The federal government has sued Lance Armstrong, alleging the former cyclist committed fraud through cheating and false statements.
According to a federal official familiar with the case, the United States Department of Justice has joined the civil fraud suit against the former cyclist under the laws set forth by the False Claims Act (FCA). The government joined the suit filed under seal in June, 2010, by another confessed and disgraced Armstrong teammate, Floyd Landis
In the suit, Armstrong and his teammates on the U.S. Postal Service cycling team are all accused of defrauding the government by participating in a doping scheme. 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.
The Postal Service team previously banned the use of drugs and blood transfusions by cyclists looking to gain an advantage, allegedly leaving Armstrong in clear violation of federal law. The USPS paid around $30 million to sponsor the cycling team, which included Landis as a teammate. The suit goes on to say that Armstrong and his associates violated their sponsorship contracts with the Postal Service team and the government is now entitled to get that sponsorship money back.
Under the False Claims Act, the government can recover up to three times the amount of damages, or around $90 million, with Landis standing to gain around 25 percent of the $90 million, as he was the whistleblower who originally brought the case to the government’s attention.
In a statement, Armstrong attorney Robert Luskin disputed the allegation that the government was defrauded, noting that the “Postal Service’s own studies show that the service benefited tremendously from its sponsorship – benefits totaling more than $100 million.”
“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,” said Luskin.
A U.S. Justice Department representative had no official comment about the case as of yet, but criminal prosecutors have said they do not expect to charge Armstrong.
The Whistleblower Law
The government is pursuing Armstrong under the False Claims Act, a law that encourages and protects the whistleblowers that come forward to file suits when they have personal knowledge of fraud committed against the government. If the government believes they have a solid case with merit, they can choose to take over the litigation of the case. If the case is tried successfully, the whistleblower then receives a portion of the money recovered.
Floyd Landis, whistleblower of the qui tam case against Armstrong, stands to gain a large sum of money should the suit be successful. Landis, who filed the suit in 2010, stands to gain up to one-third of any money government recovers. For Landis and the Department of Justice to prevail in the qui tam suit, they have to prove that team managers signed contracts with the U.S. Postal Service which they knew, or should have known, were false.
Since restructuring the FCA law in 1986, military contractors, pharmaceutical companies and hospitals have been repeatedly charged with committing fraudulent acts against the government.
Does Armstrong Have a Defense?
Armstrong’s legal team is reportedly prepared to argue that most of the sponsorship money claims are barred by a legal time restraint: the sponsorship agreement expired in 2004, and there is a six-year statute of limitations on recovery under the FCA , according to a source who spoke on the condition of anonymity. The Justice Department is expected to argue that the statute of limitations is actually ten years, and that this longer period allow them to pursue the FCA case against Armstrong.
The same source raised two additional arguments that may help Armstrong with the FCA suit. First, the sponsorship contract did not contain specific language related to the act of doping, and second, Armstrong was not in charge of Tailwind Sports, the racing team firm that signed the original contract with the Postal Service. In fact, the agreement between the Postal Service and Tailwind Sports existed before Armstrong joined the cycling team.