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Armstrong False Claims Case Likely to Proceed, Judge Says

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Cyclist Lance Armstrong’s former team, Tailwind Sports Corp., used U.S. Postal Service sponsorship fees to pay Armstrong’s salary of $17.9 million during those years, according to the complaint. Close

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Photographer: Gabriel Bouys/AFP via Getty Images

Cyclist Lance Armstrong’s former team, Tailwind Sports Corp., used U.S. Postal Service sponsorship fees to pay Armstrong’s salary of $17.9 million during those years, according to the complaint.

A whistle-blower lawsuit accusing former champion cyclist Lance Armstrong of defrauding the government by using banned substances in violation of his team’s contract with the U.S. Postal Service probably will proceed, a judge said.

U.S. District Judge Robert Wilkins said yesterday at a hearing in Washington that he’s inclined to let at least part of a suit filed by Armstrong’s former teammate, Floyd Landis, continue. His comments followed almost three hours of arguments for throwing out the case presented by lawyers for Armstrong and others named in the complaint.

“It may be dismissed as to some defendants,” Wilkins said.

The suit, filed in June 2010 by Landis, who admitted using performance enhancing drugs as a cyclist, was joined in part by the Justice Department in February. The government claims the U.S. paid about $40 million in false claims through the team’s contract with the Postal Service from 1998 through 2004. Armstrong’s former team, Tailwind Sports Corp., used Postal Service sponsorship fees to pay Armstrong’s salary of $17.9 million during those years, according to the complaint. The U.S. is seeking triple damages.

Doping Admission

A record seven-time Tour de France winner from 1999 to 2005, Armstrong was stripped of the titles by the U.S. Anti-Doping Agency in August 2012. Armstrong acknowledged in a television interview with Oprah Winfrey in January that he used a mixture of erythropoietin, testosterone and blood transfusions throughout his career.

The U.S. joined Landis in suing Armstrong, Tailwind and the team’s former manager, Johan Bruyneel. Other defendants named by Landis, including Tailwind’s founder, Thomas Weisel, were left out of the government’s action.

Wilkins, who said he expects to rule within 30 days, didn’t indicate which defendants he might drop.

Armstrong’s lawyer, Elliot Peters of Keker & Van Nest LLP, told Wilkins that the Postal Service could have chosen to investigate Armstrong after French authorities probed doping allegations against his team in 2000.

Instead, the Postal Service rewrote its contract with the team to protect itself against adverse publicity, Peters said.

Valuable Publicity

“They wanted the right, if the publicity was bad, to get out of the contract,” Peters said. “They wanted to have their cake and eat it, too. They weren’t harmed. They got millions of dollars in publicity.”

Robert Chandler, a Justice Department lawyer, said Armstrong had “an army of lawyers” and “network of enablers who helped him perpetuate his denials.”

“It’s clear that the Postal Service did not know and could not know” that Armstrong was doping,’’ Chandler said.

What the Postal Service knew and when is significant because false-claims suits normally must be brought within six years of the alleged fraud. The deadline for suing over the most recent allegation passed nine days before Landis sued, Armstrong’s lawyers argued in court papers.

A government filing contended that although most of the alleged conduct occurred more than six years ago, Armstrong wasn’t revealed to be a cheater until June 2010, putting the case within the required time frame.

French Inquiry

Robert Sacks, of Sullivan & Cromwell LLP, an attorney for Weisel, said the French inquiry found no evidence of wrongdoing by Armstrong or his team, and the cyclist adamantly insisted he was clean. That left little reason for Weisel to look further, he said.

“Forceful denials by people doesn’t indicate putting an ostrich head in the sand,” Sacks said.

Landis’s suit lacks specific information about what Weisel did to further false claims, Sacks said.

“They don’t even allege that Mr. Weisel saw Lance Armstrong’s contract,” Sacks said.

Landis’s attorney Paul Scott said Weisel’s denial of knowledge about Armstrong’s drug use is implausible given his central role at Tailwind.

“He was the single most powerful person behind this company,” Scott said, describing Weisel as its largest shareholder and “guiding force.”

Weisel did nothing to keep Michele Ferrari, an Italian physician linked to doping, from associating with the team, Scott said.

Ferrari was instrumental in the Tailwind team’s doping program, according to the U.S. Anti-Doping Agency.

Six Counts

The Justice Department brought six counts of false claims, fraud and unjust enrichment against Armstrong, Bruyneel and Tailwind Sports. An additional breach of contract claim was brought against Tailwind.

Armstrong, 42, made at least $221 million since turning professional, according to a compilation of his earnings by Bloomberg News. He was the team’s lead rider from 1999 to 2004.

Landis, who could receive some of the award if the case is successful, in August admitted defrauding donors to his legal defense fund by falsely claiming that he hadn’t used performance-enhancing drugs during his professional cycling career. The admission was part of a deferred-prosecution agreement filed in federal court in San Diego.

The case is U.S. v. Tailwind Sports Corp., 10-cv-00976, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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