Did Apotex billionaire cheat his orphaned cousins out of pharmaceutical FORTUNE?
Barry Sherman is one of the richest men in Canada. His cousins say he got that way thanks to their father’s drug companies — and they’re fighting to get a share
It’s the family drama that one of Canada’s wealthiest men has been trying to brush away for a decade.
Try as he might, Barry Sherman, the billionaire founder of generic drug giant Apotex, continues to face down his cousins in a lawsuit that alleges he owed them a “fiduciary duty” stemming from his purchase of their late father’s family of drug companies back in 1967.
Sherman contends the lawsuit is an abuse of process, denies he owes the plaintiffs a fiduciary duty and is seeking to have the entire action thrown out.
What do the plaintiffs want? Among other things, they’re claiming the financial equivalent of 20 per cent of Sherman’s interest in Apotex.
They are the “Winter orphans,” four boys, three of them grown men and one who has passed away. Their father, Louis Winter, was the founder of Empire Laboratories Ltd. and died in 1965 when the boys were still very young, just weeks apart from their mother, Beverley.
Adopted by a Toronto couple, they faced many hardships into adulthood, some turning to drugs.
In a statement of claim filed in Superior Court, the plaintiffs say that following their parents’ deaths, cousin Barry, who had worked for Louis Winter, and some associates acquired Empire in 1967 for $450,000 through a holding company.
They promised in an option that the Winter children would have the right to work for the company after the age of 21 and buy five per cent of the issued shares, according to the statement of claim.
But then the Empire assets were sold to International Chemical and Nuclear Corporation (ICN) in 1972 for approximately $2 million, according to the statement, and Sherman went on to found Apotex in 1974.
The plaintiffs allege that the purchase of Apotex was made possible from the pro- ceeds of the sale of Empire, yet Sherman “made no provision for (them) to work at Apotex and become shareholders.” Therefore, the plaintiffs claim, he breached what they say was his fiduciary duty to them.
There was nothing stopping the sale of Empire in1972, the plaintiffs say, but they maintain that it was implied in the option that the provisions regarding the children would remain in force and therefore should apply to Apotex.
“Barry’s fiduciary duty did not end with the sale of Empire, but rather was ongoing while he was in the generic drug business,” the plaintiffs allege in their statement of claim.
The family connection and option agreement were likely why the executors of the Winter estate chose to sell the business to Sherman in the first place in 1967, one of the plaintiffs, Kerry Winter, told the Star in an interview.
The plaintiffs allege that Sherman “made no provision for (them) to work at Apotex and become shareholders.” Sherman contends the lawsuit is an abuse of process and is seeking to have the action thrown out.
“I still believe, in the David and Goliath battle, that Barry, in his own way, didn’t think I’d be this tenacious,” said Winter, 55.
“He must sit back some days and be amazed that I’m still in the ring, and I’m in the ring with a fine attorney, and a legitimate cause of action. I believe we have a great chance of winning.”
Sherman’s lawyers are seeking to have the action tossed at a July hearing. They highlight the fact that a related lawsuit brought by the plaintiffs against their parents’ former estate executor, Royal Trust Corporation, was dismissed in 2013 by a judge. That ruling was upheld on appeal.
Among other things, the judge in that case found the option agreement was “null and void” after the sale of Empire to ICN, the defendants’ lawyers state in court documents.
“The court dismissed the plaintiffs’ ‘option’ claims, finding that Apotex cannot be interpreted to be the ‘purchased business’ under the ‘option agreement,’ and noting in this regard, that ‘the plaintiffs’ interpretation is wishful thinking beyond fanciful,’” says the notice of motion to dismiss.
The plaintiffs’ lawsuit against Sherman and several other defendants was first launched in 2007 but administratively dismissed by the court registrar in January 2015 for failure to take steps to set the matter down for trial.
The lawsuit was reinstated in 2016 after the Winter plaintiffs retained their current lawyer, Brad Teplitsky.
According to the defendants’ notice of motion to dismiss, Empire Laboratories was purchased by Sherman and Ulster Ltd. (S& U), a corporation in which Sherman and co-defendant Joel Ulster were majority shareholders, and Sherman’s brother-in-law Meyer (Mike) Florence, another codefendant, was a minority shareholder.
By the time of Empire’s sale to ICN in 1972, Sherman and Ulster no longer had control over it because all of their shares in S&U had been sold, according to the notice of motion.
Lawyers for the defendants state in the motion that the option agreement does not apply to Apotex and that none of the “goodwill, property or any other assets” from Empire were ever used by Apotex.
They declined to comment to the Star for this article.
The plaintiffs are seeking a declaration that Sherman “held their interests in S&U as a trustee and that he breached that duty . . . when he sold (or caused to be sold) the Empire assets without regard to their interests in the option,” according to their statement of claim.
Teplitsky, the plaintiffs’ new lawyer, said the updated statement of claim was rewritten to flesh out more details around the plaintiffs’ fiduciary claim against Sherman and his codefendants. They are also seeking to add Sherman’s wife, Honey, his children and his sister as defendants at the July court hearing, alleging that Sherman has transferred assets to them.
“I still believe, in the David and Goliath battle, that Barry, in his own way, didn’t think I’d be this tenacious.” KERRY WINTER
“What interests me about this case is the whole issue as to whether (Sherman) owed them a fiduciary duty.” BRAD TEPLITSKY PLAINTIFFS’ LAWYER
(Sherman, in an affidavit affirmed in January 2017, says the defendants oppose this motion to include his relatives because the allegations proposed to be added to the lawsuit “fail to state a cause of action.”)
“What interests me about this case is the whole issue as to whether (Sherman) owed them a fiduciary duty,” Teplitsky said, adding that their case relies on “promises in the option” made in writing.
Kerry Winter is candid about his life and the lives of his brothers, Dana, Tim and Jeff following their parents’ death. They were all adopted by the same Toronto couple, but suffered psychological hardship over the loss of Louis and Beverley, he said.
His brother, Dana, died of an overdose and is represented in the action by his widow, Julia. Winter, who once struggled with drugs, is proud to declare he’s five years clean, and now works as a site supervisor for a custom home company.
Later in their lives, the siblings had relatively stable relationships with Sherman, which crumbled prior to launching their lawsuit against him 10 years ago, Winter said. He mentioned there was a time he could walk right by security at Apotex and head into Sherman’s office.
“I look at my life today and I feel very strongly that if I ran into a whack of dough, my life really wouldn’t change that much,” Winter said. “I’ve got a great job, I see my kids every other weekend, I have a beautiful girlfriend who has been living with me for almost four years.
“I don’t know if it’s so much about getting five, 10 or X amount of millions. To me this is about, and I know it sounds cliché, it’s really about making Barry Sherman accountable.”