Barry Sherman’s company says fired employee stole valuable drug secrets - Macleans.ca

Barry Sherman’s company says fired employee stole valuable drug secrets

A lawsuit filed by Apotex months before the murders of Barry and Honey Sherman alleges the worker planned to start his own drug-making company

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An Apotex Inc. worker inside one of the company’s plants (Kevin Frayer/CP)

Apotex Inc., the generic-drug giant founded by murdered billionaire Barry Sherman, has been waging a year-long court battle against an ex-employee who was fired for allegedly stealing millions of dollars’ worth of pharmaceutical trade secrets from a laboratory computer—in the hopes of launching a rival company in his native Pakistan.

Court documents obtained by Maclean’s reveal the existence of a high-stakes internal investigation launched by Canada’s largest drug-maker in January 2017—and the urgent lawsuit that followed, aimed at recouping what the company describes as “highly sensitive” intellectual property of “enormous” value. Apotex is so determined to retrieve any missing data that, at one point during the ongoing litigation, company lawyers demanded that the former staffer be imprisoned for 45 days for contempt of court because he “willfully and deliberately” ignored a judge’s order to hand over USB drives, email passwords and other electronic devices believed to contain confidential information.

Mulazim Hussain, a veteran chemist who worked at Apotex’s research-and-development laboratory for more than a decade, was fired last year after the company discovered he had registered a private corporation and taken steps to construct his own generic-drug plant in Faisalabad, Pakistan. In hundreds of pages of court documents filed in Toronto, Apotex claims that a search through Hussain’s company email account turned up equipment invoices, factory floor designs, and a partially completed business plan that listed 21 generic medications—each one produced by Apotex. Forensic investigators hired by Sherman’s company also uncovered evidence that Hussain had plugged at least six USB drives into lab computers, a clear violation of Apotex policy; one of his drives allegedly contained “highly confidential” information about Mefenamic acid capsules, a popular painkiller.

RELATED: Barry Sherman’s legal battle with his cousins goes on weeks after his murder

In one document unearthed by company investigators, Hussain went so far as to imitate the style of Apotex’s logo—and copy its slogan, “Advancing Generics”—as part of a detailed business application submitted to Pakistani officials. The same application described Hussain as the “principal officer” of a company called Trillium, and listed his Toronto phone number as the main point of contact. (South Asia, led by India, is a rising powerhouse in the generic drug industry, where the sector is growing by more than 10 per cent per year.)

None of the allegations has been proven in court, and Hussain denies stealing any proprietary information during his nearly 13 years as an Apotex chemist. In his own court submissions, the father of seven admits he did “toy with the idea” of establishing a generics factory in his home country, and took steps to incorporate both Trillium Canada Ltd. and a related company in Pakistan, Trillium Pharmaceuticals (PVT) Ltd. But Hussain insists it was all “a pipe dream” that “was never remotely feasible or possible,” and that he abandoned the “foolish” plan as soon as he realized it would cost many millions to pursue. Anything he accessed on laboratory computers was for legitimate work purposes, he says.

“Mr. Hussain vigorously disputes the allegations raised by Apotex in its court proceeding against him and intends to fully and completely defend these allegations in court as he believes they are without merit,” wrote Paul Koven, Hussain’s Toronto lawyer, in a statement to Maclean’s. “As this matter currently remains before the Superior Court of Justice, I am unable to comment further at this time.”

Barry Sherman, 75, and his wife, Honey Sherman, 70, were discovered strangled inside their North York mansion nearly three months ago, the victims of what police have labelled a “targeted” double homicide. Since then, detectives have said little else about the high-profile murders. A parallel probe is being conducted by a team of private investigators hired by the Shermans’ four children.

RELATED: Judge greenlights lawsuit alleging Barry Sherman’s company stole rival’s trade secrets

There is no suggestion that Hussain had any involvement in the couple’s deaths. According to court filings, the chemist was not in Canada when the Shermans were killed in mid-December; he had flown to Pakistan in November following the passing of his father, and was still overseas in January. Three scheduled hearings related to the lawsuit—including one on Dec. 5, 2017, eight days before the Shermans were last seen alive—were adjourned because Hussain was out of the country, court records show.

