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Why Nike is a star witness in Lance Armstrong case

Brent Schrotenboer
USA TODAY Sports

To help prove its case against Lance Armstrong, the federal government is seeking information from Nike that shows the company wouldn’t have sponsored him if it knew he was using performance-enhancing drugs.

Lance Armstrong is being sued by the federal government for what could be $100 million in damages.

It’s a big issue in the government’s civil fraud lawsuit against the former cyclist – the theory that Armstrong concealed his doping for years in order to keep getting rich off of sponsorships.

But another issue involving Nike looms just as large in Armstrong’s defense: Didn’t those sponsors get their money’s worth while sponsoring him at the height of his success?

Armstrong says they did.

And that’s why Nike suddenly finds itself caught in the middle of this $100 million case, dragged into it against its will as a star witness for both sides.

“Armstrong’s assurances to Nike that he was `clean’ … would tend to corroborate the government’s theory that Armstrong also concealed his doping from (the U.S. Postal Service) and knew that his sponsors would terminate their relationships if they knew he was not riding `clean,’ ” government attorneys stated in court documents filed this week.

The federal government is suing Armstrong on behalf of the USPS, which paid more than $30 million to sponsor Armstrong’s cycling team from 1998 through 2004.

Nike fighting subpoenas from Lance Armstrong, feds

Both Armstrong and the government recently issued subpoenas for information from Armstrong’s other former sponsors, including Nike, the sportswear titan, and Trek, the bike manufacturer.

After Nike challenged those subpoenas, Armstrong and the government explained their reasons for them in court documents this week – reasons that strike to the heart of both of their larger strategies.

Both sides appear to be making Nike a third-party proxy for their battles, said Tony Anikeeff, an attorney and government contracts expert for the firm Williams Mullen.

“The Postal Service can say, `See, even the mighty Nike was bamboozled by Armstrong,' ” said Anikeeff, who is not involved in the Armstrong case. “Armstrong can say, `The sophisticated Nike, which is deep into all aspects of the sports culture, made millions on us like the Postal Service and hasn’t complained about being defrauded.’ ”

The stakes are colossal. The government argues that Armstrong’s team violated its USPS sponsorship contract by doping and concealed those violations to unjustly enrich itself.

In his defense, Armstrong’s attorneys say the government’s suit is baseless because the USPS suffered no damages from his doping. Instead, they say the USPS profited greatly from the publicity it received from Armstrong, who wore the USPS logo while gaining worldwide fame in the Tour de France.

If the government proves its case, Armstrong could be on the hook for triple damages – nearly $100 million.

“The government contends that it received no benefits from sponsoring the USPS cycling team, despite its six Tour de France wins,” Armstrong’s attorneys wrote in court documents this week. “Nike was a co-sponsor. Therefore, Nike’s methods of valuing its sponsorship of the same team are directly relevant to rebutting the government’s attempt to distance itself from its valuation methods.”

Nike and other sponsors fired Armstrong in October 2012, shortly after the U.S. Anti-Doping Agency released a huge file of testimony and evidence against him that said he had been doping in cycling for years. In its announcement to dump him, Nike said it was doing so because of the “seemingly insurmountable evidence that Lance Armstrong participated in doping and misled Nike for more than a decade.”

Armstrong had denied doping for years and aggressively fought those who challenged his denials. But he finally admitted to it in a January 2013 television interview with Oprah Winfrey.

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The issue in this case is whether that doping and denial defrauded the Postal Service under the False Claims Act.

Armstrong’s attorneys scoff at that notion. They have compiled evidence that shows the USPS sponsorship was a “massive success” and earned more than $140 million. They say the government’s damages are not measured by the amount it paid out but by the amount paid minus the value of goods or services it received. They say the government will be unable to prove damages by this measure.

“The government argues that, even though the USPS sponsorship of the cycling team ended in 2004, it was damaged in 2013 when Armstrong admitted to using performance enhancing drugs,” Armstrong’s attorneys wrote. “Documents and testimony from Nike regarding the benefits it received during its sponsorship of the cycling team and Armstrong, and the damage (or lack thereof) it suffered when Armstrong admitted to doping in 2013, is relevant the government’s theory of damage.”

The government doesn’t see it that way, however. The government also is pursuing Armstrong on the basis of reverse false claims, which impose liability on those who make false statements to conceal an obligation to pay back money they shouldn’t have received from the government.

“Evidence that Armstrong falsely denied and concealed his doping from sponsors, including Nike, after 2004 … further demonstrates the he knew his doping was material to sponsors, and supports the reverse false claims allegations in this case,” government attorneys wrote.

Under this argument, Armstrong had an obligation to pay back the money he received from the USPS sponsorship because he was breaching the team’s sponsorship contract.

“The government takes the approach that there are special ethical consideration when one does business with the government,” Anikeeff told USA TODAY Sports. “Armstrong may want to press the point that this was a just a commercial publicity deal just like it was with Nike, and that having gotten the benefit of the deal, then the government really has no basis to complain that it was damaged years after the fact.”

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Nike has fought the subpoenas, arguing that revealing sensitive sponsorship information and “trade secrets” could damage its business. Armstrong and the government say that an existing protective order in the case is enough to address those concerns.

Likewise, Trek this week asked a judge to modify the existing protective order to make sure its “highly confidential financial information” isn’t disclosed inadvertently.

“Trek, which is neither a party nor has any involvement in this dispute, is not seeking to avoid producing material that is responsive to the subpoenas,” attorneys for the company said in court documents. “Trek only seeks adequate protection of its competitively sensitive, confidential financial information.”

U.S. District Judge Christopher Cooper granted that request Tuesday. A hearing on the Nike issue is scheduled for later this month in Oregon.

The government said the information it seeks from Nike is narrowly targeted at developing relevant facts demonstrating Armstrong’s pattern of concealment, that his agreement not to dope was material to sponsors’ decisions to pay and that sponsors would not have paid if they had known Armstrong was doping.

Armstrong’s subpoena requests “discovery directly relevant to damages, a hotly-disputed element of the government’s case.”

Follow sports reporter Brent Schrotenboer on Twitter @Schrotenboer. E-mail: bschrotenb@usatoday.com

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