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Justice Department joins Landis whistleblower case

  • By VeloNews.com
  • Published Feb. 22, 2013
  • Updated Feb. 22, 2013 at 4:45 PM EDT
The U.S. Department of Justice has joined Floyd Landis' Qui Tam case against Lance Armstrong. Photo: Joel Saget | AFP

The U.S. Department of Justice has notified a federal court on Friday that it would join Floyd Landis’ whistleblower suit against Lance Armstrong and others. NBC News reported the action on Friday morning.

VeloNews reported on Thursday that high-level DOJ officials had decided to forgo the case, which targets Armstrong and other members of the U.S. Postal Service team management. The Justice Department reversed course today and sources tell VeloNews that the DOJ will file a notice of intervention to join the complaint, which alleges that Armstrong and company defrauded the Postal Service through the team’s use of performance enhancing drugs throughout the six-year title sponsor agreement.

Those sources asked that they not be named due to the sensitivity of the topic.

The Wall Street Journal reported on Friday that top DOJ officials, including attorney general Eric Holder, met late Thursday to resolve the Armstrong matter. According to sources, Holder made the decision to join the case, but “there was a general agreement to proceed.”

U.S. Anti-Doping Agency CEO Travis Tygart lobbied Holder to join the Qui Tam case in a letter dated Jan. 14, 2013 and obtained on Thursday by VeloNews. He applauded the Justice Department on Friday in a statement.

“As indicated in USADA’s reasoned decision, the U.S. Postal Service Cycling Team was run as a fraudulent enterprise and individuals both inside and outside of sport aided and abetted this scheme and profited greatly,” he said. “USADA applauds today’s action by the U.S. Department of Justice, which holds promise for returning the many millions of federal dollars in ill-gotten gains generated by this fraud. Those who violate the rules for personal financial gain and in the process harm numerous individuals, corporations, and the public, should be held accountable whether their conduct was in sport, business, or any other important part of American society.”

In a statement, Armstrong attorney Robert Luskin 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. The Postal’s Services own studies show that the Service benefited tremendously from its sponsorship — benefits totaling more than $100 million.”

Armstrong’s legal team released studies on Friday conducted by the U.S. Postal Service, saying U.S. government sponsorship of his Tour de France team produced a triple return on investment. To support the claim, Armstrong’s camp released sponsorship evaluations
from 2001, 2002, and 2004 that attempted to place a monetary value on the exposure benefits to U.S. Postal at that time.

The studies claimed that the $32.276 million spent by U.S. Postal from 2001-2004, generated $103.636 million in publicity benefits with never less than a 300-percent return in investment in any year of the sponsorship. There was no study to show any potential fallout in negative publicity from being attached to Armstrong’s now-tainted era in the wake of his confession to being a dope cheat in a television interview with Oprah Winfrey last month.

As the New York Daily News reported in January, DOJ officials responsible for making the decision on whether to join the suit turned to Holder after being contacted by Armstrong lawyer Robert Luskin in December about a possible settlement based on the $30 million the Postal Service paid to sponsor its teams from 1998-2004.

Filing under the Federal False Claims Act, Landis launched a Qui Tam case in 2010, suing Armstrong and former U.S. Postal team associates, including Thomas Weisel, for defrauding the government by violating the sponsorship agreement between the team and the U.S. Postal Service.

Defendants in the suit include Tailwind Sports and Montgomery Sports, owned by wealthy San Francisco financier Weisel, as well as Austin-based Capital Sports & Entertainment, which lists Armstrong, Johan Bruyneel, Bill Stapleton, and Bart Knaggs among its principals.

Knaggs and Stapleton did not return e-mails seeking comment. The two were unavailable to speak, according to a person who answered the phone at the CSE office in Austin, Texas, on Friday morning.

“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, principal deputy assistant attorney general for the Civil Division of the Department of Justice said in a release. “Today’s action demonstrates the Department of Justice’s steadfast commitment to safeguarding federal funds and making sure that contractors live up to their promises.”

The New York Daily News published the sealed 33-page federal whistleblower lawsuit, dated June 10, 2010, in January.

If Landis were to win the suit, he could stand to gain a percentage, up to 25 percent, of three times what the Postal Service spent — roughly $90 million. With the U.S. Department of Justice intervening, Landis would be entitled to up to 15-25 percent of any money the government recovered, rather than 25-30 percent if he pursues the case without the government’s resources.

Landis did not immediately respond to a request for comment on Friday.

Armstrong said Wednesday that he would not cooperate with a USADA probe into dope cheats in cycling, but would be willing to help other anti-doping inquiries. Armstrong’s move diminished his chances of having his lifetime ban from World Anti-Doping Agency-sanctioned sports reduced. Tygart had asked that Armstrong testify under oath on what he knew about such subjects as cycling team manager Johan Bruyneel’s role in the conspiracy, details of how the scheme unfolded, or if officials at the sport’s governing body, the UCI, knew about it.

In addition to Landis’ lawsuit, Texas insurance firm SCA Promotions lodged a suit against Armstrong on February 7 seeking $12 million for bonus money paid to the rider for Tour de France triumphs that are now null and void.

Velo editor-in-chief Neal Rogers, VeloNews.com editor Brian Holcombe, VeloNews.com reporter Matthew Beaudin, and Agence France Presse contributed to this report.

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