The Billionaire Murders

by Kevin Donovan

  As to Apotex, it was a business Sherman wanted to grow in Canada to provide jobs for Canadians. When other pharmaceutical manufacturing companies left Canada, he responded by adding more production facilities. At the time of his death, Sherman had six thousand employees in Canada and eleven thousand worldwide, including factories in Mexico and India. How he achieved that involved a combination of brinkmanship, risk, and intellect.

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  Apotex and Sherman would one day engineer a drug to help sustain the lives of a small number of young children suffering from a blood disorder. They would provide generic versions of AIDS drugs and donate them overseas. But the drug that put Sherman on the road to being a billionaire and began the meteoric rise of Apotex to the position of Canada’s leading generic company treated much more common afflictions: acid reflux and ulcers. Acid reflux is a condition in which acidic gastric fluid is regurgitated into the esophagus. At its most minor level, it is an uncomfortable feeling we call heartburn. But if it becomes chronic, there can be serious damage to the esophagus. Acid reflux can also be an indication of an ulcer. These conditions affect millions of Canadians. The Canadian Society of Intestinal Research estimates that 13 percent of Canadians have acid reflux, or a related condition, on a weekly basis.

  In 1982, the year that Jack Kay joined Apotex, relief came to sufferers when the drug Zantac was launched by GlaxoSmithKline. It rapidly became the highest selling drug in Canada and a huge money-maker for Glaxo. That information—the number of individual dosages sold—was itemized in Section L of a book chock full of prescription data sold by an American company called IMS Health (now renamed IQVIA after a series of recent mergers). The data is purchased from the pharmacies who fill the doctors’ prescriptions, and it is a helpful tool for all pharmaceutical manufacturers to track how well a product is selling. Governments and private insurers looking for trends to forecast costs also use the information. But the IMS Health data was expensive, beyond the reach of the fledgling Apotex’s purchasing power at the time. In his book about the generic industry, Trials and Triumphs, author D’Arcy Jenish quotes Sherman as saying that in the early days Honey Sherman did the company’s books, and in the late 1970s, “We were losing $10,000 a month.” The early 1980s showed an improvement in their finances, but Sherman was not about to spend thousands of dollars on the IMS subscription. Instead, he and his new employee Jack Kay figured out that they only needed the IMS pages that showed the top sellers. An official they knew in the federal government provided those. They took the top sellers—Zantac was number one—and set about seeing if they could obtain the active pharmaceutical ingredient and manufacture their own version.

  “We didn’t care what type of drug it was,” Kay says.

  Just as Sherman had done with those crumbling vitamin C tablets so many years before at Empire, he worked to come up with the correct formulation, a blend of the active ingredient and the excipients, the compounds that would make a pill that would properly deliver the active ingredient to the patient’s system.

  It took five years of product development and for the federal approval process to run its course before Apotex could bring its generic form of Zantac to market. The key ingredient was a chemical compound called ranitidine. Sherman and Kay found a supplier in Italy, which was then a major source of the chemicals that make up many pharmaceuticals. A little known fact is that most of the drugs we take these days have a connection to the petroleum industry. Ranitidine is synthesized from the chemical nitromethane, a highly toxic substance used both as a cleaning solvent and a race car fuel. Apotex’s version arrived in pharmacies in 1987, and the low-cost version was frequently substituted for Zantac. That gave sales and profits at Apotex a huge boost.

  “We were dancing,” Kay recalls. Their big competitor in the Canadian generic market, Novopharm, owned by rival Leslie Dan, was not even close to getting its version to market. In the world of generic drugs, the first company in makes the big money. The Apotex sales force visited hundreds of pharmacists and pharmacy chains, talking up the product, and individual salespeople made hundreds of thousands of dollars in commissions each from Zantac alone. Kay said he and Sherman watched the revenues climb and allowed themselves a brief pause to marvel at their success before diving into the next product launch.

