On Thursday, a federal judge rejected聽a settlement聽between two of Lance Armstrong鈥檚 associates and Floyd Landis.聽For $600,000, the deal would have dismissed Bill Stapleton, Armstrong鈥檚 longtime agent, and Barton Knaggs, Armstrong鈥檚 longtime business partner, from a false-claims lawsuit filed by Landis in 2010. But the settlement wouldn't聽have included Armstrong.
Confused? You鈥檙e not the only one. Here are the basic facts you need to know:
#1 Who鈥檚 Suing Whom?
In 2010, Floyd Landis , alleging that the doping and subsequent cover-up at the U.S. Postal Service pro cycling team amounted to defrauding the federal government, the team鈥檚 principal sponsor.
As defendants, Landis named: Armstrong; team director Johan Bruyneel; the team鈥檚 holding company, Tailwind Sports; the team鈥檚 one-time owner, Thom Weisel; Stapleton; Knaggs; and Capital Sports and Entertainment鈥攖he agency Stapleton and Knaggs co-founded and which for a time controlled the team.
The , but only partly, declining to name Knaggs, Stapleton, CSE, and Weisel as defendants.聽Last June, Weisel was dismissed as a defendant. He is so far the only defendant to be let out of the case.*
#2 What鈥檚 the False Claims Act?
The False Claims Act is a federal statute designed to protect the federal government from fraud by private contractors. It鈥檚 also known as Qui Tam or the federal whistleblower law.
The government can bring its own suit, but the False Claims Act also allows a private citizen to bring legal action on behalf of the government and claim a portion of the damages if he wins. That鈥檚 designed to encourage a whistleblower with knowledge of fraud to come forward. Many False Claims Act cases start with private whistleblower suits.
Here鈥檚 the basic legal theory in the Landis case: Armstrong and the rest of the defendants defrauded the federal government by doping and then covering it up. Doping is a form of cheating, which is against the rules of the sport and thus violated the team's contract with the USPS.
The federal government can decide whether to intervene or join the case. That鈥檚 usually a major development when it happens, because it brings the federal government鈥檚 considerable resources and legal expertise to bear. It also adds a measure of validity to what would otherwise just be a case between two private parties.
In Landis v. Armstrong, the government didn鈥檛 intervene in 2013 when it came to Stapleton, Knaggs, CSE, and Weisel. But it reserved its right to do so later. Federal law permits the government to join part of a False Claims Act case, without invalidating the part it did not join. However, intervention does give the federal government control over parts of the case it did not join, including dismissal of defendants.
#3 What鈥檚 at Stake?
Under the False Claims Act, damages are high. The law allows for damage awards up to three times the original amount of fraud, plus legal expenses. In the USPS case, the Postal Service invested more than $30 million in sponsorship of the team from 1999 to 2004. So damages could theoretically be in the $100 million range, at their max.
The defendants, including Armstrong, would be collectively liable for those damages. But the number of defendants depends on who wins the case. If Landis wins his action, then all the defendants are liable. If the government wins鈥攂ut Landis can鈥檛 make the case that all the defendants are responsible鈥攖hen the damages are limited to the defendants named by the government: Armstrong, Bruyneel, and Tailwind Sports. And because Tailwind Sports is out of business, it comes down to Armstrong and Bruyneel.
Note that a False Claims Act is purely a civil action. There is no possibility of jail time. In 2012, of Armstrong and his associates.
#4 Where鈥檚 the Case Now?
The parties are arguing over which parties are on the docket once the case goes to trial.
Armstrong鈥檚 previous request to be dismissed from the case was unsuccessful.
Last December, Knaggs and Stapleton (whom, you鈥檒l remember, aren鈥檛 part of the governments action), reached a settlement with Landis in exchange for $600,000 to the government and $100,000 to Landis鈥檚 lawyer, Paul Scott. But the federal government objected to the settlement. Court filings by Knaggs and Stapleton鈥檚 attorneys suggest that the objection was designed to keep the pair as defendants, thus encouraging them to cooperate with the government鈥檚 case.
The federal judge upheld the objection and rejected the settlement agreement Thursday. Knaggs and Stapleton may appeal that judgment. The rejection has implications for settlement negotiations with other defendants as well.
#5 What Will Happen Next?
Here鈥檚 the basic legal theory in the Landis case: Armstrong and the rest of the defendants defrauded the federal government by doping and then covering it up. Doping is a form of cheating, which is against the rules of the sport, and the contract between Tailwind Sports and the USPS had clauses in it that would nullify the deal if the team violated USPS policies or ethical standards, what鈥檚 often called a 鈥渕oral turpitude鈥 clause.
Further, Landis argues that, had the USPS known about the doping, it would not have renewed its original sponsorship agreement. Doping wasn鈥檛 the only fraud鈥攖he cover-up is an issue, too.
Armstrong, on the other hand, argues that court filings suggest senior USPS officials knew (or should have known), that the team was doping. More specifically, Armstrong claims the USPS has valued the sponsorship deal at over $100 million when it comes to exposure, which would mean there are no damages to recoup.
The case does not have a hearing date yet. But most likely the outcome will hinge on settlement agreements with one or more of the defendants. As the federal government has made clear, those agreements must include a satisfactory level of cooperation. Unless that happens, all parties in the case will head toward trial.
Correction:听笔谤别惫颈辞耻蝉濒测 国产吃瓜黑料聽reported that聽Weisel was still a defendant in the case.