Armstrong maintains high public profile
Amid investigation, cyclist not shying from appearances to help his foundation
Lance Armstrong will appear on ABC, CBS, Fox, NBC and a slew of cable channels simultaneously Friday evening in a pre-taped segment for the celebrity-stocked "Stand Up To Cancer" telethon. He'll participate in a panel discussion and rub shoulders with heads of state and corporate VIPs at the Clinton Global Initiative in New York City next week. Sometime before the end of 2010, he plans to join a State Department-sanctioned group that will visit Haiti to assess care for chronically ill people in the earthquake-stricken country.
On Oct. 2, the anniversary of Armstrong's 1996 testicular cancer diagnosis, his eponymous foundation, now known as Livestrong, will stage nationwide grassroots events related to survivorship and wellness. And later in the month, Armstrong will honor the foundation's top donors at his annual Ride for the Roses weekend in Austin, Texas.
The seven-time Tour de France winner does not appear to be ratcheting down his public profile or crossing anything off his schedule even as federal investigators continue to probe allegations of organized doping and fraud against Armstrong and some of his current and former team officials.
Foundation CEO Doug Ulman said none of the events were booked as a reaction to the investigation, and added, "There was never a minute's discussion of 'Should we do this or not?'"
Experts in crisis communications say that by going about his normal business and not ducking the spotlight, Armstrong is proceeding in exactly the way they would expect -- indirectly trying to influence public opinion, and by extension, perhaps even prosecutorial discretion.
"Anything else would send the wrong message,'' said Jim Haggerty, president and CEO of the PR Consulting Group in New York, which advises clients on communications strategies in high-profile lawsuits. "From a perception standpoint, anything that might make you look guilty makes you guilty.''
David Chamberlin, senior vice president and director of issues and crisis management for the New York-based MS&L Group, said Armstrong has built up a huge reservoir of public goodwill because of his association with the foundation, but noted that will only go so far if the facts don't support him.
"I tell my clients to just be honest, be truthful, because if you're not, it comes back and bites you,'' Chamberlin said. "He's said what he's said over and over again. If it turns out that he lied, he has bigger problems.''
Armstrong's lead criminal defense attorney, Bryan Daly, has said he fears the foundation could be hurt if the current legal limbo drags on. There is potential jeopardy on two fronts now: a Food and Drug Administration investigation backed by the U.S. Attorney's Office in Los Angeles, and a whistle-blower lawsuit filed by former teammate Floyd Landis that remains under seal as the Department of Justice weighs whether to get involved.
Daly and Mark Fabiani, the lawyer/spokesman hired by Armstrong earlier this summer, have repeatedly tried to hammer home the notion that the probes are an unwarranted use of public funds. They hope that message, coupled with Armstrong's continued high visibility, will resonate with the public. Whether that would or could influence the path of the federal investigations is another question, and those doing the investigating aren't talking.
IPO could generate big funds
Armstrong's return to professional cycling in 2009 after three years in retirement helped the foundation's bottom line in a sagging economy. According to figures provided by the foundation, revenues from donations ($12 million) and merchandise sales ($3.5 million) from January through August of this year are up 2 and 10 percent, respectively, from the same period the previous year. (In 2009, the first year of Armstrong's comeback, revenues from those two sources spiked 29 and 44 percent higher than in 2008 in those eight months.) The number of individual donations is up from last year, but the average amount of each donation has declined slightly, a trend Ulman attributed to economic factors.
The foundation's finances -- and that of Armstrong himself -- could get a boost soon, thanks to a business deal struck in January 2008. At that time, the social media/content provider Demand Media acquired perpetual licensing rights to use the foundation's registered trademark as a commercial domain name. Shortly afterward, Demand launched the for-profit website Livestrong.com, which features stories and interactive features about fitness, diet and mental health issues, among others.
In return, Demand gave the foundation perpetual rights to use its proprietary social media platform on its website, Livestrong.org, and guaranteed that it would drive a certain amount of traffic to the nonprofit site. Armstrong and Demand entered a separate agreement under which Armstrong became a "strategic advisor and ongoing content contributor" to Livestrong.com for the next four years. The joint announcement also disclosed that Armstrong and the foundation had acquired unspecified equity stakes in Demand.
Privately held Demand last month filed documents with the Securities and Exchange Commission indicating the company's intention to raise capital through an initial public offering of its stock. The S-1 filing for the IPO shows the foundation holds 1.25 million warrants -- which give the holder the right to buy, but no obligation -- to purchase shares of Demand at a price of $6. Armstrong personally holds 1,062,500 warrants at the same price, and his management company, Capital Sports and Entertainment, holds 187,500. The warrants must be exercised by the end of the first day of the public offering and then can be resold or held at the owner's discretion.
IPOs don't always go forward if market conditions aren't right, and there's no guarantee that the price of the stock would exceed the warrant price -- although it wouldn't take much for the foundation and Armstrong to realize a substantial profit.
