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Lance Armstrong Must Pay $10 Million to SCA Promotions

Arbitration award decision is punishment for lying under oath about doping

By

Vanessa O’Connell

Updated Feb. 16, 2015 9:04 p.m. ET

Lance Armstrong must pay a prize-insurer $10 million as punishment for lying under oath about doping, according to an arbitration award decision filed in a Texas state court.

The decision represents a blow for the former pro cyclist who is fighting a couple of legal battles that could strip him of many millions of dollars.

The prize insurer SCA Promotions Inc. asked a Texas state judge to confirm the arbitration award against Armstrong, in a filing Monday. It wants the court to enter a $10 million judgment against Armstrong and former team owner Tailwind Sports, a move which it believes will enable it to collect payment.

“This award is unprecedented,” Armstrong’s lawyer Tim Herman said Monday. The dispute had previously been “fully and finally settled voluntarily” years earlier, Herman said. More recently, Armstrong offered to pay SCA “the entire” $10 million, Herman added, “despite the absence of any legal basis for the sanction.” SCA refused Armstrong’s offer.

SCA’s next step will likely be to question Armstrong under oath in a deposition about his assets, and whether he has enough remaining money to pay the sum, its lawyer Jeffrey Tillotson said.

Related Coverage

See the final arbitration award package

SCA’s dispute with Armstrong began more than a decade ago, after the former cyclist for the U.S. Postal Service team won the 2004 Tour de France, the sixth of his seven consecutive Tour victories.

Armstrong’s salary was $4.5 million that year, according to his agreement with the team. An addendum to his agreement called for the team to pay Armstrong a $10 million bonus if he won the Tour de France each year from 2001 to 2004. The agreement also required the team to insure those bonuses.

The team owner purchased coverage from SCA Promotions, a small Dallas, Texas, firm that protects the financial interests of team owners and sponsors. SCA offers “hole-in-one” insurance and other coverage of athlete performance incentives in football, basketball, baseball, soccer, Nascar and golf.

But SCA refused to give Armstrong $5 million in bonuses, on the suspicion that he had cheated to win, prompting Armstrong and Tailwind Sports to sue SCA for payment. The case went to arbitration, and Armstrong said under oath that he didn’t dope. “I race the bike straight up fair and square,” he testified in January 2006, according to a transcript of his testimony before a panel of three arbitrators, who are experienced lawyers.

Concerned it might lose, SCA ultimately agreed to a $7.5 million payment to settle the original arbitration case. That sum represented Armstrong’s bonuses, interest and attorney fees. The agreement said “No party may challenge, appeal or attempt to set aside” the settlement. It also said the agreement was “fully and forever binding.”

But in 2012, Armstrong was stripped of nearly all of his titles, including his Tour wins, following a ferocious battle with the U.S. Anti-Doping Agency. In 2013, he publicly acknowledged that he had used performance-enhancing drugs when he captured his seven Tour victories.

SCA then accused Armstrong of fraud, demanding that he repay it more than $12 million, or the sum it paid him for Armstrong’s Tour wins from 2002 to 2004. Armstrong refused, and his lawyers said that Texas state law doesn’t allow the company to reopen the original settlement.

The arbitration panel agreed to reconsider the case. Two of three arbitrators, representing a majority, issued a “final” arbitration award ordering Armstrong and Tailwind Sports to pay SCA $10 million. “Deception demands real, meaningful sanctions,” the two-person majority wrote in their Feb. 4 decision.

ENLARGE

Lance Armstrong in action during the 2004 Tour de France. Photo: Getty Images

A dissenter among the three arbitrators argued that the $10 million sanction represents “an unwarranted, unlawful reversal” of the original settlement.

Former team owner Tailwind Sports previously asserted that the arbitrators have no jurisdiction over Tailwind because it was dissolved consistent with Delaware law, on Dec. 31, 2007. In any event, the panel would still have jurisdiction over Armstrong.

Armstrong also faces a pending False Claims Act lawsuit, in which his former teammate Floyd Landis alleged that Armstrong defrauded the U.S. Postal Service as a former team sponsor. Landis filed the lawsuit in June 2010 in order to help the government recover at least some of the $40 million the Postal Service paid to sponsor Armstrong and his cycling team from 1998 to 2004.

