Bitter Pill

This article was first published in the July 2008 issue of Toronto Life, when Barry Sherman was embroiled in a lawsuit brought by his cousins, who claimed they were owed a piece of his pharmaceutical company. That suit was dismissed in late September. 

Barry Sherman parks his 2005 Chrysler Sebring convertible in the spot closest to the main door of the Apotex headquarters in Weston. Although Sherman, the CEO and founder, is the country’s 10th richest man, with a personal wealth of about $3.7 billion, he’s notoriously thrifty. He’s owned only four cars in his life, driving them until they’re ready to junk.

When Sherman founded the company in 1974, generic drugs were generally dismissed as flawed imitations of the real thing. Since then, Apotex has become Canada’s largest drug manufacturer, filling 75 million prescriptions a year. Most of the company’s 300 products are versions of such widely used drugs as the antidepressant Paxil, the antihistamine Claritin and the antibiotic Tetracyn. Apotex tests and develops its products with a staff of 2,100 scientists, who run a 105-bed clinical hospital for human guinea pigs.

Sherman also spends a small fortune on litigation—a full 50 per cent of what he invests in research. Generic manufacturers like Apotex live or die by the speed with which they can plunge into the market­place with copycat versions. So they make it their business to shorten the duration that brand name companies hold on to drug monopolies, weighing potential profits against the risk of lawsuits. It’s not unusual for Apotex—probably the country’s biggest litigator—to be engaged in 100 court cases simultaneously.

The firm gained international notoriety in the ’90s, during a vicious battle with Dr. Nancy Olivieri, a clinical researcher at SickKids, who denounced as unsafe the Apotex-sponsored trials of a drug for a rare blood condition. Last year, Apotex endured another public relations nightmare when it was revealed that the company had reached a $40-million backroom deal to delay selling a version of Bristol-Myers Squibb’s blockbuster anticoagulant Plavix.

While Sherman has successfully taken on big pharma, he hasn’t been as lucky with his own relatives. He’s the principal defendant in a $1‑bil­lion lawsuit brought last year by two of his cousins, the unfortunate heirs of the late Louis Winter, founder of Empire Laboratories, a forerunner to Apotex. They claim Sherman didn’t honour an option agreement that would have allowed them employment in the family business and the right to purchase, collectively, 20 per cent of the company shares. Sherman has also sued, recalling more than $8 million in loans he had made to his cousin Kerry Winter, the most aggressive of Lou’s sons. Winter has a history of drug addiction and has already spent years of his adult life entangled in this feud. Sherman, with a battalion of lawyers and bountiful resources, calls it extortion and refuses to settle.

Barry and Honey Sherman live in an unassuming, modern house on one of those mature York Mills streets where ranch-style bungalows are being replaced by French châteaux. Barry had refused my interview requests, but his wife, Honey, had agreed to speak to me. On the day I visited, their front door was opened by a hearty bleached-blond housekeeper wearing khaki shorts and Crocs. She took me to wait near the kitchen, where Barry Sherman stood in a blue terry cloth robe at the counter in his bare feet, reading the paper and eating breakfast.

“What are you doing here?” he asked. Either Honey had not told him about the interview or he’d forgotten. He listened to my explanation, then went back to his paper. No small talk. Honey appeared, dressed not unlike her housekeeper in a white T-shirt, green pants and white Crocs, no jewellery. She’s short and solidly built, with heavy eyebrows, sable hair and the look of someone who plays tennis daily. It once was one of her sports, along with skiing, but now she plays golf when she can, her athletic life curtailed by severe arthritis.

She led me down a hall beside a glassed-in swimming pool. The house had an overstuffed 1980s look, with lots of leather, glossy stone floors and a spiral staircase. We sat across from each other in the den, close to her workstation piled high with papers. Honey Reich, the daughter of Polish Holocaust survivors, met Barry in 1970, just after graduating from the University of Toronto and before starting to teach. It was her mother’s suggestion that she volunteer at Mount Sinai to meet a nice Jewish doctor, and Honey considered that not such a bad idea. A friend fixed her up with Barry, and a year later, when both were still in their 20s, they married. She calls herself a trophy wife who “came a little early.”

She sees the family lawsuit as the price they pay for the high-profile business they’re in and won’t let it keep her from doing what she likes: sitting on boards, raising money and giving away impressive sums. Their Apotex Foundation supports community, education, scientific and Jewish causes. In 2002, they made the initial donation of $50 million to start an endowment with the United Jewish Appeal Federation. Since then, they’ve committed $5 million toward a York University research facility and given $7 million to the U of T faculty of pharmacy, housed in a building carrying the name of a former competitor, Leslie L. Dan of Novopharm. The Apotex name has been added to a new wing of the Baycrest Centre and the Jewish Home for the Aged ($6 million). The Sherman Campus ($25 million), an expansion of the Bathurst Jewish Community Centre, is slated to open in 2011.

