Documents reveal U.S. Postal Service spending on Lance Armstrong

Posted by Sabrina B. @gametimegirl

The U.S Postal Service spent $31.9 million to underwrite Lance Armstrong’s pro cycling team during its glory years of 2001 to 2004, approximately 60 to 65 percent of the team’s total budget, according to documents newly obtained from the agency under the federal Freedom of Information Act.

The materials provide the first clear look at how heavily the agency invested in Armstrong and reveal the exact dollar amounts at issue should Armstrong and former team officials be charged with fraudulent use of government funds at the conclusion of an ongoing federal investigation.

Until now, the USPS has gone to great lengths to keep the precise amount it spent on Armstrong a secret. In 2003, the agency’s Office of the Inspector General issued an audit report that was highly critical of the deal but blacked-out specific sponsorship amounts.

As recently as last summer, when a federal grand jury in Los Angeles began hearing testimony from ex-members of Armstrong’s team, Postal Service officials continued to be tight-lipped about their sponsorship, responding to a Freedom of Information Act request by The File with heavily redacted documents.

The memo showed that Tailwind Sports, Armstrong’s team, was formally notified in June 2004 that USPS would not be renewing its sponsorship, but the amount that USPS paid during the term of the contract is obscured.

The File appealed the agency’s redactions in September. Last month, the agency honored the appeal by releasing the same documents without stipulations. This version of the 2004 notice shows that USPS paid Tailwind $31.968 million between 2001 and 2004.

Another exhibit breaks down the payments that San Francisco-based Tailwind was to receive over the term of the deal: $6.1 million in 2001; $7.61 million in 2002; $8.23 million in 2003; and $8.66 million in 2004, plus a total of $400,000 for a junior program.

About $700,000 more was added to the deal through contract modifications, which included adding $75,000 for “promotional activities.” The 2003 audit conducted by the USPS Inspector General faulted officials for “ineffectively” managing extras, such as event tickets and invitations.

“Over the years, many different sponsors have seen — and continue to see — the benefits of associating with Lance and his cycling teams,” Armstrong spokesman Mark Fabiani said in a statement to The Associated Press.

Jim Andrews, a sponsorship expert with the Chicago-based consulting firm IEG, says that this is the first time USPS has publicly acknowledged the specifics of its sponsorship deal, which he calls “very significant, and not standard, but also not unheard of for a top-flight team.”

The escalating figures show the tangible effect of Armstrong’s star power and the leverage it gave Tailwind. The agency’s initial contract with the team in 1996 was for $1 million. Armstrong signed with the team before the 1998 season, and won the first of his record seven Tour de France titles in 1999.

By 2000, the contract, renewed yearly, had grown to $3.3 million. In 2004, it was more than eight times the original amount.

The documents also show the vast discrepancy in bonus payments. An invoice from August 2001 shows Armstrong earned $1.47 million for stage wins, days wearing the leader’s yellow jersey and the overall win at that year’s Tour.

Teammate Tyler Hamilton, whose contract stipulated that he would be the second-highest paid rider after Armstrong, earned just $150,000 in bonuses for the same race.

Hamilton, who retired in 2009 after admitting to a second doping offense, testified under subpoena before a federal grand jury that is meeting behind closed doors in Los Angeles.

The specific dollar figures revealed in the documents are relevant to more than just that criminal investigation, which began with an inquiry into another American cycling team but ramped up when former Postal rider Floyd Landis confessed to his own use of performance-enhancing drugs and described organized doping on the team.

Sources have confirmed to ESPN that Landis, Armstrong’s teammate from 2002 to 2004, filed a federal whistleblower lawsuit last spring at about the same time that he made those allegations.

The Department of Justice is weighing whether to intervene on Landis’ behalf, a move that would greatly increase his odds of success. Plaintiffs are eligible for up to a third of the treble damages that prosecutors can assess if they prove government funds were fraudulently used.

Armstrong strongly denies that he ever doped, and ex-aides such as the team’s former medical director, Luis Garcia del Moral, have backed him, saying they never saw anything untoward. USPS officials also maintained they had no knowledge of doping on the team.

Yet the newly released Postal Service documents show that, as early as 2000, officials were becoming queasy about news stories tying the team to drugs. The four-year renewal struck that year included a “morals turpitude and drug clause,” specifically citing “failure to pass drug or medical tests” and “inappropriate drug conduct prejudicial to the team” as causes to suspend or fire riders.

The renewal also included a negative publicity clause that became an issue when a French television crew found suspicious medical waste in trash disposed of by team staff members. The French government subsequently launched an investigation into the team but closed the case two years later.

In February 2001, Lynda Zelnick, a USPS contracting officer, wrote to Allen Furst, then the managing director of Tailwind, to warn him about the “the need for prudence and discretion in talking with the media.”

She also noted “the Postal Service’s concern about the deleterious impact upon the anticipated value of our sponsorship” that the news was having, and said that the agency was hiring a PR firm to run interference in the future. The $50,000 cost, she added, was being deducted from the overall sponsorship fee.

Andrews says he believes that there are several people with intimate knowledge of the deal who may be asked to come forward by federal investigators. “There’s another shoe out there,” he said. “I’m just not sure if it will drop. I’m not sure anyone else is going to break their silence.”

The reason originally cited by USPS for denying the public records request was that “publicizing the price needed to obtain sponsorship rights [would] harm [our] ability to negotiate cost-effective sponsorships” in the future.

On the appeal, it was pointed out that the agency no longer maintains sports sponsorships, and any financial information is at least six years old.

Shaun Assael is a senior writer for ESPN The Magazine. ESPN.com’s Bonnie D. Ford contributed to this report.