“We will continue vigorously to defend Lance against this wrongheaded lawsuit,” said Elliot R. Peters, an attorney with Keker & Van Nest, who represents Armstrong in the False Claims Act case.

—Ashby Jones contributed to this article.

Write to Vanessa O’Connell at vanessa.oconnell@wsj.com

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48 comments

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William Wahl subscriber

I can't believe the hubris of Armstrong. Did he really think he could get away with this? After the recent episode in Aspen the answer is yes.

Peter Rives subscriber

If you read about doping and sports, it seems that most top athletes cheat with PED's etc. What Armstrong did was detestable and bad, but with a backdrop of how many others have done it, am I missing something? I hardly think that anyone else that admitted to doping would have said it had Armstrong not been so heavily investigated. If you ask me, all of cycling should be prosecuted for this, not just someone who arguably did it better.

Alonzo Quijana subscriber

Michael Vick. Tiger Woods. Sammy Sosa. What's with these drug-infused "athletes?" Can they ever tell the truth?

Alonzo Quijana subscriber

And he may owe up to $100 million in the USPS (taxpayer) suit.

sandy malik subscriber

Armstrong needs to be behind bars. & who else needs to be behind bars?

http://blogs.wsj.com/law/2013/01/27/why-did-federal-prosecutors-drop-their-lance-armstrong-case/

No one has ever answered this question yet? How can Armstrong cheat hundreds of millions of ppl around the globe, defraud sponsors of millions, give USA a bad name & not go to jail?

And not even be prosecuted? Case was dropped by one Andre Birote Jr. who was appointed by Obama in 2010. Then again, he was promoted by Obama & appointed Judge to US Central District California.

Inside word is that White house wanted the case to be dismissed in Feb 2012 coz Armstrong & Headstrong org had millions of fans who were upset.

Some one needs to investigate this. While Obama has a reputation for appointing incompetent people, we still need to know the truth.

http://en.wikipedia.org/wiki/André_Birotte_Jr.

Steve shulman subscriber

I don't see anything immoral. I just see an inability of the cycling governing bodies to adequately regulate the sport. They are to blame because so many athletes doped that it makes you think someone(s) were turning blind eyes. The competition was fierce and was a major international attraction. I believe no one wanted cyclists yanked during the event, but there should have been blood testing done every single day immediately following or preceding each stage. Stripping cyclists of their medals months later was not the way to regulate it. I feel badly for Armstrong because he got caught up in something he couldn't escape.

rian davis subscriber

Concerned it might lose, SCA ultimately agreed to a $7.5 million payment to settle the original arbitration case. That sum represented Armstrong’s bonuses, interest and attorney fees. The agreement said “No party may challenge, appeal or attempt to set aside” the settlement. It also said the agreement was “fully and forever binding.”

How can a contract based on a lie be "forever binding"? Aren't the terms conditional based on his testimony? By definition a contract is based on mutal agreement based on shared, symmetrical information, which was obvious not the case as legally demonstrated.

Armstrong is in such hot water, not because he cheated, but because he went so far against those who claimed he cheated and sued for millions to collect damages when in fact he was lying all along. I don't feel bad at all for him since he could have just collected the normal awards and walked away.

Jerry Frey user

"In [1988] 1990, Ramsay MacMullen, a distinguished Yale historian of Rome, published a book that took on one of the central questions of his field: Why did the greatest empire in the history of the world collapse in the 5th century? The root cause, he explained, was political corruption, which had become systemic in the late Roman Empire. What was once immoral became accepted as standard practice, and what was once illegal was celebrated as the new normal. Many decades from now, a historian looking at where America lost its way could use “This Town” as a primary source."

http://napoleonlive.info/politics/forward-with-obama/

Hector Roman user

From a legal perspective this decision is troubling. The dissenting arbitrator seems correct here. A voluntary settlement was entered into with clear language that it could not be reopened and neither party relied on the statements of the other in reaching a settlement. Moreover, the panel is clearly finding a "back door" to reversing the settlement in the form of sanctions. However, the panel didn't rely on the testimony and never had to make a determination based on false testimony. Moreover, SCA Promotions also had incentive to settle since they weren't even licensed to offer insurance in Texas and would have faced heavy daily fines if it came to light. Neither party had cleans hands and both entered into a voluntary settlement with competent counsel. People really need to put aside their personal feelings about Mr. Armstrong and focus on the legal aspects of the case. I see both sides but I think the stipulation should have stood considering the language in it.

