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Justice Department Will Join Lawsuit Against Armstrong Government Joins Suit Against Armstrong
(about 9 hours later)
The Department of Justice has decided to join a lawsuit against Lance Armstrong and several associates that accuses them of using taxpayer money to finance doping on the United States Postal Service cycling team, according to a lawyer for Armstrong. The Justice Department on Friday joined a federal whistle-blower lawsuit claiming that Lance Armstrong, his former team manager and the company that owned his cycling team defrauded the government by entering into a sponsorship agreement with the United States Postal Service while doping occurred on the team.
Armstrong is named as a defendant in a federal whistle-blower case filed in 2010 by Floyd Landis, one of Armstrong’s former teammates. The suit claims that Armstrong and his associates defrauded the government by allowing doping on the United States Postal Service team when doping was explicitly forbidden in the sponsorship contract. The lawsuit, unsealed Friday, asserts that the defendants knew the team’s cyclists were doping when the Postal Service sponsorship contract, which was worth about $31 million from 2001 to 2004, expressly prohibited the use of performance-enhancing drugs.
Armstrong admitted to using performance-enhancing drugs during his cycling career in an interview with Oprah Winfrey last month. He had already been stripped of his seven Tour de France titles and given a lifetime ban from Olympic sports as a result of an investigation by the United States Anti-Doping Agency. Ronald C. Machen Jr., United States attorney for the District of Columbia, said the government joined the case as a plaintiff because Armstrong and his associates “took more than $30 million from the U.S. Postal Service based on their contractual promise to play fair and abide by the rules.” It is also unfair, he said, that the Postal Service is now associated with the cycling team that ran what the United States Anti-Doping Agency has called the most sophisticated doping program in history.
Armstrong and his lawyers had been negotiating with the government to settle the case, with Armstrong offering a payment of $5 million. But the government is said to be asking for much more, which would be the latest blow to Armstrong’s legacy. On the day that Armstrong’s interview with Winfrey aired last month, the government was granted an extension to decide whether it wanted to join the suit. “In today’s economic climate, the U.S. Postal Service is simply not in a position to allow Lance Armstrong or any of the other defendants to walk away with the tens of millions of dollars they illegitimately procured,” Machen said in a statement.
“Lance and his representatives worked constructively over these last weeks with federal lawyers to resolve this case fairly, but those talks failed because we disagree about whether the Postal Service was damaged,” Robert Luskin, a lawyer for Armstrong, said in a statement. “The Postal’s Services own studies show that the Service benefited tremendously from its sponsorship — benefits totaling more than $100 million.” Armstrong, who is serving a lifetime ban from Olympic sports for being the leader of a doping program on his seven Tour de France-winning teams, vehemently denied for years that he had doped. Last month, however, he admitted to using performance-enhancing drugs to win those Tours.
The case is under seal, but will be unsealed when the government joins it. If the government recovers money from the lawsuit, Landis would be eligible to receive part of it. The payout is likely to be in the millions. Since then, he has been confronted with civil lawsuits that are threatening to drain him of millions of dollars. In one recent suit, an insurance company in Dallas asked for $12.1 million it had paid him for several of his Tour victories.
The case could have added significance because of the possible consequences for Thomas Weisel, a major figure in finance and Silicon Valley, who was Armstrong’s biggest backer as a co-owner of the United States Postal Service Pro Cycling Team. But the whistle-blower case, initially filed by his former teammate Floyd Landis in June 2010, has the potential to cause the most damage to Armstrong’s bank accounts. His estimated worth is about $125 million, but the Justice Department could win more than the $31 million in sponsorship money the Postal Service paid out from 2001 to 2004.
In federal whistle-blower lawsuits, a court or jury can award triple damages, which in this case could add up to an award of more than $90 million. Each defendant would be liable for that amount, whistle-blower lawsuit experts say, though the government could not recoup more than the $90 million. A judge or jury would decide how much each defendant would pay.
Landis, who was stripped of his 2006 Tour title for doping, also stands to benefit if the government wins the case. As the whistle-blower, he could be given one-third of the award.
With the government now a plaintiff, Landis’s chances of winning the case have risen steeply. The Justice Department joins only about 20 percent of cases filed under the False Claims Act, said Gordon Schnell, a lawyer at the firm Constantine Cannon and a specialist in whistle-blower lawsuits. Of the cases it joins, it wins or settles 80 percent of them, he said.
“It only picks the low-hanging fruit, the cases it thinks it will settle,” Schnell said. “But this may just be a game of cat and mouse at this point. They could have brought the case to try to increase their leverage in working out a deal.”
Armstrong and his lawyers have recently been negotiating with the government to settle the case, with Armstrong offering a payment of $5 million, according to one person briefed on the talks. That person did not want to be identified because the case is ongoing. The government wanted more than double that offer, the person said.
“Lance and his representatives worked constructively over these last weeks with federal lawyers to resolve this case fairly, but those talks failed because we disagree about whether the Postal Service was damaged,” Robert Luskin, a lawyer for Armstrong, said in a statement. “The Postal Service’s own studies show that the service benefited tremendously from its sponsorship — benefits totaling more than $100 million.”
The lawsuit as originally filed by Landis named several other defendants, but the Justice Department has joined against only three: Armstrong; Johan Bruyneel, his former team manager; and the now-defunct sports management company Tailwind Sports.
In the lawsuit, Landis claimed that he saw Armstrong dope and that Armstrong also gave him testosterone patches and the endurance-boosting drug EPO in front of Armstrong’s wife and children. He also said that Bruyneel, who is facing a lifetime ban from Olympic sports, facilitated his doping, teaching him how to use banned drugs like human growth hormone, and that other riders on the team followed Bruyneel’s lead.
Landis, through his lawyer, Paul D. Scott, said he was encouraged by the government’s joining the case as a plaintiff.
To win the case, the government must prove that it was damaged by the violation of the contract, said Eric R. Havian, a lawyer at Phillips & Cohen and an expert in False Claims Act cases.
“They have to say, look, the Postal Service didn’t get what we bargained for, you gave us a black eye because of the doping, and that’s a legitimate case,” Havian said. “They might not get the full amount because they received some benefit from the sponsorship. They also have some very serious problems with Landis. He’s not the most sympathetic whistle-blower in the world.”
For years, Landis lied about his own doping, including collecting money for his defense from supporters, who included Weisel and other investors in the Postal Service team. In an agreement with the government, he has agreed to pay that money back.
He now lives in Norwalk, Conn., in a guesthouse on the property of David “Tiger” Williams, a hedge-fund trader who invested in Tailwind Sports in 2002 but had a falling-out with Armstrong years later.
“The next step is that Armstrong and the other defendants will try to dismiss the case, and this could last years,” Havian said. “I don’t know if Landis is popping the Champagne cork, but it’s premature to celebrate.”