Honey has served on several boards, including Mount Sinai Hospital and Baycrest, alongside other prominent philanthropists and friends, such as Fran and Eddie Sonshine, founder of RioCan Real Estate Investment Trust; Debbie and Warren Kimel of Fabricland; and Linda Frum and Howard Sokolowski, co-founder and CEO of Tribute Communities and co-owner of the Argonauts. She’s a large player in a relatively small world. By her own account, she and her husband “live nice lives, not large lives.”

She worries that the road for their children—three daughters and a son, ages 17 to 32—will be more difficult because of their wealth. “You have to work hard to instill in them a sense of reality.” Last year, her husband named their son, Jonathon, a Columbia University business and engineering graduate, the CEO of Steelback Breweries, acquired after the company racked up a $120‑million debt. Jonathon had tried working at Apotex but didn’t like it. She expects none of their children will take over the business, leaving the matter of succession dangling.

At 66, Barry Sherman likes to boast that he’ll work another 40 years. But if he died suddenly—and there is a history of unexpected death in his family—he’d leave behind a huge fortune, as well as vast problems. Just in case, he’s thinking of strengthening management and considering his options—including the possibility of going public and giving away much of his personal wealth. He and Honey like to believe that Apotex will continue as an influential Canadian company for generations, whoever runs it.

The family feud that’s recently interrupted the Shermans’ ordered life has its roots in the death of Barry’s 46-year-old father from a heart attack. Herbert Sherman was the president and senior partner of American Trimming, a Toronto zipper manufacturer. In Barry’s unpublished and unfinished autobiography, A Legacy of Thoughts, he describes accompanying his father to work on a Saturday, just weeks before Herbert’s death. Barry was 10 years old. “He sat me at a table where zippers were ready to be counted into boxes of 20. In order to please him, I worked quickly.” Surprised that his son outperformed his employees, Herbert selected random boxes to confirm the score. “I was extremely offended that he doubted my counts would be accurate.” They were.

Like many prodigies, Barry was an awkward, introverted, insecure little boy. He suffered so severely from lethargy that his Grade 5 classmates called him “Grandpa.” To this day he fights fatigue, needs 10 hours of sleep and struggles to get out of bed in the morning.

He earned top marks in high school and decided to enrol in engineering physics at U of T because it was said to be the hardest program in math and physical sciences. He graduated with a gold medal, then went on to do graduate work at MIT, where he specialized in developing control systems for the aerospace industry.

If there’s a science gene, Barry inherited it. Two of his mother’s brothers were doctors. A third, Lou Winter, a biochemist with a keen business sense, was the relative he most resembled. After Herbert Sherman’s death, Lou became Barry’s father figure and mentor, bringing him into his drug business, Empire Laboratories, when he was 18.

Barry was made his uncle’s legal heir when it seemed that Lou and his wife, Beverley, couldn’t have children. Then, in 1958, Lou and Beverley adopted a baby boy, Tim, and, as sometimes happens, Beverley became pregnant. She gave birth to Jeffrey in 1960, Kerry in 1961 and Dana in 1962. Shortly after the last birth, Beverley was diagnosed with leukemia, and the couple escaped to Bermuda for a last vacation. Barry, still an undergrad, took charge of the plant. He did an admirable job.

Beverley withstood her disease for a few years, but in November 1965, when Barry received a middle-of-the-night phone call at MIT, he expected to hear she’d finally succumbed. Instead, he was told his uncle had died suddenly from a probable aneurism. Barry attended Lou’s funeral, then visited Beverley in the hospital, where they talked about what might happen to Empire and the children’s future interests. He said that if she and the executors wished, he would take over the business and protect its value for the benefit of the children. In return, they would have to grant him the right to purchase the company if it came up for sale. Beverley discussed the idea but made no decision. Seventeen days later, she was dead.

Three days after her death, Barry made the same proposal to trustees of the Winter estate. They said no, that they would continue to run the business. And so the children’s legacy—Empire Labs and a trust fund—remained in the hands of two lawyers, an accountant and Royal Trust.

