Lance Armstrong Action Highlights Value of Whistleblower Lawsuits

While winning seven Tour de France titles from 1999 to 2005 - and ever since - Lance Armstrong was the target of rumors and accusations the he used performance enhancing drugs. After steadfastly denying such claims, earlier this year Armstrong came clean and admitted to illegal drug use while competing in and winning the world's most famous cycling competition.

Beyond the public disgrace, Armstrong now faces a significant legal challenge in the form of a whistleblower lawsuit filed by Floyd Landis, a former teammate of Armstrong's on the United States Postal Service (USPS) cycling team.

Landis filed the lawsuit in 2010 under the False Claims Act. The lawsuit claims that Armstrong used performance enhancing drugs while on the USPS cycling team, which violated terms of the sponsorship contract and therefore defrauded the U.S. Postal Service. The U.S. Postal Service spent more than $30 million in sponsoring the team.

While certainly high-profile, this action incorporates elements of most whistleblower lawsuits.

Like any whistleblower lawsuit filed under the False Claims Act, the goal of this action is to recover money received under fraudulent circumstances. The False Claims Act was originally designed to stop contractors from defrauding the U.S. government and inflicting harm. A key legal issue in Landis' lawsuit will be determining if the USPS suffered harm from Armstrong's fraudulent actions.

The person bringing a whistleblower lawsuit receives a percentage of any settlement. Damage awards may be triple the actual damages. In Landis' whistleblower lawsuit, that amount could be as high as $90 million - three times what USPS spent in sponsorship money. He could receive up to 25 percent of any settlement. This is a sizeable incentive known as qui tam, designed to encourage those with knowledge of fraud to come forward. Triple damages are included as a way to stop similar fraudulent action in the future.

A qui tam lawsuit must be based on "inside" information. Even though long publicly suspected, details of Armstrong's doping were apparently known only to his teammates, team doctors, and a few other close associates.

The Department of Justice has the option of joining a whistleblower lawsuit. Not long after Armstrong admitted to using performance enhancing drugs, the DOJ did just that, and will bring its considerable resources to the action.

Even with the DOJ's involvement, it would be prudent for any individual who wishes to bring a whistleblower suit and stop government fraud to consult an attorney.

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