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Monday, January 17, 2011

U.S Postal Service Paid a Lance Armstrong-Linked S.F. Firm $32 Million

Posted By on Mon, Jan 17, 2011 at 2:31 PM

click to enlarge The Plot Thickens
  • The Plot Thickens
The Plot Thickens
The United States Postal Service has revealed it paid $32 million to a San Francisco firm that was established to run the team sponsoring cyclist Lance Armstrong, ESPN reports. The news puts a possible dollar figure on financial interests at stake in an ongoing U.S. investigation regarding allegations that Armstrong doped to win the Tour de France.

Former Armstrong teammate Floyd Landis has filed a federal whistle-blower complaint, alleging that San Francisco-based Tailwind Sports, a sports management company founded by SF financier Thom Weisel, defrauded the U.S. government by lying to USPS officials about performance-enhancing drug use on Armstrong's team. Weisel eventually took on Armstrong as an ownership partner after founding the company in the 1990s -- which means the two men could face penalties for fraud.

According to, newly-released internal USPS documents,


that the agency spent $31.9 million sponsoring Armstrong's team,

Tailwind Sports, from 2001-04. The figure will become significant if the

federal investigation turns up evidence that Armstrong and team members

engaged in systemic doping, as former teammate Floyd Landis has

alleged. If prosecutors can prove that taxpayer funds were spent

financing a team that was winning through the use of banned drugs, they

could charge fraud."

In 2005, SF Weekly was the first to report Armstrong and Wiesel's risk of paying tens of millions of dollars in damages under America's False Claims Act whistle-blower law. Like ESPN's story this week, SF Weekly's 2005 column "Legal Complications on Steroids" reported on internal USPS documents, and how they suggested the potential for a multimillion-dollar fraud case involving Armstrong:

Sponsorship and bonus-payment agreements entered into by Weisel-controlled companies created a situation in which performance-enhancing drug use could theoretically be construed as a form of financial fraud, defined here as a situation in which a party misrepresents the truth in order to obtain money. If such a definition were ever to hold up in court, it could open a floodgate of legal questions.
In its weekend story, ESPN noted that after doping allegations against Armstrong appeared in the news, the team insisted on a "morals clause" aimed at shielding the government agency from scandal.

"The newly released Postal Service documents show that, as early as

2000, officials were becoming queasy about news stories tying the team

to drugs. The four-year renewal struck that year included a "morals

turpitude and drug clause," specifically citing "failure to pass drug or

medical tests" and "inappropriate drug conduct prejudicial to the team"

as causes to suspend or fire riders.

SF Weekly readers, however, have known for six years that USPS sponsorship contracts began carrying language aimed at banning drug use in 2001.

Starting in 2001, sponsorship agreements between the U.S. Postal Service and these companies included strong anti-drug language under which the contracts could be thrown out if team management knew of athletes' drug use and looked the other way. Copies of the agreements I obtained had the sponsorship amounts blacked out.
Press reports, however, have claimed the USPS paid out around $10 million annually during the agreement, underwriting Armstrong's Tour victories between 1999 and 2004.

ESPN took SF Weekly's 2005 reporting a step further, and appealed USPS' refusal to reveal the sponsorship amount. The postal service had previously defended withholding the information,

claiming it was a trade secret which, if revealed, might hinder

the government agency's ability to negotiate

future sponsorship deals.

In its Freedom of Information Act appeal, however, ESPN pointed out that the postal service no longer sponsors athletes, and that the more than a half-decade-old

financial information is irrelevant in today's pro-sports marketplace.

According to the newly uncensored documents, USPS payments to sponsor Lance Armstrong's team peaked at $8.66 million in 2004. Over the years, the government agency paid Tailwind a total of $31.9 million to run the the team.

The new information, however leaves the thrust of SF Weekly's 2005 story intact:

The postal service is considered a government agency under an 1863 federal law called the False Claims Act, designed to root out fraud against the government. That means that any insider who believes he has evidence that would hold up in court showing Armstrong used drugs while his team management knew yet quietly looked the other way could potentially reap a bonanza under legal provisions that give whistle-blowers a share of any lawsuit's proceeds.

"Like most cycling fans I would be reluctant to believe Lance Armstrong, or any other member of the U.S. Postal Service Team, used performance-enhancing drugs. But if that were indeed the case, and the company was aware of that at the time, the company may very well have exposure for treble damages under the False Claims Act," says Paul Scott, a former U.S. Department of Justice trial attorney in San Francisco specializing in cases involving the Act.

Landis is now waiting to see whether the U.S. Justice Department decides to take up his whistle-blower claim against Tailwind and its owners.

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