Lance Armstrong Settles with DOJ in a Novel Application of the False Claims Act Targeting Misconduct in Sports

On April 19, 2018, the Department of Justice announced its settlement with Lance Armstrong to resolve its False Claims Act (“FCA”) suit for Armstrong’s admitted use of illegal performance-enhancing drugs while under sponsorship by the U.S. Postal Service.  Armstrong agreed to pay $5 million, of which $1.1 million will go to the qui tam suit’s relator, Armstrong’s former teammate Floyd Landis. In addition to the $5 million, Armstrong has also agreed to pay Landis’s $1.65 million in legal fees.

Much of the media discussion of the settlement has focused on the fact that the amount is dwarfed by the government’s original $97 million demand (the maximum allowable penalty under the FCA). The demand represented three times the $32.3 million invested by the U.S. Postal Service to sponsor Tailwind, Armstrong’s cycling team. The contract governing the sponsorship contained an anti-doping provision, the violation of which allowed for the filing of Landis’s qui tam lawsuit.

While it is true that the Armstrong settlement amount was small in comparison to the government’s initial demand, the settlement allowed the government to avoid the risk of a significant loss – a setback that could have limited the FCA’s application in the future. And given the government’s recent focus on corruption in athletics (see our prior post relating to allegations in the NCAA, here), it is now likely that the FCA will continue to be a weapon in the DOJ’s arsenal.

Problems of proof

Even though Armstrong admitted his drug use, the DOJ’s case against Armstrong was not a sure bet. The DOJ’s and Landis’s theory of the case hinged on the belief that the government’s contract with Tailwind (and Armstrong) was rendered worthless because of Tailwind’s and Armstrong’s tainted connections to performance-enhancing drugs. However, 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 only the statutory penalty for violating the FCA. This would have amounted to approximately a quarter to a half million dollars – far less than the ultimate settlement, and less than one percent of the government’s demand. Such a comparatively trivial amount would have undermined the government’s efforts to deter future misconduct.

Continued targeting of sports?

It is safe to say that government prosecutions of performance enhancing drug use in professional sports have had limited success. In February 2012, federal authorities dropped a two-year criminal investigation into Armstrong’s doping activities. Likewise, the government was ultimately unsuccessful in its criminal prosecutions of performance enhancing drugs in baseball.

Qui tam actions under the FCA, however, provide a strong financial incentive to whistleblowers, and after Armstrong’s settlement, will remain a deterrent to corruption in sports where there is a federal nexus. While the FCA has largely been used to combat fraud in the medical and government contracting arenas, the DOJ may find new applications of the FCA in the sports arena in order to target misconduct. And as we have previously reported, participation in athletics potentially opens doors to whistleblower claims wherever representations are made to the government.  With this settlement, Armstrong has avoided financial ruin, and the DOJ can continue to use the FCA as another weapon in its fight against misconduct in sports.