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US joins fraud case against Lance Armstrong to recover funds

Published: 6:37AM Saturday February 23, 2013 Source: ONE News/ Reuters

Lance Armstrong has failed to talk the US government out of suing him to recover sponsorship money, the disgraced cyclist's lawyer has revealed.

The US Justice Department is accusing Armstrong of defrauding the US Postal Service by taking its sponsorship money at the same time he was doping and using performance-enhancing drugs in violation of cycling rules.

The Justice Department is joining a civil whistleblower lawsuit filed by Floyd Landis, who was stripped of his 2006 Tour de France title for doping, against Armstrong.

Armstrong and his teammates from Tailwind Sports wore the logo of the US Postal Service during their record-breaking wins.

The battle with the US government over civil fraud charges threatens to sap what remains of the once-revered athlete's reputation, and hurt his wallet.

"This lawsuit is designed to help the Postal Service recoup the tens of millions of dollars it paid out to the Tailwind cycling team based on years of broken promises," Ronald Machen, the US attorney for Washington DC, said in a statement.

The service paid around $30 million to sponsor Armstrong's cycling team, which included Landis.

Armstrong plans to contest the suit because the Postal Service was "not damaged", his lawyer, Robert Luskin, said.

"The Postal Service's own studies show that the service benefited tremendously from its sponsorship - benefits totalling more than $100 million," the lawyer said in a statement.

Prosecutors have said they do not expect to charge him with a crime.

Landis filed a sealed whistleblower suit against Armstrong in 2010. The decision by the government to join the suit triggered its unsealing.

"I had come to a point in my life where I decided that I had to tell the truth for the sake of my conscience," Landis, who also admitted to cheating, said in a statement released by his lawyer on Friday.

Prepared to fight

Last month, Armstrong ended years of vehement denial and admitted in a televised interview with Oprah Winfrey that he had cheated his way to a record seven Tour de France titles through the use of banned, performance-enhancing drugs.

Armstrong has been banned from cycling for life and stripped of race wins, including all of his Tour de France victories.

Armstrong is prepared to argue that claims over most of the sponsorship money are time-barred, a source close to his legal team said, speaking on condition of anonymity.

The sponsorship agreement expired in 2004, and there is a six-year statute of limitations on recovery under a US anti-fraud law, the source said.

The source raised two other arguments that could help Armstrong. First, the sponsorship contract did not contain specific language or promises related to doping.

Second, Armstrong was not in charge of Tailwind Sports, the racing team firm that signed the contract with the Postal Service and that existed before Armstrong joined it.

Luskin is among the most sought-after defense lawyers in Washington. He represented former White House adviser Karl Rove in a case about the leak of a CIA officer's name.

Statements from government lawyers appeared to dismiss the idea that Armstrong could use the lack of specific contract language as a defense.

Armstrong and his team "agreed to play by the rules and not use performance enhancing drugs. We now know that the defendants failed to live up to their agreement," said Postal Service General Counsel Mary Anne Gibbons.

In the most recent fiscal year, the government reached $5 billion worth of settlements and court judgments under the False Claims Act - a single-year record.

"If they intervene, that puts the force of the government behind the suit," said Matthew Orwig, a former Justice Department lawyer now at the Jones Day law firm. He is not involved in the Armstrong case.

"There's the FBI, other investigative resources, Justice Department lawyers - in effect, the richest client in the world," he said.

Legal challenges

Armstrong already has other legal problems.

SCA Promotions Inc, in a suit filed in Texas state court in Dallas, alleges Armstrong and his management company, Tailwind Sports, defrauded SCA into paying Armstrong US$12.1 million in prize money for his 2002, 2003 and 2004 Tour de France wins by lying about Armstrong's use of performance-enhancing drugs during those events.

"Lance Armstrong cheated to win all of his Tour de France victories," SCA Chief Executive Officer Robert Hamman said in a statement. "He has admitted as much on national TV."

"As a result of Lance Armstrong's unjustly achieved victories and related activities, SCA paid $12,120,000 to Tailwind Sports Inc," Hamman said. "SCA also suffered reputational damage and substantial loss of business."

Also, last month two California men sued Armstrong and his book publishers for fraud and false advertising, claiming his best-selling memoirs, billed as non-fiction, were revealed to be filled with lies after his confession to systematic doping.