Philanthropist at Center of Canadian Campaign Flap

By Sheldon Gordon

Published June 23, 2006, issue of June 23, 2006.
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TORONTO — Barry Sherman is often cheered as one of Canadian Jewry’s most successful businessmen and most generous donors to charitable causes. But this month, his largess has put him at the center of a campaign finance scandal.

The controversy involves about $100,000 of political contributions from Sherman — the 64-year-old founder and chair of Apotex Inc., Canada’s largest drug manufacturer — four of his former and current employees and 15 of their respective family members, including children as young as 11. The money was given to Joseph Volpe, a Member of Parliament who represents a heavily Jewish district in Toronto, for his campaign to win the leadership of the opposition Liberal Party.

The Volpe campaign insisted that the donations did not violate the Canada Elections Act, but hastily returned the donations that came from the underage children.

Sherman, the country’s sixth wealthiest person — according to Forbes, he has a personal net worth of $3.7 billion — declined to be interviewed for this article.

The controversy over the donations is generating negative publicity for one of Canada’s leading Jewish philanthropic families. In 2002, Sherman and his wife, Honey, made the largest donation ever — $45 million — to the UJA Federation of Greater Toronto. They subsequently gave a $22.5 million gift to the Jewish Toronto Tomorrow Campaign, a multiyear project to fund new buildings for Jewish community institutions. Sherman has served as co-chair of the project’s steering committee, and this year his wife is co-chairing the federation’s annual campaign.

Other Jewish philanthropists are closing ranks around Sherman.

When asked whether the scandal could harm Sherman’s leadership role, Neil Nisker, chair of the Jewish Foundation of Greater Toronto, replied, “Are you serious?” The foundation holds Jewish community bequests and endowment funds. “What does one have to do with the other? What someone does in their private life politically does not necessarily affect what they do philanthropically with the community. I am not one iota concerned.”

David Engel, chair of the Toronto federation, also dismissed the recent controversy.

“In my opinion, he’s done absolutely nothing wrong: He’s done nothing illegal,” Engel said.

“I’m not going to comment on whether it’s ethical or unethical. That’s not the issue,” the federation chair added. “There might be questions about the loopholes in the Canadian system of how you give funds.”

Canada’s campaign finance law prohibits corporate donations; it limits individual donations to $4,860. It is a crime for any individual to “act in collusion” with others to circumvent the law, and it is also illegal to conceal the identity of donors, compensate a person for making a donation or make a donation that actually comes from another person.

Earlier this month, it was disclosed that Sherman, his wife and their four adult children each contributed $4,860 to Volpe’s leadership campaign. Volpe received identical amounts from Sherman’s brother-in-law, former Apotex vice president Allen Shechtman, and from Shechtman’s wife, Mary, and their three children — two 11-year-old twins and a 14-year-old. Apotex’s president and chief operating officer, Jack Kay, and his family members, including one child under 18, also each contributed the maximum allowed.

The controversy over the donations has triggered calls for an amendment to the campaign finance law that would require contributors to be 18 or older.

Some community sages expressed concerns about the importance of ethics in philanthropy, but none was willing to discuss the scandal or to be quoted by name. Some politicians were less restrained. “It’s almost as if there is some collective unconscious here that all of the Apotex executives woke up one morning and all decided to give the maximum amount of money to one leadership candidate,” said Pat Martin, a leftwing Member of Parliament. He added that “laundering money through your children’s bank accounts to circumvent the donation limits of the Elections Act seems like fraud, and it’s up to the elections commissioner to determine if what took place is illegal or not.”

A representative for the commissioner said the office would not “confirm or deny” whether an investigation is in progress.

Sherman is legendary for his hardball style. With a doctorate from the Massachusetts Institute of Technology, he took over his uncle’s small generic drug maker in the 1960s and eventually created what is now Canada’s biggest pharmaceutical company. As a generic drug maker, he frequently has tussled in court with brand-name drug manufacturers over their patent protection.

In the late 1990s, Sherman was accused by a University of Toronto hematologist of using Apotex’s financial support for her pharmaceutical research to try to bully her into suppressing negative findings from her clinical trials of one of the company’s drugs. The company accused her of defamation and breach of contract. An independent inquiry eventually cleared the researcher of any wrongdoing, supported her findings, and ruled that the university and Apotex had acted unethically.

Sherman also clashed with American regulators in the 1990s. He ran afoul of the U.S. Securities and Exchange Commission for failing to disclose his ownership of a now-defunct American company. (Sherman maintained that he was a passive investor who was given options that boosted his ownership stake without his knowledge.) The Food and Drug Administration fined a mail-order drug company operated by Sherman and by Shechtman, his brother-in-law, $500,000 for selling drugs in the United States without approval. Sherman has insisted that neither he nor his firm did anything illegal.

Despite such scrapes, Sherman doesn’t lack for admirers — certainly not at the Toronto federation.

“He’s a visionary. He’s a kind gentleman and a very bright guy,” Engel said. “I hope he plays a role in our community for years to come.”

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