Darl J. Dumont subscriber

Please, let no one ever again say "sports is character-building". It is all too clear what kind of character is being built. Can you hear me now, Joe Paterno?

Jeffrey Schreiber subscriber

The house of cards built upon Lance's lies is falling down around him. Sad moral tale with real consequences for his fortune.

Daniel Palmer subscriber

It seems reasonable that Armstrong should have to repay the insurance company that covered the bonus he got for winning (although really, the odds were very high he would win, a hole-in-one is a very unlikely thing, Armstrong winning again was not, they were stupid to write the policy to begin with).

USPS however should jump in a lake. First, it never should have spent the money to sponsor a sports team of any kind, and second, it more than got its money's worth in positive press for the years Armstrong was winning and the USPS name was prominent on TV and in the press. The pub it got well exceeded what it paid.

Tommy Butler subscriber

Fraud in the inducement of a Settlement is never a pretty thing to witness.

As is often said: "The wheels of justice may turn slow; but they grind exceedingly fine".

It's good to see the truth finally revealed, and the ill-gotten gain finally returned to those entitled to it.

Mike Murray subscriber

Dear Karma,

Thank you for showing up at Lance Armstrong's doorstep... we've all been waiting for years for this. Not only is this guy an admitted cheater, he also viciously attacks and attempts to ruin anyone who dare confront him about his cheating. Every day he spends in court and money flows out of his pocket is a better day in the world.

Your Pal,

Mike

P.S. Please bring back Livestrong...it is actually a good cause.

Cary Scafide subscriber

Come on, people. You had to be suspicious of Armstrong when he won 7 Tour de France races in a row. You have to be suspicious of any athlete whether their name is Lance Armstrong or Barry Bonds when they perform amazing athletic feats.

Ross Windsor subscriber

Sounds like double jeopardy here to me.

“fully and forever binding.” appears to be defined by the first opportunity

to get their hands on some real dough.

I say "Nay, nay"

Sara Baker subscriber

As this cheater lied and doped his way to every dollar he made, justice would mean he gets to keep none of it.

JOSEPH FINEMAN subscriber

Hey Alonzo: you've left a couple of names off of your last. You forgot to mention George W. Bush, Dick Cheney and Richard Nixon. The first two managed to get some people killed. They were not very nice people.

Russ Jacks subscriber

"The “Postal Service received well over $100 million in benefits—both direct revenue and brand advertising value based on its own internal records—from its $40 million sponsorship of the cycling team,”

The Postal Service should be thanking Lance. It may be the only thing the US Postal Service has ever done in 40 years that actually didn't run a deficit.

Lance should counter-sue the Postal Service for "false advertising" for equating anything to do with "speed" and the Postal Service.

Matthew Ondre subscriber

As I once said to a (soon to be ex) girlfriend "Cheat less or cheat better."

Jeffrey Tierney subscriber

Yes, over the years it appears professional cycling has become corrupted by performance enhancing drugs, blood doping, etc. Not really a surprise given the amount of money involved. Thank goodness PEDS, pain killers, etc. are not abused in our other professional sports, especially football and baseball.

Preston Moore subscriber

Shame on everybody who actually believed that an aging cyclist with cancer who claimed to be clean, could beat younger and healthier guys who admitted to being on drugs!

Just goes to show how gullible many people are, in the great search for heroes and role models. They get burned over and over again.

XAVIER L SIMON subscriber

What a disappointment he is. So many put so much faith in him and he let us all down. Shame. Let him be stripped of all the money he "won."

Alonzo Quijana subscriber

He's such a liar. Up there with Gruber, Hillary, Obama, Brian Williams, and Sharpton for all-time liars. And in the sports category, he's with Sosa, Pete Rose, Michael Vick, Tiger Woods.

FRANKLIN CARONE subscriber

He deserves punishment for what he did and then tried to cover up. We thought he was a real hero, worthy of our admiration and respect. He inspired many with his story and accomplishments. Then we found out he was a cheater, liar and tried to intimidate witnesses. The money penalty is significant and justified. But the damage he did to his fans and his sport is also important. I hope understands this!

SCOTT LUCAS subscriber

The FBI agent stated there were politics involved.

Duh.

We may never know why the case was dropped But Lance is going to get roasted financially during his depo.