But as investigators continue their painstaking search for potential clues, the fallout from Hussain’s firing provides a rare window into the machinations of the lucrative, ultra-competitive industry in which Barry Sherman made his fortune. The lawsuit also reveals specific details about the inner workings of Apotex—details that rarely reach the public domain. The court filings disclose, for example, that the privately held company spends approximately $150 million a year to develop new products and improve manufacturing methods.

News of the lawsuit comes as Apotex tries to defend itself against similar allegations of corporate espionage. In a court action launched last July in the United States, Sherman’s company is accused of using sex, lies and USB drives to illegally obtain valuable trade secrets from the world’s largest generic drug-maker, Israel’s Teva Pharmaceutical Industries Ltd. As Maclean’s reported last month, a Pennsylvania judge denied Apotex’s attempt to throw out the sensational lawsuit, which accuses a former Teva executive of leaking confidential information to her boyfriend—then-Apotex CEO Jeremy Desai. Desai abruptly resigned in January, six weeks after the Shermans were killed, “to pursue other opportunities,” according to the company.

RELATED: Barry and Honey Sherman murders: What’s slowing the cops down at Apotex headquarters

Now 44, Hussain immigrated to Canada in 2002 after earning an organic chemistry degree from Lahore’s University of the Punjab, then a master’s in analytical chemistry. Hired by Apotex in June 2004, his primary job was to test medications to ensure the company’s generic versions were biologically equivalent to brand-name counterparts already for sale. To carry out his duties, Hussain was granted unfettered access to a secure intranet that stores all of Apotex’s propriety data, including drug ingredients and manufacturing methods. The network contains such sensitive material that employees are instructed to print only the information they need at any given time—then promptly destroy the pages when they’re finished.

On Jan. 5, 2017, Apotex received a tip about Hussain’s company, incorporated in May 2015. The tip triggered an immediate investigation, including a surreptitious inspection of Hussain’s work email account. Among the discoveries were records forwarded to another email address (trilliumpharma@gmail.com), including incorporation documents for Trillium Canada and the business plan listing 21 drugs made by Apotex. A senior executive would later write, in a sworn affidavit, that those 21 products were worth $300-million in global sales in 2016, including $50 million in Canada.

The discoveries didn’t end there. Unbeknownst to Hussain, Apotex commissioned a private forensics firm to dig deeper into the laboratory’s two secure computers. The firm reported that when Hussain was logged in, he accessed 42 documents related to four of the 21 products listed in his business plan, including Cyclobenzaprine (a muscle relaxant) and Donepezil (used to treat Alzheimer’s disease). Because he was not assigned to conduct research on any of those four drugs—nor any of the other 21 identified in his business plan—he had no legitimate reason to be viewing the records, the company claims.

“In simple terms, the Accessed Documents provide detailed descriptions of how to make four of the Listed Products and set appropriate manufacturing specifications,” wrote Chetan Doshi, Apotex’s vice-president of product development, North America, in another sworn affidavit. “Using these documents, a person with access to the necessary infrastructure, supplies and equipment could begin manufacturing the relevant products within a short time.”

RELATED: Barry Sherman’s death cuts short the lobbying probe against him

On the morning of Jan. 25, 2017, Hussain was called to a meeting with various Apotex officials and lawyers (not including Sherman). Confronted with the evidence, he denied any involvement in Trillium Pakistan, but did confess to incorporating Trillium Canada—as a clothing importer. Although Hussain agreed to hand over his personal computer and any USB keys he could find, he said he needed to speak to his wife before allowing company representatives to come to his west-end Toronto apartment and retrieve the material.

The meeting ended with Hussain’s being terminated—and served with the lawsuit, which seeks unspecified financial damages and the return of all misappropriated information. “The pharmaceutical business is highly competitive,” reads the statement of claim. “The conduct and prospective conduct of the defendant constitutes a blatant disregard for Apotex’s rights.”

Before he left the premises for the last time, Hussain was told to be in a downtown courtroom the next morning, where Apotex would be seeking an injunction compelling him to immediately hand over all his personal computers and e-mail passwords. In his own affidavit, Hussain says he didn’t sleep that night because he was so distraught. “I was completely in shock after being terminated from my employment with Apotex and so terrified that I was not even able to discuss the matter with my wife on that day,” he wrote.

