would execute its own trades in those securities to profit from the client’s impending trades. In addition, Doscher discovered that Smith was running this secret “backbook” hedge fund while also running an investment banking business for the firm without any mechanism in place to prevent clients’ confidential investment banking information from being used in Seaport’s “backbook” trading. In one instance, Doscher learned that confidential client information about one client’s interest in a block-stock auction was used by Smith and the other partners to facilitate the bid on that same block by a different client.”
Which, you know, sounds bad! Especially if you’re an investment-banking client of Seaport’s, unless you happen to be the “different client.” Even if none of it is true—and here it should be mentioned that an earlier, federal version of Doscher’s lawsuit was thrown out of court—it is the kind of thing you probably don’t want out there, even if there’s also a Hamptons bar at stake. Luckily for us, the remaining Seaport partners do not agree that discretion is the better part of valor.