I'm guessing he's hidden much of his worth

Alonzo Quijana subscriber

What??? Armstrong just got "caught up" in this? He was making $4 million a year. And he new exactly what he was doing. Are you that naive?!

sandy malik subscriber

@Steve shulman Ppl like you promote cheats like Lance Armstrong. Laws are there for a reason. "Everyone else does it!" Have we heard this before? Well, if everyone else does it, then first please stop the sponsorships, stop the competitions, jail all those who do it… so that we can believe what we see on TV! Not a bunch of white-collar crime con-men like Armstrong. Shame on Lance & shame on ppl like you. & please don't even bring the 'Headstrong' organization into this argument!

Kevin Snyder subscriber

@Steve shulman Armstrong destroyed Frankie and Betsy Andreu when they told the truth about Armstrong's doping. He cost them their livelihood, their reputations, and their friends. Same with Mike Anderson, Fillipo Simeoni, and many others. He is a user and an abuser, a drunken hit-and-run driver, and an all around narcissistic personality. Perhaps sociopathic.

I don't feel sorry for him at all. He's evil. And now the world knows, even if Armstrong never understands it himself.

Kevin Snyder subscriber

@rian davis "How can a contract based on a lie be "forever binding"?

I am not a lawyer, but I think you are correct in that a contract is usually void if material facts are deliberately misstated. Any Texas contract lawyers out there?

June Sullivan subscriber

@Jerry Frey What's it lead poisoning.

robert skotnicki subscriber

@Darl J. Dumont Darl: Do you think obama will have to give some money back when we finally see his college transcript and real birth certificate?

Do ever let anyone say that "politics is a public service".

Harvey Davis subscriber

@Darl J. Dumont Don't you see the same thing in the arts, academics, macho construction workers, cops and firefighters, driving cars, ... almost any human pursuit? I have seen it everywhere. Ego, pride and other sins are part of human nature, not just the sports world.

Michael Quick subscriber

@Mike Murray

Armstrong's cheating is bad enough, but absolutely unpardonable was the way he attacked and sought to destroy anyone who told the truth about the doping on the team. That is his true character.

Alonzo Quijana subscriber

I was always suspicious. Sadly the Postal Service was not. So taxpayer dollars wasted on this drug fueled. " athlete."

Andres Gutman subscriber

@Cary Scafide

Initially I believed Armstrong because I knew how he trained -- much harder than anyone else. Also, he was randomly tested on an average of twice per week.

I became suspicious after his principal rivals were caught doping.

Now, it's clear that Armstrong had access to superb doctors to manage his doping program.

Cary Scafide subscriber

@Ross Windsor Restitution may still be in order if there is fraud involved.

Andres Gutman subscriber

@Sara Baker

Armstrong was quick to sue anyone who accused him of doping. He got a nice judgement against a British journalist. It's only right that he now pays that money back. There's no reason to feel sorry for him.

Daniel Palmer subscriber

@Matthew Ondre : IDK Matthew, Armstrong passed test after test after test. I think he more than met your second option. He may well be the best PED cheat ever.

Andres Gutman subscriber

@Jeffrey Tierney

Many years ago, 'Sports Illustrated' did an investigation of the use of drugs in pro sports, hoping to counter scandal-mongering journalists.

Alas, they were forced to conclude that, in any sport, if you're on the podium, you're on drugs.

There's something sick about the manner in which we tend to deify pro athletes and "the big game". Super Bowl Sunday has become more important than Easter Sunday.

Sport, like sex, is more important to do than watch. Pity; that it's not an option for a beered-up, smoking couch-potato over 40.

David Paton subscriber

@Preston Moore

Lance was at a competitive age and, while certainly no excuse, many pros were involved here. Lance should give up any wealth that came as a result of his fraud.

Matthew Ondre subscriber

@Alonzo Quijana Nobody is as low as Michael Vick.

Preston Moore subscriber

@Alonzo Quijana

Questionably selective list here. You have some odd biases.

Alonzo Quijana subscriber

It seems much worse the last 10 or 15 years. I, for one, am disillusioned.

Cary Scafide subscriber

@Jeffrey Tierney How do we know the celebratory target for Easter Sunday is not a fraud? Were you there when Jesus supposedly rose to the heavens? Are you going to believe that because a book says that happened, a book that has been tainted and corrupted by human hands and minds? Fraud and corruption is everywhere, my friend.