  “We finally did it. We are ahead of our competitors. We are going to make a lot of money. And we had the happiest sales force in the country,” Kay says.

  As the business grew, it became clear that the acerbic Sherman should concentrate on the science and product development; Kay, with his outgoing personality and street smarts, should oversee sales. Aubrey Dan, son of Leslie Dan, remarked in an interview that when he was a young man working in his father’s business in the late 1980s, it was apparent who should be doing which job at their rival’s firm. “The more Barry connected with customers, the better we did at Novopharm.”

  The pharmaceutical world is a cutthroat business. There is a great deal of scrutiny by competitors, and by government, of the companies that make drugs, both brand name and generic. Among the Canadian generic companies, Sherman’s Apotex and Leslie Dan’s Novopharm were competing neck and neck in terms of product development and revenues at the start of the 1990s, though Apotex would eventually win the race to be first.

  Their simmering battles became nasty and public in 1993. Sherman suspected that one of his former employees, a scientist, had given proprietary information on a new drug formulation to Novopharm. Sherman hired private investigators to go through the Novopharm trash. He did not find what he was looking for. Next, Sherman and his legal team went to court to get a rare Anton Piller order, a civil search warrant giving search and seizure power that typically only police have. Jack Kay, who was present during the search at Novopharm, said he watched as the team working for Apotex went through reams of Novopharm company documents and even searched Leslie Dan’s office, with Dan standing to one side, fuming. According to court documents related to the case, Sherman found documentation that proved his company’s information had gone to Novopharm. The courts awarded Sherman and Apotex $3.7 million in damages, plus legal costs, and ordered that the Apotex research material be returned to Apotex. The already fragile relationship between Sherman and Dan, who were both significant donors to Jewish causes and would often be at the same charity events, was completely broken. Years later, Dan’s son Aubrey, a financier and theatre impresario, would become friends with both Jack Kay and Barry Sherman and work with them on a unique idea to make marijuana pills.

  While one company celebrates a success, competitors and government regulators are checking to see if the success is legitimate. In my review of many of the drugs Apotex manufactured, there never seemed to be a simple final answer to the question Who won? Litigation often went back and forth for years. Sherman and Apotex took huge risks. One day they would be down $300 million due to a loss in court after miscalculating a brand name’s ability to fight them; a month later, they would win a related battle and be up $600 million. Sherman was aggressive, and as one observer says, “Barry never took his foot off the gas.” In the summer of 2017, the year he died, Sherman and Apotex would settle one of his long-standing patent battles and agree to pay $400 million, which would be a big hit to the bottom line at a time when cash was becoming tight. For Sherman, all of this was simply the price of doing business his way.

  Zantac alone prompted high-stakes court cases and regulatory challenges. Once both brand name and generic versions of the acid reflux medicine were being sold, the Canadian tax authorities took a close look at documents that both GlaxoSmithKline and Apotex (and later Novopharm) were filing related to the expense of ranitidine, the active pharmaceutical ingredient. Federal auditors discovered that GlaxoSmithKline appeared to be wildly overpaying for ranitidine, which had the effect of raising the company’s expenses and lowering its profits and its tax bill.

  Canada took GlaxoSmithKline to court. In the y
ears assessed (the early 1990s), Apotex and Novopharm were found to have paid between $194 and $304 per kilogram to the companies that provided them the ranitidine. At the same time, GlaxoSmithKline was paying between $1,512 and $1,651 per kilogram. Tax auditors did further digging and found that the brand company was purchasing ranitidine from a related company, meaning that the price may have been set artificially high. The case went all the way to the Supreme Court of Canada, which sided with the tax authorities and sent the case back for reassessment and a trial. Before that could happen, Glaxo settled with the federal government, but the amount the company had to pay in fines and reimbursement to government coffers due to the inflated expenses has never been made public.