Barry returned to school and completed his PhD. His dissertation led to his first patent, a system to control satellites in orbit. He was a young man with great prospects when he abandoned astronautical engineering to seek an opportunity in a scientific business, the one he knew best, and returned to Toronto early in 1967. He looked into Empire’s performance—either out of concern for Lou’s sons or a personal desire to buy the company on the cheap—and reported to the trustees that sales had declined from more than $1 million a year in 1965 to about $800,000. He suggested that Lou’s children might some day hold Royal Trust liable for negligence if it didn’t keep Empire from insolvency.

Within a week, the trustees had put the company up for sale. Sherman and Joel Ulster, a high school friend, bought it for approximately $350,000, beating out a Montreal firm. Sherman’s mother, Sara, guaranteed a loan of $100,000 and Ulster put up $150,000 borrowed from his father, who also arranged for an operating line of credit. Two options were added to protect the Orphan Children—the phrase that the surviving sons, now in their late 40s, still use to describe themselves. The first states that all of Lou Winter’s sons would be given the opportunity to become “responsible full-time employees” once they turned 21 or completed their formal education. Second, any employed child who worked two years with the company would “have the right to purchase five per cent of the issued shares of the company or companies owning the purchased business.” However, the option could be exercised only if Sherman, Ulster or Ulster’s father kept control of the business.

Those were promising years for generic drug companies. Empire’s annual sales, now including the generic psycho­pharmaceuticals Librium and Stelazine, reached almost $2 million. Then, in 1972, ICN Pharmaceuticals expressed an interest in buying Empire and merging it with their Canadian operations. Sherman and Ulster, ambivalent at first, decided to let ICN evaluate their company. When the offer came in at just under $2 million, they took it, netting a few hundred thousand each. ICN made it a condition of sale that none of the principal shareholders in Empire could go back into the same business for five years. Fortunately for Barry, his shares were held by Bernard C. Sherman Limited. ICN must not have noticed the loophole. When Sherman launched Apotex the following year, ICN didn’t exercise its non-compete clause.

Business boomed, thanks to a combination of lucky timing and entrepreneurial savvy. Barry started with 5,000 square feet, employed two people and made only compressed tablets. He selected about a dozen established products with an eye to getting them to market quickly, then sold them cheaply by mail order and telemarketing. Further changes in the law during the Trudeau years allowed greater scope and removed some advantages of brand name companies. By the ’90s, there were a dozen generic drug companies in Canada. Apotex was the biggest.

Kerry and Tim claim their father’s company made Barry’s success possible. But with the sale of Empire, they lost any interest they might have had in it. Or did they? They maintain that without Empire there could be no Apotex, therefore Barry has a legal obligation to hand over five per cent of his present assets to each of Lou’s sons or heirs. That’s what he promised when he bought Empire Labs. They claim that Barry sold it to weasel out of his commitment to them.

Before she died, Beverley Winter left instructions that her children not be adopted by any relatives. Her brother, Wayne Rockcliffe, still wonders why she didn’t choose him and his wife. At that time they had no children. They were willing to move into the Winter home and send the boys to Upper Canada College. But Beverley, a convert to Judaism, wanted her sons to be raised as Jews. Rockcliffe thinks that his sister “just didn’t want us to have what was hers. What a shame that was!” Beverley’s rabbi found a home for the boys with Martin Barkin, a highly regarded urologist, and his wife, Carol, a schoolteacher.

By 1973, the year Sherman sold Empire, Kerry, then 12 years old, and his closest brother, 11-year-old Dana, were extremely un­happy. They found Barkin difficult and their adoptive mother cold. By age 15, Kerry had left home and moved into a rooming house. He continued to attend school, where he was arrested for selling hash and marijuana and sentenced to six months in the Mimico Correctional Centre. In what would become a recurring theme, a relative came to his rescue. Uncle Wayne used his connections to get Kerry accepted into Ottawa’s tony Ashbury College. He graduated and took honours English at Richmond College in London, England, with fees paid by the family trust. He enrolled in San Diego State University for a masters but never finished. Instead, he travelled around the world; while in Peru, he began to experiment with crack cocaine and heroin.

Two of Lou’s other sons had their own problems. Jeffrey was diagnosed as bipolar and was in and out of treatment. And Dana, like Kerry, got into drugs. One night in 1988, while eating at Bemelmans on Bloor, Dana bumped into a man named Stan Garden, who struck up a conversation. It happened that Garden had greatly admired Dana’s mother, Beverley (“beautiful, like Lana Turner”). At her deathbed, she asked Garden to keep an eye on the boys, but he’d lost touch. Now he could make amends. He got Barry’s number from someone he knew and phoned him. He told him about Dana’s situation and was invited to bring him to the Apotex office the following Saturday.

