Armstrong’s wealth likely to withstand charges

Lance Armstrong may have been stripped of his seven Tour de France titles and barred from cycling for life after a report from the U.S. Anti-Doping Agency detailed how he used performance-enhancing drugs to win cycling races and coerced teammates to do the same.

But he is still a rich man, with an estimated net worth of $125 million. Independent advisors and lawyers say he is likely to hold on to most of that wealth — although he may have to give up an estimated $3.9 million in prize money he won in the Tour and pay some hefty legal bills.

Most of Armstrong’s money came from his sponsors: Nike, AnheuserBusch and smaller brands like FRS, an energy supplement, and Honey Stinger, a maker of organic waffles. They have all dropped him, but it remains to be seen what damage, if any, the brands will suffer, particularly the smaller ones.

Then there is the U.S. Postal Service, which paid tens of millions of dollars to sponsor Armstrong’s team for six of its seven Tour de France titles and now looks naive, at best, for continuing to finance his racing while accusations of doping swirled around him.

Still, it is generally the case that no amount of wrongdoing by athletes will force them to forfeit the money they were paid by sponsors. The worst that typically happens is that their contracts are voided.

David Newman, a partner in the law firm Day Pitney, said it was rare for a sponsor to try to get back money from an athlete who had violated the terms of a contract.

Most contracts include a provision barring the use of performance-enhancing drugs.

Newman said that a sponsor who wanted to test the contract could demand its money back, but that Armstrong, who has vehemently denied doping, could simply refuse and argue that none of the accusations against him had been proved.

“They’d have to spend a lot of money to prove these allegations,” Newman said. “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 Armstrong would do if his sponsors sued him for damages, Tim Herman, one of his lawyers, said, “We don’t have a plan for that, because I do not expect that to happen.”

For a big company like Nike, which has weathered plenty of controversy with its athletes — it dropped quarterback Michael Vick after he accepted responsibility for his role in a dogfighting ring and pleaded guilty to federal conspiracy charges in 2007, but re-signed him last year, and it kept Tiger Woods on after his marital scandal in 2009 — the loss of Armstrong is no big deal. But I expected more anger from smaller companies like FRS, which makes an energy drink that was closely associated with Armstrong. Armstrong’s image, until recently, was featured prominently in the company’s advertising.

There are two areas, though, where Armstrong is at risk of losing a little or a lot of money.

The case against him that is getting the most attention is being pursued by SCA Promotions, a company in Dallas that insures potentially costly but unlikely events, like a prize for a hole in one in a golf tournament. In 2004, Armstrong sued the company for not paying him a $5 million bonus for winning his sixth Tour de France title. SCA said it would not pay because of allegations of doping that had come out in a book by two sports reporters.

In 2006, though, the company settled the suit and paid Armstrong $7.5 million, including interest and fees.

“There is no revisiting that,” Herman said. “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.”

Still, SCA said it intended to do just that. Jeffrey Dorough, SCA’s corporate counsel, said the firm was sending 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.

But there is one way the company could cause problems for Armstrong, and that is by deposing him as part of a lawsuit.

The biggest threat to Armstrong’s wealth is a False Claims Act lawsuit against him and Tailwind Sports, the limited liability corporation that owned his team. The Wall Street Journal reported in late 2010 that Floyd Landis, a former teammate of Armstrong’s and another Tour de France winner who was stripped of his title over doping, had filed a whistleblower lawsuit under the False Claims Act alleging that the government — the Postal Service, in this case — had been defrauded. The suit remains sealed while the Justice Department decides whether to act on it.