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18 October 2012 - 10:33am | posted by | 0 comments

As Nike claims it was 'misled' by Lance Armstrong, do sponsors have a case for fraud?

Lance ArmstrongLance Armstrong

Ben Griffin of the Fraud & Risk Services team at national law firm Cobbetts LLP considers whether sporting cheats could not only expose themselves to public disgrace, but also to claims of fraud

During his reign as Tour de France champion, Lance Armstrong was a sporting superstar, with some of the top brands in sport clamouring to be associated with him. However, with the recent publication of a report labelling him a ‘serial cheat’ and alleging that he systematically used performance enhancing drugs, the question of whether he deceived sponsors and employers for financial gain has come to the fore.

Indeed, this question is certainly one Nike’s bosses may now be asking, after the global sports brand dropped Armstrong on the basis of "seemingly insurmountable evidence that he participated in doping and misled Nike for more than a decade". Bike maker Trek and Budweiser brewer Anheuser-Busch have also now dropped Armstrong.

In English law, Armstrong’s sponsors may have grounds to argue that they have been victims of fraudulent misrepresentation. This is on the basis that he would have represented to sponsors that there was a benefit to being associated with him at the same time he was, according to the US Anti Doping Agency (USADA), taking performance enhancing substances. The sponsors, Nike included, would have paid substantial sums for the supposed benefit of being associated with him at this time.

However, Armstrong has denied doping (though he chose not to contest USADA’s claims). Furthermore, the brands associated with him during his prolonged period of dominance in cycling’s biggest race will no doubt have benefited from the profile he gave them at the time and as a result, may not have suffered a loss – which is vital if they were to pursue a claim.

It is also doubtful whether their brands have truly been tarnished by association, as it could be argued that only true cycling fans can remember the bike he rode or who sponsored the kit he wore on Alpe d’Huez in the 2004 edition of the Tour, or indeed, in any other race.

In addition, the teams for which Armstrong rode, could, theoretically, have claims against him. A parallel can be drawn with the situation where job applicants falsify of qualifications in order to secure employment. In some cases of such falsification, the applicants have been subject to criminal sanctions and employers have pursued civil proceedings for recovery of salary paid to them.

In an employer-employee relationship, the employee is subject to a duty of good faith and therefore must not act in a dishonest manner or in a way that would be detrimental to the employer. It is arguable that such a duty could be established between Armstrong and the teams he rode for.

The only fraud that we can say Armstrong (and a large number of riders in the professional peloton) is perhaps guilty of is one against the fans.

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