Until then, Barry knew nothing of the cousins’ struggles. Now he became involved in the lives of Dana, Jeff and Kerry, providing money and moral support. (Tim Winter, now a chef, never asked for help.) His motives? If you believe Barry, he was just trying to help Lou’s children. If you believe Kerry and Tim, he intended to make them dependent. That way, if they ever discovered the option agreement that could make them rich, they’d be too incapacitated or beholden to Barry to sue.

For whatever reasons, Barry bankrolled three of the Winter children in their ventures. Dana started a jewellery business; Jeff moved from a travel company into custom CDs; Kerry launched a construction company. Barry bought them homes and cottages, paid Visa bills and gave out allowances, lending millions on dubious security. Behind his back, Dana called him “Bank Sherman.”

But no amount of money could set things right. In 1995, Barry sent Dana to a remote fishing village in B.C. to get clean. Dana decided to settle in B.C., married a woman named Julia Zwicker, fathered two children and slipped back into drugs. He would later be charged with conspiracy in the murder of a fellow drug dealer. From a holding tank in Vancouver, he called Barry to arrange bail. While he was out, Dana, then 33 years old, died of a heroin overdose. At the time of Dana’s death, Kerry was in the final chapter of his marriage to Elee Scarlett, a lawyer. The living allowance that Barry gave Kerry would eventually reach $20,000 a month.

The relationship between Barry and the cousins started to sour in 1999 when Jeffrey began seriously investigating aspects of the Empire Labs sale. He was convinced that he and his siblings had been cheated out of years of royalties, and out of their promised share of the successor companies, including Apotex. When Royal Trust failed to hand over key documents, saying they were mislaid, Jeffrey took them to court, and a judge ordered the company to hand them over. Then, in March 2006, Tim, Jeffrey, Kerry and Dana’s widow, Julia, filed a claim against Royal Trust for $500 million, accusing them of failing to protect their interests. Royal Trust argues that it had acted properly and the claim should be dismissed.

That summer, Apotex was embroiled in the Bristol-Myers Squibb debacle. A U.S. judge ordered Apotex to stop sales of a generic version of Plavix while the case proceeded through the courts—but not before Sherman had flooded the market, made a fortune, and paid out $6 million in bonuses to his entire staff. While Sherman battled over Plavix, he also sought and received assurance from the cousins that they wouldn’t launch a suit against Apotex.

In January 2007, Kerry, Tim and Julia nevertheless filed a claim against Sherman and his former partners for $1 billion. Sherman, acting with the same lethal cool he brings to his fights over patents, turned down an offer to settle. He then sued Kerry for $8 million in outstanding loans. In Vancouver, Sherman took Julia to court to have the terms of his mortgage on her house clarified so he could collect his money immediately rather than when the house was sold.

In August 2007, the court heard the suit against Kerry. His lawyer, Malcolm Kronby, argued that Sherman was acting vindictively. The judge still ruled in Sherman’s favour and Kerry had to surrender two business properties, a cottage and his home on Bellwoods Avenue. Kerry agreed to stay on as a tenant, paying $2,500 a month. Even this sum could be hard to come by. His construction company was shrinking while he continued to obsess over justice and riches.

Kerry winter admits that for many years Sherman was “like a surrogate dad and I was like an adopted son.” Now, perhaps because he feels most betrayed, he leads his family litigation and, going against his legal advice, feeds stories to the press. His lawyers told him not to talk to me, and for more than a year we communicated like spies. He would secretly transmit documents if I promised not to tell Kronby. He’d call me with various rants: “For me it isn’t about shekels, it’s about revenge!” Dozens of emails passed between us. He accused me of falling for “Sherman’s spin” if I hesitated before contacting people he recommended. Once, when I didn’t reply fast enough, he accused me of being out for dinner with Honey and Barry. Twice, after I sent questions in advance to both Kerry and Kronby, Kerry backed out of our scheduled interview. Finally, last March, we met.

He arrived at the Starbucks near his Trinity Bellwoods home, a tall, ruddy-faced, boyish-looking 46-year-old. He had just come from seeing his uncle, Wayne Rockcliffe, who had once again come to his aid, promising to cover Kerry’s $2,500 rent that month if needed. I was surprised. A recent Globe and Mail article had reported Rockcliffe’s advice that the cousins move on with their lives. Later, when I spoke with Rockcliffe, he complained that the reporter had omitted a crucial qualifier: “Perhaps if I’d had their terrible start in life, I’d think differently.” Rockcliffe has his own reason to dislike what he calls “Barry’s cold heart.” Forty-three years ago, when they shared a limo at Beverley’s funeral, Rockcliffe said it would be a shame if the Orphan Children were adopted separately. Sherman’s reply, he claims, was, “So what? Worse things could happen.” Rockcliffe says he can’t forgive him. Sherman denies ever having said anything to that effect.