Two heads of charity watchdog groups that rate nonprofit organizations said the deal's apparent bundling of Armstrong's personal financial interests with those of the foundation troubled them.
"This blurs the lines between the foundation and its charitable mission, and the personal gain of its founder,'' said Ken Berger, president and executive director of Charity Navigator. "It's mixing two purposes in a way that smells of a conflict of interest. The most precious thing a charitable organization has is the public's trust, and things like this put a chink in that.''
Daniel Borochoff, founder and president of the American Institute of Philanthropy in Chicago, said he was uncomfortable with the arrangement, especially because Armstrong remains chairman of the board of the foundation. "Nonprofits have to be concerned not only with actual conflicts of interest, but the appearance of conflicts of interest,'' Borochoff said.
Dean Zerbe, an expert on charity regulations and former tax counsel to the Senate Finance Committee, had another view: "It's a different relationship, but I wouldn't immediately label it as suspect or wrong." He said many nonprofits license their trademarks, and his chief question would be whether the foundation received fair compensation and was not unduly influenced by Armstrong's talks with Demand.
"I can legitimately see a company saying, 'We want both of them,'" said Zerbe, national managing director at alliantgroup, a tax advisory firm. "He's unique because he has value, and he's so intertwined with the trademark.''
Los Angeles-based attorney Doug Mancino, who specializes in representing nonprofit organizations, vetted the Demand deal for the foundation as its outside counsel. He said that the two transactions were negotiated on a parallel track but completely separately, and that Armstrong recused himself from any decisions made by the foundation board. The value of the trademark as a commercial domain name was determined in an independent analysis by intellectual property attorneys, and Mancino said he was satisfied that the foundation received full worth.
Ulman said he views the Demand relationship as one of several "innovative, entrepreneurial" steps the foundation has taken in tandem with corporate partners that also have relationships with Armstrong. Livestrong.com is "furthering our mission in significant ways,'' he said.
Texas legislator seeks investigation's end
Armstrong's lawyers have said they will refrain from lobbying politicians or policy makers to try to get the investigations quashed, although they acknowledge they hope to draw support for their contention that the allegations against Armstrong are not a matter for the government to explore.
Daly said that making a direct pitch to elected and appointed officials could easily backfire. "We have no plans to reach out to legislators, but if anyone has a question, we will answer it," Fabiani said.
From a crisis communications vantage point, Chamberlin agreed. "If that were to become public, it makes it look like he's trying to get out of something instead of facing the music,'' he said. But Chamberlin said he had no doubt that Armstrong has "naturally" made numerous connections in politics and policy circles through his foundation work and his celebrity.
The first shot over the bow may have come from Texas State Rep. Allen Vaught, a Democrat who represents east Dallas. Vaught said he does not know Armstrong personally but was familiar with him through the cyclist's campaign to pass a 2007 state cancer research funding ballot initiative, Proposition 15.
Vaught told ESPN.com that a conversation with a constituent he met while campaigning door-to-door prompted him to write a letter to FDA Commissioner Margaret Hamburg protesting the premise of the agency's investigation. The probe is being led by Jeff Novitzky, the same agent who spearheaded the BALCO steroids investigation when he worked for the Internal Revenue Service.
In the Aug. 26 letter, Vaught said he was skeptical about the allegations against Armstrong, but "more upset that taxpayer resources might be used in this matter. We have millions of contaminated eggs, peanut products possibly contaminated with [pesticides], seafood possibly made toxic by benzene contamination from the BP oil spill and prescription medications that are unsafe for end users. During these challenging times, the FDA should be using taxpayer resources to address those issues and other pressing life-and-death matters, and not a retired athlete.''
The waste-of-money argument has been made recently by many high-profile athletes and officials facing charges or accusations, and is always more effective in times when the economy is suffering, Haggerty said. "It's the argument du jour,'' he said.
There is certainly precedent for such investigations in other countries -- although it's also true that laws regulating the use of performance-enhancing drugs and techniques vary wildly from nation to nation. Law enforcement authorities in France, Austria, Italy, Germany and Spain have gone to some lengths to try to crack doping cases.
The fiscal argument has been a largely one-sided dialogue so far because federal authorities won't comment on their reasoning, much less their expenditures. Similarly, U.S. Anti-Doping Agency chief executive officer Travis Tygart refused comment on the Armstrong investigation or any ongoing case, but he vigorously defended the government's right to explore such cases.
"Fraud, corruption and drug use are criminal, dangerous and potentially life-threatening activities that would not be tolerated in any other important social institution in our country,'' Tygart wrote in an e-mailed response to ESPN.com.
"In fact, clean athletes and those that value corruption-free sport have asked that more resources, not less, be devoted to ensure that their rights, as well as the integrity and values of our national pastimes, be fully protected.''
Bonnie D. Ford covers tennis and Olympic sports for ESPN.com. She can be reached at firstname.lastname@example.org.