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Feds join civil fraud case against Armstrong

1:41 PM, Feb 22, 2013   |    comments
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(USA Today) -- The federal government finally has stated its opinion on the Lance Armstrong case.

It believes the former cyclist committed fraud through cheating and lies.

And now it wants its money back times three - possibly around $100 million.

The U.S. Department of Justice made it official Friday when it joined a civil fraud suit against the former cyclist under the False Claims Act. By joining the suit, the government is teaming up with another confessed cycling cheat, Floyd Landis, who filed the suit under seal in June 2010.

The suit accuses Armstrong and his associates on the U.S. Postal Service cycling team of defrauding the government through their doping scheme. Because the USPS team used banned drugs and blood transfusions to gain an advantage, the suit argues they violated their sponsorship contracts with the USPS and that the government should get its money back.

The USPS paid around $30 million to sponsor Armstrong's cycling team, which included Landis as a teammate. Under the False Claims Act, the government can recover treble damages - around $90 million, with Landis in line to get up to 25 percent as the whistleblower who brought the case to the government's attention.

In a statement, Armstrong attorney Robert Luskin disputed the allegation that the government was defrauded.

"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 said. "The Postal's Services own studies show that the Service benefited tremendously from its sponsorship -- benefits totaling more than $100 million."

It's another huge legal headache for Armstrong, who was under criminal fraud investigation by the federal government until it dropped that case without explanation in February 2012. After considering it for nearly three years, the government now picks up Landis' civil fraud case right when Armstrong might be most vulnerable to it.

Just a few weeks ago, he confessed on national television that he engaged in doping during all seven of his victories in the Tour de France from 1999 to 2005. The admission provided ammunition to those who believed they were defrauded by such cheating, including the government, which could have decided to leave Landis' suit alone.

If the government had done so, Landis could have proceeded on his own without the resources of federal government to back him up. But now that the government has joined his cause, the suit adds to Armstrong's legal woes as the biggest of the bunch.

It names several co-defendants: Armstrong's agent Bill Stapleton, Stapleton's agency, the cycling team's management company, Tailwind Sports, and Tailwind's financier, Thomas Weisel.

If the government can prove damages, any of the defendants could be held liable for the entire amount.

The biggest problem for the government just might be proving those damages. Armstrong's attorneys are likely to argue that the USPS was not defrauded at all, but instead benefited from the sponsorship. According to economic benefit studies conducted for the USPS, the USPS received around $100 million in value from the cycling team sponsorship thanks to media coverage and related benefits from 2001-04.

"The government will say they would not have paid out the money if they knew he was violating the contract, and presumably Armstrong's attorneys will argue that even if that's the case, the government got value otherwise," said Jason Workmaster, a Washington D.C. attorney who specializes in cases under the False Claims Act. "They could argue that value is worth a certain amount of money, and that it offsets what the government paid out."

Additionally, Armstrong's attorneys might argue that parts of the case are too old to be subject to the False Claims Act, with some of the evidence dating to more than 10 years ago.

Such an issue would be argued in front of a judge before trial. And it might not even get that far. Most of these cases settle before trial, and the two sides already have been trying to reach a settlement for weeks.

But by joining the case, the government appears to have gained leverage in such talks. Landis also has gained an upper hand against his old enemy Armstrong, who once portrayed him as a fraud and a liar.

After years of denials in 2010, Landis confessed that he cheated to win the 2006 Tour de France. He was one of the first to accuse Armstrong of cheating, too - an allegation that drew a fierce response from Armstrong, who denied it and attacked Landis' character.

Now they square off in federal court, confessed cheater vs. confessed cheater, with the government joining forces with one against the other.

(USA Today)

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