The Billionaire Murders

by Kevin Donovan

  What no one realized, or apparently did not turn up through the due diligence one would expect of shrewd investors, was that Bellfield was a charming fraud. He had just been discharged from bankruptcy in Canada and was facing fraud charges over some other schemes, and the entire corporate web that attracted Sherman and others was a sham. Only two yachts were ever acquired, and each was sold almost immediately. Fantaseas was a complete fabrication, as investigators and a criminal court eventually found. Bellfield was sentenced to a decade in prison and ordered to pay a $1-million fine, punishments that were unusually harsh compared to other white-collar prosecutions in Canada. In the case files, federal investigators detail how the scheme deprived the Canadian government of several million dollars of tax revenue and deprived investors of much more.

  The real pain for investors, including Sherman, came when Canadian tax authorities reassessed years of tax returns and found that the losses the investors had been claiming to reduce their payable income tax were, like the yachts, a mirage. Since there were no yachts, there could be no losses. One of Bellfield’s pitches was that since seagoing yachts depreciate quickly in value, the investors would be able to record the depreciation as a loss. No boats, no depreciation, said the taxmen—and they were right.

  Caught with their financial pants down, most of the six hundred plus investors made a deal with the Canadian tax authorities and settled. Not Sherman. He kept fighting for several years, though he too eventually cut a deal. He agreed that his deductions should be disallowed, and as part of the settlement agreement the amount he owed was reduced. But Sherman sued Orenstein and Partners, the accountants Bellfield used to prepare financial statements for his scheme. Sherman claimed that the accountants were negligent in not providing a warning in their reviews that Bellfield’s company was not a “going concern.” Sherman felt that the accountants should have suspected a scam and wanted Orenstein to reimburse him for the $634,996 he had paid in interest during the four years of the swindle. Sherman lost in the lower court, however, and lost again at the Ontario Court of Appeal.

  It is quite likely that to do battle with Revenue Canada for several years, and with Orenstein and Partners for more than a decade, Sherman incurred legal expenses greater than the amount he was seeking. In his ruling, writing for a unanimous decision of three appeal court judges, Justice John Laskin wrote that the judge whose ruling they upheld had made a keen observation about the Apotex founder after seeing him testify for two days on the witness stand: “[Justice Maurice Cullity] was left with the impression of a man with too many businesses and other responsibilities and interests to pay much attention to his investments once he had made them.”

  That Barry Sherman rubbed shoulders with a fraudster was not at all unusual. Around the same time as the yacht scheme, Sherman provided investment funds to Harvey Rubenstein, a shady Toronto stockbroker who would later be convicted of fraud in Canada and the United States. Jailed in Oregon and awaiting trial, Rubenstein telephoned Sherman in Toronto and persuaded the man he had already duped out of more than one million dollars to advance him $100,000 bail money. As Sherman said in a deposition as part of his attempt to recoup some of the money Rubenstein owed him, he saw no point in having the man “languish” in jail. Sherman eventually sued Rubenstein in an unsuccessful attempt to get the bail money back.

  Fred Steiner says he was completely unaware of all these private side deals in which his friend was involved. “He never discussed them,” says Steiner. “As good and as close a friend as I am, I can’t tell you about his outside deals.” In retrospect, Steiner, who with Sherman’s help built a very stable coffee service business, says he thinks his friend resisted sharing information about his more unusual deals because he was worried that he would meet with disapproval. “I think he felt that I was so legit, he did not want to burden me with anything that was off the wall. I think he did not want to involve me with anything that I might object to. I also think he did not want to be questioned or criticized. And I would have criticized him.”

  Steiner did become aware of one of Sherman’s private deals. Several months before the Shermans’ deaths, a mutual acquaintance told Steiner that Barry had made a substantial investment in the development of The One, a retail and condominium tower at 1 Bloor Street West in Toronto, on the southwest corner of Yonge and Bloor Streets, arguably the city’s most high-profile intersection. Every city seems to have at least one of these troublesome sites: a choice location for all sorts of reasons, but one where developers struggle to get financed and the project built. Developer Sam Mizrahi had been trying to construct a colossal project for several years but had trouble securing financial backers. In mid-2017, a real estate investment trust that was backing the property had withdrawn financing, and Sherman and other lenders, including an Ontario paving company and a firm based in China, agreed to help out. In late August, Sherman advanced $61 million to Mizrahi in a mortgage at the high rate of 13 percent interest. Other investors, apparently assembled with the help of Sherman, provided hundreds of millions of dollars more, and construction on the eighty-five-floor skyscraper, destined to become the tallest structure in Canada, broke ground. Associates of Sherman told me that the interest rate on his contribution was really only 8 percent, not the 13 percent recorded on the mortgage documents. They said Sherman, to help Mizrahi out, signed documents stating that if the deal went smoothly, he would make adjustments in the money owed so that Mizrahi paid the lower interest rate. For reasons that remain mysterious, Sherman told friends he wanted the public to know he was charging a high rate, yet in fact he was taking much less. No matter the rate, why did Sherman bail out Mizrahi?

