Monday, October 29, 2012

Lance Armstrong – the ugliest American

Lance Armstrong’s lost legacy will forever remain the millions of dollars he helped raise for cancer research and the hope he offered cancer survivors and their families. Gone forever is anything good Lance Armstrong has accomplished. Lance Armstrong’s lasting legacy will be as the ugly American, a man who personified some of the worst characteristics a man can have, a man who cheated, a man who bullied others. Lance Armstrong is the poster boy for what is wrong with the sports industry and sadly the world we live in.

In the last few weeks as has been well documented, Armstrong remained defiant throughout the years he was accused of using performance enhancement drugs, bullied and threatening anyone who challenged his honor. Armstrong has done irreparable damage to his reputation, is facing the loss of millions of dollars he will be forced to pay the Tour de France prize money he never earned for cheating his way to seven Tour de France titles, and millions of dollars in related prize money. Sadly The New York Times reported Lance worth more than $125 million will manage to retain most of the millions he earned.

Armstrong earned most of his money (more than $100 million) from his sponsors: Nike, Anheuser-Busch, Oakley, Trek Bicycles and smaller brands like FRS, an energy supplement, and Honey Stinger, a maker of organic waffles. Armstrong’s sponsors ended their business relationships with the disgraced icon.

The sponsors can sue Armstrong if a “morality’s clause” was included in their agreements. Morality clauses have become standard in most endorsement agreements. The clause protects companies if during the lifetime of the agreement the endorsee does damage and harm to the image of the company. More often than not the clause allows companies to end their contractual obligations but rarely offer companies the right to ask for their sponsorship fees back. Armstrong’s sponsors exercised that option in their contracts.

David B. Newman, a partner in the law firm Day Pitney told The New York Times: “They’d have to spend a lot of money to prove these allegations,” Newman added. “From a return on investment, you’d spend a lot of money on lawyers and lawsuits, and more publicity can’t help your product.”

He added, “They don’t walk away happy, but they’ll say, better to cut our losses now.”

When asked what Mr. Armstrong would do if his sponsors sued him for damages, Tim Herman, one of Armstrong lawyers, told the Times, “We don’t have a plan for that, because I do not expect that to happen.”
SCA Promotions a Dallas based company is expected to go after Armstrong for $7.5 million
Armstrong won in a 2006 lawsuit against the company, and an additional $4.5 million they paid Armstrong.

Armstrong successfully sued the company after SCA refused to pay a $5 million bonus Armstrong was owed for winning the 2004 Tour France his six of seven fraudulent titles. Armstrong was awarded the $5 million insurance policy the United States Postal Cycling team purchased in advance of the 2004 Tour de France with SCA against Armstrong winning the Tour. The additional $2.5 million represented the court costs which Armstrong was awarded when he won the lawsuit.

“There is no revisiting that,” Herman said in the New York Times report. “If everyone who had settled a case finds out something later on and they want to renegotiate or relitigate, the system would break down. The point is, the agreement is unequivocal. There is no going back.”
Herman is simply saying what is in the best interest of his client – Lance Armstrong.

Jeffrey Dorough, SCA’s corporate counsel, told the New York Times the firm was preparing a letter to Armstrong demanding that he return $12 million — the $7.5 million and an additional $4.5 million it paid for a previous victory.

“It is inappropriate for him to keep any bonuses that were contingent on him being the champion of the Tour de France,” Dorough said. “We’re hoping he’ll respond to our letter.”

During the 2006 lawsuit Armstrong offered sworn testimony that he had never used performance enhancement drugs, allegations that have since been proven false after 11 of Armstrong’s teammates and 15 support personal associated with Armstrong’s seven Tour de France titles offered sworn testimony to the United States Anti-Doping Association that Armstrong had used performance enhancement drugs.

“In any deposition, if he would deny the usage of performance-enhancing drugs, he would open himself up to criminal prosecution for lying under oath,” said Andrew Stoltmann, a lawyer in Chicago who has represented professional basketball, football and baseball players in the New York Times report. This would be testimony in addition to the sworn testimony Armstrong made in 2006 were under oath he testified that he had never used performance enhancement drugs.

“Prosecutors love high-profile obstruction of justice cases to serve as a deterrent for lying under oath.” Stoltmann offered.

It remains to be seen if the United States Justice Department will pursue charges against Armstrong relating to the 2006 testimony he provided. The Justice Department indicted Marion Jones, Barry Bonds and Roger Clemens alleging they have provided false testimony in congressional hearings.

In January 2008 Jones who won five medals at the 2000 Sydney Olympic Games (she was later stripped of all the Olympic medals) was sentenced in a federal court to six months in prison, two years of probation and community service for lying to federal prosecutors investigating the use of performance-enhancing substances. Bonds was convicted of a minor offense and the charges against Clemens were dismissed.

It is in Lance Armstrong’s best interest that he writes SCA Promotions a check for $12.5 million and another $3.8 million check to Amaury Sport Organization organizers of the Tour de France are demanding Armstrong return. $16.3 million may seem like a great of money – however if Armstrong fights either case the public battle will likely strip Armstrong of any dignity he has left, along with a near certainty the Justice Department will file perjury charges against him.

Luxottica Group SpA (LUX), whose Oakley brand was the last major sponsor to drop Armstrong, won’t try to recoup money paid to the cyclist, company spokeswoman Cheri Quigley told The New York Times.

“We are deeply saddened by the situation, especially given our longstanding relationship, but we feel it is best for all involved to move on and collectively spend our energy rebuilding the sport of cycling,” Quigley, who declined to discuss financial details of Armstrong’s contract, said in an e-mail sent to Bloomberg Media.

It’s impossible to know what Lance Armstrong is thinking. He was fearless in defending a reputation he never earned – badgering and bullying anyone who suggested he used performance enhancement drugs. It wasn’t necessarily a sense of entitlement that convinced Armstrong that he was right and everyone else pointed fingers at Armstrong was wrong; it was more likely something as simple as “if everyone else was cheating why can’t I”.

Armstrong’s actions will forever be inexcusable. Lance Armstrong may not care, however if he ever really believed in the message he offered to millions, if he believes in doing what is right, Lance Armstrong needs to return the $16.3 million and fade into obscurity.

For Sports Business News this is Howard Bloom

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