  With the high sales from their version of the acid reflux drug, Apotex was now the number one generic company in Canada. The 4 percent compulsory licensing royalty they were required to pass on to GlaxoSmithKline was a small price to pay. But by the late 1980s, there were strong signs that the days of compulsory licensing would soon be over. That would create much bigger challenges for Apotex, beginning in 1993, and it would give rise to the pervasive belief that Sherman was the most litigious businessman in Canada. While that is most likely true, there was a good explanation for his many court appearances.

  But for the moment, the generic Zantac success was savoured and utilized by Kay, the Apotex sales force, and others at the firm. New cars and houses were purchased, trips were taken. They had indeed made “a bit of money,” as Sherman had promised in that job interview with Jack Kay in Montreal, and they would earn more and more as the years went by. For his part, however, Sherman remained unimpressed by lavish spending, as he did for his whole life, and it confounded his friends and associates that he did not assume a lifestyle that corresponded with his growing riches. Sherman’s choice of car is the most recognizable emblem of his frugality. In thirty-five years, he would have exactly four cars, all North American–made and relatively inexpensive two-door convertibles. All would be repaired multiple times and would show rust and other signs of aging well before each was replaced.

  Jack Kay, who has always enjoyed driving a nice vehicle, recalls Sherman frequently expressing concern that employees at Apotex would think the executives who drove BMWs, Mercedes-Benzes, and Jaguars were trying to show off their wealth. He also told Kay that he just did not understand the need for an expensive vehicle. “Jack, you just need four tires and a carburetor to go from A to B. We have employees who cannot afford a car like that, and I do it because I am showing them I am a normal person,” Kay recalls him saying.

  Ed Sonshine, the founder and CEO of real estate investment trust RioCan, knew Sherman for a quarter century. As a major contributor to charitable causes himself, Sonshine is well aware of the many millions of dollars Sherman contributed over the years to Jewish and non-Jewish causes. What he notes as unusual is that, other than the decision late in their lives to start building a true mansion in Forest Hill, neither Barry nor Honey Sherman seemed to “enjoy their material success. There was something in their brains that was odd.”

  Sonshine and his wife, Fran, have a condominium in Florida, northeast of Miami, in the same complex where the Shermans had a condo. Sonshine epitomizes the “self-made man.” His parents were Holocaust survivors who’d been at the Auschwitz concentration camp, and he was, like Honey Sherman, born in a displaced persons camp. Like Barry, he has worked hard all his life, and though his own fortune pales in comparison to Sherman’s, he enjoys the finer things in life. A few years ago in Florida, he was waiting with Sherman outside their condominium entrance for the valet driver to bring his car, a Bentley convertible. Sherman’s was a rental, an older, nondescript vehicle.

  “My car comes up,” says Sonshine, “and then Barry’s comes up. He looks at the Bentley and says, ‘Did you rent that car?’ I said, ‘No, it’s my car from home. I sent it down here for the winter. A convertible’s not much good in Toronto in the winter.’ ”

  Sherman looked at the car. Then back at Sonshine. “Why would you buy a car like that?”

  “Because I really like it. It drives great. Look at it, it’s a beautiful car. Why not?”

  The valet quizzed Sonshine about Sherman, who at the time was a new resident.

  “I told him that Mr. Sherman is a very good friend of mine. I said, ‘Carlos, he is probably the richest guy in the building. Don’t be fooled by that car.’ ”

  Sonshine says it became a “shtick” for Sherman to conspicuously spend so little on material possessions, but he admits that his friend “honestly could not see the point in spending money on material items.” Often, when seated in business class on a flight to Florida, Sonshine would see Barry and Honey walk by on their way to the inexpensive seats at the back.

  “Where are you going, Barry,” Sonshine once asked.

  “Economy. It’s only a two-and-a-half-hour flight,” Sherman explained, holding up the line of snowbirds pulling overstuffed carry-on luggage behind them. “Ed, if I could get a cheaper fare and fly standing up, I would take that one.”