Sipping his coffee, Kerry explained that he was firing his lawyers. “They always tried to shut me up. Well, they’re finished.” He drew his finger across his throat. He thinks that because his lawyers are Jewish they hesitated to go after Barry in the press, afraid of being shunned by their community. He claims there was a breakdown of trust.

According to Kerry, Stan Garden and Rockcliffe aren’t the only people on his side. He says several of Sherman’s business enemies want him to win. As he spoke to me, his face reddened and his voice rose. “If Barry had his way, I’d be eating cold french fries out of a Dumpster at KFC. Well, Barry, that’s just not going to happen.” He rapped his knuckles on the table and leaned in close. He vowed he’d be Sherman’s “nemesis,” saying that for him this was “a lifelong mission.” He expressed fear for his personal safety and, pointing a finger in my face, warned: “By the way, sweetie, you’re next.” By this time, he was shouting. He imagines Sherman at the courtroom door, begging to settle. “I’ll go to trial, sweetie,” he growled. “I’m not going away.” Then he put on his coat and walked out without another word.

We met a second time, same place. I asked Kerry about the effects of drugs on his life. He said he’s been clean for the past four years, “except for weed.” He said he once told Barry that he might have given up the drugs earlier if he’d known it might have made him a multimillionaire.

Behind the middle-aged receptionist at Apotex headquarters hangs a towering three-storey plastic banner with the company logo and the names of affiliated companies. The dedication reads: “In appreciation of our 25 years of success 1974–1999” and along the bottom, “Presented by the employees to Dr. Barry Sherman on August 15, 1999.” It’s covered with hundreds of signatures and lit from above by a skylight, as if by the Divine.

Sherman appears to be loved by his staff, if not by his relatives. Opposite the banner, inside a large plastic case, sits a sculpture of a rock and a falcon, carved by a staff member. It was presented to Sherman on the company’s 30th anniversary. “To Dr. Barry Sherman in appreciation of his Visionary Leadership…and the inspiration he provides as a truly remarkable human being.”

The Barry Sherman who led me into a modest boardroom appeared truly remarkable, mainly in his total disregard for appearances. He wore no suit jacket. His crumpled white shirt bunched out of the back of his well-worn trousers. While he said he was still reluctant to talk to me, he didn’t explain why he’d changed his mind. Perhaps he was hoping to answer some of the accusations that had already appeared in print. Perhaps Honey had twisted his arm. After exposure to Kerry’s paranoia, I was surprised that Barry had not asked for questions in advance, had no lawyer on hand and offered no resistance to anything I asked.

There are still traces of the gawky teenager in Barry, a man more at ease in his brain than his body. Outside the sanctity of Apotex, he is treated warily, with respect and more than a little awe. He does not invite banter. He is not one of the boys, probably never wanted to be. He is the type of man who would write cheques to his cousins not out of a sense of obligation or guilt, but to eliminate a nuisance. He is as dispassionate as they are overwrought.

In his autobiography, he described himself as recognizing no God and rejecting religion and free will in favour of “logical deduction.” He wrote about the instinct to co-operate with others, particularly relatives, when it was to “mutual advantage.” There can be no such thing as “altruism, kindness, generosity or morality,” he says, because humans act only in pursuit of their own happiness.

A self-professed workaholic, he does worry about the future of his company, recognizing that it would be impossible for his children to duplicate his obsessive commitment to Apotex. Casually he informed me that Lauren, his oldest daughter, is his wife’s only “natural” child. Honey suffered several miscarriages after her birth. When it looked as if they couldn’t have more children, they decided against adoption and opted for surrogacy. As a committed Darwinian, he naturally favoured the preservation of his genetic material. In the early 1980s, surrogacy had just become an option in the U.S. It’s likely that his son, Jonathon, was the first child in Canada born to a surrogate mother. “It worked fine.”

Even at his stage of life, he’s committed to expanding his business and shoring up his legacy, more concerned with the judgment of the courts than with public opinion. As for the Orphan Children, he remains steadfast in his belief that he did all he could for them, perhaps too much. He argues that at the time of the Empire sale, the boys, ages 11 to 15, were too young to benefit. And after so many years, it’s too late to file a claim.

No one can say when the $1-billion suit will be heard in court. It will probably take years. Will Barry settle? Not likely. He’s a lion, a stranger to the notion of compromise.