February 25, 2013

Justice Throwing Its Weight Behind Fraud Case Against Lance Armstrong

By Jason Enzler

The Department of Justice announced in a press release late last Friday that it has elected to join a fraud lawsuit filed against the beleaguered former American-darling and cyclist Lance Armstrong.  The lawsuit, brought by another disgraced cyclist, former Armstrong teammate Floyd Landis, essentially alleges that Armstrong and others ripped-off the government to the tune of $30 million when they obtained federal sponsorship for the U.S. cycling team while participating in a doping scheme.  (Click here to read our previous post.)  Because the case was filed under the False Claims Act, which triples the amount of damages, the government could recover upwards of $90 million in damages as well as civil penalties of up to $11,000 for each instance of fraud if it is successful.

Armstrong’s attorney has rejected the notion that the government was defrauded, arguing that the benefits to the government for its $30 million investment totaled well over $100 million and should wipe-out even the trebled amount of damages.  While there is some support for that argument, there are also numerous cases where courts have held that there can be liability even in the absence of any actual loss to the government.  In these types of cases, the government has successfully argued that it would not have made any payments or even entered into the relationship in the first place if it had known of the fraud.  These and other issues will need to be decided by a court assuming the case does not settle first, but the Landis complaint appears to allege enough facts to support either of the government’s potential rebuttals to Armstrong’s “no-harm, no-foul” argument.

The government’s decision to join greatly increases the likelihood of a settlement.  The vast majority of False Claims Act cases  the government joins result in settlement.  And while not a hard and fast guide on what the settlement could look like, the government’s reported rejection of an earlier $5 million settlement offer by Armstrong portends that it will be at least larger than that.

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