At the hearing, Hussain insisted he would never do anything to compromise his job—“I swear to God, this is my bread and butter,” he said, according to a transcript of the proceedings—and voluntarily provided the password for his personal Yahoo account and two USB drives. He told Ontario Superior Court Justice Frank Newbould that his kids often gave him USB drives so he could print their school assignments at work. Asked about the private email address found on his company account—trilliumpharma@gmail.com—Hussain insisted it wasn’t his. “I never use it, Sir,” he told the judge.

Newbould granted the injunction, ordering Hussain to turn over everything Apotex demanded. What he disclosed in the ensuing days only bolstered the suspicions of his former employer.

RELATED: Jonathon Sherman pays tribute to his parents Barry and Honey Sherman

Although Hussain surrendered his personal desktop computer, an analysis quickly determined it hadn’t been used in nearly 18 months. Of the two USB drives he handed over, only one actually worked—and on it, investigators said they found 79 company files that were deleted the same day Hussain was fired. Recovered, the files included two “technology transfer packages” that lay out, in granular detail, how to move a particular drug production from one facility to another. As Doshi wrote in a second affidavit, such details “would be very valuable to Apotex’s competitors.”

By that point, the forensics team working for the company reported finding more relevant material on Hussain’s Yahoo account, including detailed reports about three drugs he had no reason to be accessing. Hussain had also coughed up the password to Trillium’s Gmail address—the same account he told Justice Newbould he’d never used. When investigators logged in, they found that someone had deleted every email that pre-dated Jan. 26, the day of the court hearing.

Citing what it described as Hussain’s “willful, deliberate and continuing breach” of the January injunction, Apotex went back to court to file a contempt motion—demanding that he be imprisoned for 45 days. “The primary purpose of this [lawsuit] is to limit the harm done by Mr. Hussain’s wrongful conduct,” company lawyers wrote in their factum, filed Feb. 23, 2017. “This will only be possible if Mr. Hussain complies with the Injunction Order and grants access to the e-mail addresses and electronic devices used to perpetuate his scheme. However, Mr. Hussain has sought at every turn to evade his obligations by dishonesty and clumsy attempts to cover his tracks. This must stop.”

After being served with the contempt motion, Hussain finally contacted a lawyer; only then, his affidavit says, did he “fully understand” his obligations to disclose. He has since handed over for inspection three more USB keys, his cell phone, an Apple computer used by his eldest son, and the passwords to eight other email addresses. Filed last April, his affidavit goes on to say that he has “no further intention or desire to set up a business in Pakistan, as the entire idea was foolish from the outset”—and “has destroyed my ability to work in my profession.”

RELATED: The Barry and Honey Sherman murder investigation by the numbers

Hussain is adamant, however, that he never misappropriated any confidential information. “I fully expect that all of the recovered files were files that I worked on during the course of my duties of employment at Apotex,” he wrote. His affidavit also points out that Apotex does not have the exclusive right to manufacture any of the 21 drugs listed in his business plan, as many generic pharmaceutical companies already sell the same products.

A hearing on the contempt motion, originally scheduled for last May, was adjourned until Sept. 12. According to court records, those proceedings were further adjourned until November as both parties worked on a possible resolution. The motion was pushed back three more times—to Dec. 5, then Jan. 16, then Feb. 13—while Hussain was in Pakistan following his father’s death.

Although the lawsuit remains active, Apotex is no longer pursuing the contempt motion.  Court records show the company is now preparing a summary judgment motion, with written arguments scheduled to be filed later this week.

“Mr. Hussain was dismissed with cause due to his theft of Apotex intellectual property,” said Jordan Berman, an Apotex spokesman, in a written statement. “I can confirm that we are not pursuing a contempt of court motion or any step that could result in the imprisonment of Mr. Hussain. Our focus is on reaching a resolution that protects Apotex’s intellectual property.”

Asked if Apotex executives have informed homicide detectives about Hussain’s firing—and the ensuing lawsuit that was active when the Shermans were murdered—Berman replied, via email: “It’s best you speak directly with Toronto Police Service about what information has been shared with them during the course of their investigation.” A police spokeswoman would only say that because the investigation is active, it would be inappropriate to disclose the names of people who have been interviewed.

Maclean’s asked Koven, Hussain’s lawyer, whether his client has been contacted by police in connection with the Sherman murders. He had not replied by the time this story was posted.

The authors can be reached at michael.friscolanti@macleans.rogers.com or anne.kingston@macleans.rogers.com