USA First Look

Lance Armstrong can't outrun US Postal Service: $100 million lawsuit races on

Lawyers for Lance Armstrong failed to halt a $100 million lawsuit by the US Postal Service, which accuses the disgraced cyclist of defrauding the US government.

US Postal Service Team rider Lance Armstrong raises his arms as he crosses the finish line to win the 204.5 km long 17th stage of the Tour de France from Bourd-d'Oisans to Le Grand Bornand, France in 2004.
Wolfgang Rattay/Reuters/File
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Caption

Neither snow nor rain nor Lance Armstrong’s attorney can stop the US Postal Service.

A federal judge decided in favor of the US Government on Monday, allowing their $100 million dollar lawsuit against former professional cyclist Lance Armstrong to go to trial.

Originally brought by former teammate Floyd Landis, the US Department of Justice suit accuses Mr. Armstrong of defrauding the government by accepting a US Postal Service (USPS) sponsorship worth millions while he used an elaborate illegal doping scheme to win a string of Tour de France victories.

"Because the government has offered evidence that Armstrong withheld information about the team's doping and use of [performance enhancing drugs] and that the anti-doping provisions of the sponsorship agreements were material to USPS's decision to continue the sponsorship and make payments under the agreements, the Court must deny Armstrong's motion for summary judgment on this issue," Judge Christopher Cooper of the US District Court for the District of Columbia wrote in a 37-page ruling.

As lead sponsor, the USPS paid the now-defunct Tailwind Sports Inc. team as much as $40 million between 1998 and 2004, a period which included six of Armstrong’s seven Tour de France wins, now invalidated. Armstrong personally received almost half of that sum.

Under the False Claims Act, the government can sue for triple damages, putting the lawsuit at about $100 million.

Also known as the Lincoln Law, the False Claims Act was first used to target fraudulent sales by government contractors who provided equipment for Union troops during the Civil War. More recently, it has been used to hold defense contractors responsible for defective airplane parts. In this case, however, gains and losses are harder to pin down.

Everyone knows when an engine malfunctions, but advertising is much less obvious.

Mr. Landis first brought the suit in 2010 as a whistleblower, and the Justice Department joined the case in 2013, shortly after Armstrong admitted to doping. Landis’s attorney, Paul Scott, argues that the sponsorship of the now-disgraced racing team hurt the USPS’s reputation.

“It was all a fraud," Scott told The San Diego Union-Tribune. "US Postal would not have paid a dime if they had known the truth." He believes that the agency will "forever be tied to the largest doping scandal in the history of sports."

The Armstrong team, however, believes the government got a good return on its investment, despite the scandal. They point to internal reviews conducted between 2001 and 2004 that show the contract bringing in nearly $140 million in international exposure.

During that period, Armstrong featured prominently in newspapers, magazines, and online, bringing the USPS’s brand along with him.

"The US Postal Service benefited tremendously from its sponsorship of the cycling team," Armstrong attorney Elliot Peters said in 2013. "Its own studies repeatedly and conclusively prove this. The USPS was never the victim of fraud. Lance Armstrong rode his heart out for the USPS team, and gave the brand tremendous exposure during the sponsorship years."

How much that exposure boosted sales is another question. A 2003 audit criticized the deal for bringing in less than $1 million in revenue during the four years, although some USPS officials disputed the conclusion at the time.

Judge Cooper wrote that Armstrong makes a “persuasive case,” but that the government’s argument had merit as well.

"Giving Armstrong 'credit' for the benefits he delivered while using [performance-enhancing drugs] could be viewed as an unjust reward for having successfully concealed his doping for so long," Cooper wrote. "[But] disregarding any benefits USPS received from the sponsorship could bestow the government with an undeserved windfall. The same could be said of Landis, whose role in this entire affair some would view as less than pure."

Landis, a fellow doper who was also stripped of his Tour de France title, stands to share as much as 25 percent of any damages recovered.

Armstrong, once one of the richest and most respected athletes in the world, has lost almost all of his sponsors and paid back more than $10 million in damages as part of other lawsuits. The Landis suit, if successful, would be the most damaging so far.

The case is expected to go to trial in the fall.

This report includes material from the Associated Press and Reuters.

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