Five years after then-U.S. Attorney General Eric Holder announced that the U.S. Justice Department would co-sign onto Floyd Landis’s whistleblower lawsuit against Lance Armstrong, the sides have reached a settlement. Armstrong has agreed to pay $5 million to resolve the claims against him, and pay an additional $1.65 million to cover Landis’s legal fees. In a statement, assistant U.S. attorney general Chad Readler says the settlement “demonstrates that those who cheat the government will be held accountable.”
However, for a case that threatened Armstrong with over $100 million in damages and that required substantial time and energy of taxpayer-funded investigators, prosecutors and court officers, it’s not clear the government has proven that cheaters are held accountable. One might go so far as to say that Armstrong brought government to a draw, if not edged it out.
Armstrong could have won the trial. Here’s how
Every case has two sides and that is no doubt true here. Until now, Armstrong had been unwilling to settle at an amount acceptable to the government. That disposition reflected his and his attorney’s assessment of the strength of the government’s case and the strength of his rebuttals.
If Armstrong could have convinced a jury that the government was not harmed by any fraud attributable to Armstrong, then the jury would have been directed to award the statutory penalty for violating the FCA: an amount between $5,000 and $11,000 for each violation. Since Armstrong faced 41 FCA claims, he would have had to pay somewhere between $205,000 and $451,000. There is no doubt that Armstrong would have regarded such a modest penalty as a clear win.
Armstrong likely felt encouraged by some of Judge Cooper’s remarks during pretrial proceedings. SI obtained a transcript of a hearing held on Nov. 16, 2016. Much of the hearing centered on the dramatically different views of how damages should be measured in Armstrong’s case. Attorney Elliot Peters—a former federal prosecutor who successfully defended MLB players during the steroids era—delivered the bulk of arguments for Armstrong, while several federal prosecutors spoke for the government.
Although Judge Cooper was critical of both sides, he repeatedly expressed doubt that the government could prove the Postal Service suffered significant financial harm. For instance, Judge Cooper asked, “Is there any evidence from which a juror can infer that the Postal Service lost revenue as a result of the disclosures and then compare that to the amount of revenue it may have gained as a result of the endorsement activities during the sponsorship agreement?” Prosecutors insisted that jurors could make such an inference by listening to expert testimony and weighing the billions of “negative impressions” found online. Yet, as Judge Cooper suggested, the actual link between Internet articles containing “Lance Armstrong,” “Postal Service” and “doping,” and the Postal Service losing money was not immediately clear.
On the other hand, in a Feb. 13, 2017 order denying Armstrong summary judgment, Judge Cooper identified a potential flaw in Armstrong’s reasoning on damages. Judge Cooper ruled that a jury should consider, as the government contends, “the adverse effect on the Postal Service’s revenues and brand value that may have resulted from the negative publicity surrounding the subsequent investigations of Armstrong’s doping and his widely publicized confession.” How jurors would have perceived damages, then, partly depended on which sequence of time they find most meaningful. During the years of the contract, USPS appeared to benefit considerably from its association with Armstrong, but years later—after Armstrong admitted he doped—USPS’s brand may have taken a hit from its link to Armstrong.
Another key defense for Armstrong rested in the idea of an implicit waiver, which refers to Armstrong’s contention that USPS knew Armstrong was doping and intentionally took no action to stop it. USPS, Armstrong stresses, profited greatly from the sponsorship, which spanned from 1995 to 2004. This relationship worked so well that USPS extended the contract in 2000. USPS, then, arguably waived any rights it enjoyed under the sponsorship to take action against Armstrong. Along those lines, Armstrong highlighted how the government admits it was aware of allegations of Armstrong doping—allegations that were reported in the late 1990s by The New York Times, NPR and other national media—but did not investigate. Instead, USPS negotiated new contractual terms that dealt with negative publicity from any failed drug test. Contractually, you might say, USPS “made a deal with the devil” and knew exactly what it was getting.
There were still other defenses for Armstrong. One such defense was that the case was barred by time: Armstrong insisted the relevant statute of limitations had run out.
Armstrong could have lost everything by risking a trial
No matter the rebuttals Armstrong raised, he knew that the government usually wins its false claim cases or at least negotiates a settlement in which the defendant must pay a great deal of money. According to one recent analysis of false claim cases where the government has intervened, approximately 95% lead to a favorable judgment or settlement. These realities likely played a motivating force in Armstrong’s decision to settle in spite of his rebuttals and in spite of the fact that so few qui tam defendants possess the level of resources necessary to retain a legal team of top attorneys as Armstrong had assembled.
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