  “Barry did not want Sam to lose the project,” Jack Kay explains.

  Born in Iran to Jewish parents, Mizrahi is yet another colourful character in Sherman’s life. Mizrahi’s previous business was a luxury Toronto dry cleaner named Dove Cleaners, which Mizrahi exited around the time it was having financial difficulties and restructuring. He then got into the real estate development business. In recent years, Mizrahi claimed in a lawsuit that some fellow Iranian businessmen in Toronto had threatened to kill him. As a result, Mizrahi told reporters in Toronto that he had gone into hiding for a time. I interviewed those Iranian businessmen, and they said Mizrahi’s claims were “ridiculous.” Both sides are locked in a multi-million-dollar dispute over a series of development properties near the 1 Bloor West development. (Mizrahi declined three requests to speak to me about his business association with Barry Sherman and his friendship with both Shermans.)

  Sherman continued to deal with the aftermath of investments gone wrong until the day he died. On Wednesday, December 13, his lawyers filed documents in court requesting an early trial date in a case that involved, of all things, a trivia app for smartphones. Steiner and other friends, when asked about this particular side deal, shook their heads and said Sherman never mentioned that one either. The trivia app deal started the way most of them did. Somebody Sherman knew needed assistance. An old friend, Myron Gottlieb, had approached Sherman in 2015 looking for help. Gottlieb, along with Toronto theatre impresario Garth Drabinsky, had been convicted of two counts of fraud for their role in a scheme to falsify financial statements at their production company, Livent Inc., the firm behind the Toronto production of The Phantom of the Opera and so many other big hits. Investors lost an estimated $500 million when Livent went under. Gottlieb was sentenced to four years in prison for his role and released on day parole in 2013 after serving eleven months. While in prison at Ontario’s “country club” Beaver Creek Institution (located in cottage country and the usual destination for non-violent white-collar offenders), Gottlieb became friends with convicted fraudster Shaun Rootenberg, a flamboyant and fast-talking con man. Once out of jail, Rootenberg began developing Trivia for Good, a smart phone app. Promotional materials for the company stated that the app would generate revenue by pushing advertisements to the user. Rootenberg needed investors, so he first enl
isted Gottlieb, who in 2015 turned to Sherman. The Apotex billionaire agreed to provide $150,000 in return for a share in the trivia company, and he instructed his financial people at Sherfam where to send the money.

  Documents Sherman later filed in court as part of a lawsuit allege that his investment was diverted to a separate bank account controlled by Rootenberg and others. There never was a fully functioning app. Sherman said he was the victim of a scam, and he wanted his money back. Had any due diligence been conducted by Sherman and his financial people, they would have uncovered Rootenberg’s background and that of others involved in the scheme. As to Gottlieb, Sherman did not go after his old friend. During the same time period, Rootenberg was accused by Toronto Police of “romance fraud,” meeting women on the dating site eharmony and convincing them to invest money with him. (At time of writing, those charges were before the court, as was Sherman’s lawsuit against Rootenberg and other parties.)

  Gottlieb declined a request to be interviewed for this book, instead providing a short statement: “My wife and I were privileged to be friends of Barry and Honey. They were an exceptional couple and their death was both a tragedy and was untimely. Others knew them better and for a longer period of time.”

  Sherman may not have liked the concept of betting on cards, but he was a risk-taker and a gambler. One of his lawyers told me, “Barry’s risk profile was off the charts.” Jack Kay says this simply about his friend, “Barry was a schemer.” Back in the early 1970s, Joel Ulster had decided to part company with Sherman professionally because he was not comfortable with the risks his friend took. Ulster, Steiner, Kay, and others who knew Sherman very well say they believe Sherman entered into all of these dubious ventures because he believed he was right when he backed someone. In the pharmaceutical world, that was why he backed the researchers on the thalassemia drug. When it came to his many side deals, he believed he had the ability to determine if something was a good bet. As so many of the deals showed, he was not always right. The trial judge in the Fantaseas yacht case quite astutely noted that Sherman’s busy life did not allow him the time, nor did he seem to have the inclination, to either dig in and properly vet a new venture or direct one of his staff to do so. As he said in his 2015 email exchange with his son, Sherman did not use “equations for analysis.” For him, his judgment was king.

  Friends say Sherman was a contrarian. Fellow philanthropist and businessman Ed Sonshine says that if the world seemed to be against someone, Sherman would back the man. “He loved helping financially guys who other people told him were bad guys,” Sonshine says. Over the years, Sherman would call Sonshine and ask him for advice. In one instance, where Sherman ultimately advanced $30 million to an individual, Sonshine warned him not to do it. Sherman recouped only a fraction of his investment.

  “You want to call it vanity, you want to call it ego, you want to call it an unshakeable belief in his own brain?” says Sonshine. “The more everyone told [Sherman], ‘This guy is not going to work out for you,’ the more he would be interested in doing something.”

