Bloomberg News

U.S. Joins Armstrong Ex-Teammate’s False Claims Lawsuit

February 23, 2013

The U.S. joined a lawsuit against Lance Armstrong brought by ex-teammate Floyd Landis that accuses the former champion cyclist of defrauding the government by using banned drugs while riding for the U.S. Postal Service.

The Justice Department yesterday joined the False Claims Act lawsuit. Landis alleges that Armstrong, his team manager Johan Bruyneel and team owner Tailwind Sports Corp. defrauded the U.S. government based on years of using banned substances in violation of the U.S. Postal Service’s sponsorship agreements.

“The Postal Service contract with Tailwind required the team to enter cycling races, wear the Postal Service logo, and follow the rules banning performance enhancing substances -- rules that Lance Armstrong has now admitted he violated,” Stuart F. Delery, chief of the Justice Department’s civil division, said in a statement.

The government joins only about 25 percent of privately filed whistle-blower cases, and when it does, a recovery is likely, said John Phillips of Phillips & Cohen LLP in Washington, who has litigated False Claims Act cases since 1986. U.S. participation adds credibility because it means the allegations survived a thorough vetting by the department and shows “they believe in the case and want to pursue it.”

Record Recoveries

The Justice Department recovered a record $3.3 billion in suits filed by whistle-blowers in the 2012 fiscal year, the department said in December. When they win a False Claims Act case the U.S. joined, whistle-blowers can get from 15 percent to 25 percent of the recovery, which can be three times the government’s damages.

The U.S. Postal Service paid $31 million in sponsorship fees to Armstrong’s team between 2001 and 2004, the Justice Department said. Armstrong, who was stripped of his seven Tour de France titles last year, won the cycling race in each of those years. He was the team’s lead rider from 1999 to 2004.

Armstrong’s lawyers had been in talks with the Justice Department over a possible settlement deal, his attorney, Robert Luskin, said yesterday. Those negotiations fell apart.

“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,” Luskin of Patton Boggs LLP in Washington, 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.”

‘Banned Substances’

The lawsuit, unsealed yesterday, alleges Armstrong and his teammates knowingly caused U.S. Postal Service team agreements to be violated by “regularly employing banned substances to enhance their performance,” the Justice Department said in its release.

A record seven-time Tour de France winner from 1999 to 2005, Armstrong was stripped of the titles by the U.S. Anti- Doping Agency in August. The cyclist acknowledged in a television interview with Oprah Winfrey last month that he used a “cocktail” of testosterone, erythropoietin and blood transfusions throughout his career.

A compilation of the 41-year-old American cyclist’s earnings by Bloomberg News, using public documents, interviews, court testimony and marketers’ comments, showed part of Armstrong’s business ventures and profit centers. Armstrong made more than $218 million during a career he told Winfrey was “one big lie.”

Prize Money

Armstrong also faces a lawsuit seeking the return of $12 million in prize money a promoter paid the cyclist for three of those championships.

SCA Promotions Inc. paid Armstrong the bonuses after he won the 2002, 2003 and 2004 bicycle races, believing his representations that he had won each contest fairly, according to a complaint filed Feb. 7 in Texas state court in Dallas. SCA is suing to get the money back. Armstrong had previously denied doping allegations under oath, according to SCA’s complaint.

The department said it is only joining Landis’s lawsuit against Armstrong, Buryneel and Tailwind. It won’t intervene against other defendants named by Landis.

Landis in August admitted defrauding donors to his legal defense fund by falsely claiming that he hadn’t used performance-enhancing drugs during his professional cycling career as part of a deferred prosecution agreement filed in federal court in San Diego.

Wire Fraud

He’s charged with one count of wire fraud for which he could be sentenced to as much as 20 years in prison under the terms the agreement with the Justice Department. Federal prosecutors could continue prosecuting Landis if he fails to make restitution of more than $475,000.

“I had come to a point in my life where I decided that I had to tell the truth for the sake of my conscience,” Landis said yesterday in a statement issued by his lawyer, Paul Scott. “I’m still dealing with the consequences of that decision to this day but it’s better than living a lie.”

The case is U.S., ex rel. Floyd Landis v. Tailwind Sports Corp., 10-cv-00976, U.S. District Court, District of Columbia (Washington).

To contact the reporters on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net; Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Steven Komarow at skomarow1@bloomberg.net


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