  In the forty-two years his personal assistant, Joanne Mauro, worked for Sherman, he owned, in chronological order, an Oldsmobile Cutlass, a Buick Reatta, a Chrysler Sebring, and a Mustang GT. All four were convertibles, the one luxury Sherman would allow. Each one he kept for roughly a decade, repairing it constantly.

  Mauro had to run an errand one day, and Sherman said, “Take my car,” which at the time was the white Buick Reatta.

  “There are no brakes!” Mauro said when she returned to Apotex. She’d had to drive at a snail’s pace, because she was afraid that whatever lining remained on the brake pads would disintegrate. The Reatta was given away to a local high school’s auto body shop after that.

  Mauro was sixteen years old in 1976 when Sherman hired her as a summer student to do typing and odd jobs. Throughout that summer and the next, she handled secretarial duties and even did some cleaning. When she graduated high school, she was offered a full-time job by Sherman. She had mused about a career in nursing, but this seemed more fun. It was not unusual for her to be presented with what others at Apotex termed Sherman’s “chicken scrawl” on a page but which she could interpret and reproduce on a typewriter as her boss’s latest formula.

  When Sherman returned from his family trip to the Serengeti, in Tanzania, during which he wrote his unfinished “A Legacy of Thoughts,” he handed the handwritten foolscap pages to Mauro, and she typed them up. In those pages, written in 1996, when he was fifty-four years old, Sherman laid out his thoughts on what a person might or should do with their financial gains. “Power and wealth bring no obligation,” he wrote. “Given that our instincts give us a desire to help others, particularly those close to us, power and wealth bring an opportunity to derive an extra measure of happiness by acting to help others, be it family, friends, members of our community, our country, or mankind at large.”

  Barry Sherman would become one of the biggest donors to charity in Canadian history, giving away hundreds of millions of dollars to Jewish and non-Jewish causes, including community centres and hospitals. As his wealth grew, people would approach him hoping he would invest in the next great business: real estate developments, a tax shelter that promised to build a fleet of yachts to sail the Mediterranean, beer production, even a trivia app for smartphones. He would also give millions of dollars to support the children of his friends, and, because he admired the underdog, invest enormous amounts of money in dodgy business dealings. So whenever the issue of his cousins—his late Uncle Lou’s children—came up in social circles, it would raise eyebrows. Given Sherman’s immense wealth and public commitment to others, people would wonder, Why did he not just give them everything they wanted?

  NINE

  FAMILY MATTERS

  THE MOMENT KERRY WINTER HEARD the news that his cousin Barry Sherman and Sherman’s wife, Honey, had been found dead, he had two thoughts, he says. The first, that Barry murd
ered Honey, then killed himself. Then, as his mind shifted to the bitter, ongoing fight he and his siblings had waged with Sherman, another thought struck him: “Oh my God, I think Jeffrey did it.”

  Winter was recounting this to me, three months after the Shermans died, while standing at the long “hot table” at a family diner on St. Clair Avenue West, in Toronto, while trying to decide which pasta dish from the line of steaming stainless steel chafing dishes to put on his plate. “Kevin, wait ’til you taste this. Delicious,” he said, selecting a heaping portion of lasagna, dripping with cheese and tomato sauce, and ladling it onto his plate. Picking up cutlery and a fistful of napkins, Winter moved to a corner of the restaurant. I followed. A regular at the diner, and having been featured recently in a TV documentary, Winter turned heads.

  “Did you do it?” a man at the table beside us asked Winter.

  Winter’s eyes widened and he laughed. He nodded at the fellow and then leaned across the table towards me, laying his hand on mine. “Everybody saw me on TV. Everybody. It’s what everyone is talking about.”

  I reminded Winter that he was telling me the story of what he was thinking about his brother Jeffrey. Kerry and Jeffrey are two of the four “orphan cousins” who sued the Apotex founder for $1 billion, an event that upended the already precarious relationship they had with the cousin they referred to as Uncle Barry.