  On one occasion, Sherman lamented to Sonshine, “Ed, if I only stuck to my own business, I would be a lot richer than I am.” Another time, reflecting on some recent losses, he told Sonshine, “If things keep going like this, I will be down to my last billion.”

  Is there a clue to the murders somewhere in Barry Sherman’s business deals? “Follow the money” is something that many people with an interest in the Sherman case have said. Jack Kay says it. Frank D’Angelo says it. The quote comes from the Watergate movie All the President’s Men, and it is attributed, incorrectly, to the government source Deep Throat, who never actually said it in real life to reporter Bob Woodward. But the concept—follow financial transactions to solve a case—is a good one. But without the search warrant powers of the police, it is difficult to do. Sherman’s financial history, holdings, and the estate he left behind are kept secret by court order. Further complicating things is that Sherman’s dealings were intensely private and sometimes sealed with a handshake and little or no paperwork.

  THIRTEEN

  WORKING THEORY

  “DETECTIVE CONSTABLE YIM, you have sworn this affidavit and we have gone through a lot of the details. I want to ask you a question that may sound provocative. Is the Toronto Police force on a fishing expedition here?”

  It was April 24, 2019, in an Ontario Court of Justice hearing room in the north end of Toronto. The man in the witness box looked at the papers in front of him, which included an affidavit he had sworn stating that should any of the police documents about the Sherman investigation be made public it would jeopardize the probe.

  “No.”

  I looked at the binder on the lectern in front of me, page thirteen of my planned twenty-page cross-examination. I am not a lawyer, but for reasons that include my knowledge of the case and shrinking resources at my newspaper, I was representing the Toronto Star in court. The job that day: learn as much as possible about the police probe of the Sherman case with the hope of getting thousands of pages of case information unsealed in the near future.

  “What are you doing in this case—that is not a fishing expedition?” I asked.

  “We are just following the evidence wherever it leads us,” Yim replied.

  Dennis Yim had been seconded from his duties as a divisional detective to the high-profile homicide squad the week after the Shermans’ bodies were discovered. Now, sixteen months later, he was the only full-time officer on the file, though four other detectives, including Brandon Price, the original officer on the case, were involved part time. Detective Yim was in his mid-thirties, an officer for thirteen years. As I learned during my cross-examinations of him, Yim began each day on the Sherman case at 7 A.M. He clocked out at 3 P.M. He never left the office. His job was to prepare applications for search warrants and production orders, then read, review, and analyze the information that was obtained from those court orders. Those applications, or ITOs, contained synopses of everything the police had learned to date, from the moment the bodies were discovered.

  While all court documents are considered “presumptively open” in Canadian law laid down by the Supreme Court of Canada, in practice that is not always the case. Search warrant documents in active murder cases typically remain sealed. But if, after hearing arguments, the court finds either that the case is inactive or that there is no risk to the “administration of justice” if the documents are made public, they can be unsealed. Also, when there is an arrest, courts often unseal at least portions of the warrant files. No arrests had been made in the Sherman case. When I first went down this road four months after the Sherman deaths, I tried the former argument, suggesting that the police investigation was inactive. That failed. Now I was arguing that some of the information could be made public because Yim’s affidavit describing the nature of the risk in releasing information was speculative, not well grounded in evidence, which is the Supreme Court test. My problem, or one of my problems, was that I was appearing before Justice Leslie Pringle, the same judge who had issued all the warrants and production orders and then ordered them sealed. Asking her to change her ruling was like a teenager whose parent has said he cannot use the car asking the same parent the same thing five minutes later.

  The documents I wanted access to sat near the court clerks, to the right of Justice Pringle, in her black robes and red sash. A mountain of sealed manila envelopes. The thickest of them was 599 pages. That, I learned, was the most recent ITO, reflecting the growing amount of information filed in support of the latest production order. Getting Yim to tell me anything under the watchful eye of Justice Pringle and Crown attorney Peter Scrutton, who represented the interests of Yim and the police in keeping the documents sealed, seemed impossible. It was not that the atmosphere was hostile. Everyone in court was saying all the right things about the importance of the media in bringing scrutiny to the police and courts on behalf of the public. Justice Pringle was pat
ient with me, a non-lawyer, emphasizing that the information would eventually be unsealed, just not at this stage. In the hallway during a break, Scrutton, Yim, and I talked about our kids, mine in university, theirs in elementary school. They even kibitzed about learning that Jonathon Sherman owned a big storage company in the east end of Toronto, which struck me as a non sequitur and about which they provided no more explanation.

  After the break, I decided to try a different tactic. Since the original announcement that police were investigating the case as a “targeted double murder,” they had said absolutely nothing about the investigation, quite unusual even by close-mouthed Canadian standards.

  “Detective Yim, are you making progress in this investigation?”

  “Yes,” Yim responded.

  “And what is the goal of the investigation?” I asked, lobbing a softball at the affable detective.