Federal investigation of doping allegations could hurt foundation arm of Lance Armstrong Inc.

By Michael Liedtke, AP
Tuesday, August 3, 2010

Doping scandal may hurt Lance Armstrong foundation

NEW YORK — Lance Armstrong has overcome cancer, rival cyclists and nagging allegations of doping to become one of the world’s best-paid athletes and a sought-after pitchmen.

He’s also turned the Lance Armstrong Foundation, better known as Livestrong, into one of the top 10 groups funding cancer research in the United States. Since its inception in 1997 it has raised more than $325 million, and become synonymous with the 72 million yellow bracelets it has sold bearing the Livestrong name.

The Armstrong brand is one of the best in sports.

Yet everything the seven-time Tour de France champion has created is now threatened by a new opponent: a federal investigation. Philanthropy experts say the foundation, in particular, is at risk of losing future donations if its namesake and chairman is dragged down in scandal.

Federal prosecutors have been investigating pro cycling since Floyd Landis, a former Armstrong teammate who was stripped of his 2006 Tour title, admitted this spring that he used performance-enchancing drugs. Landis also accused many others in the sport, including Armstrong, of doping too.

Last week, prosecutors subpoenaed documents from a 2004 case in which a Texas company with business ties to Armstrong tried to prove he used drugs in order to avoid paying him a performance bonus.

Armstrong has long denied — vehemently — that he used performance-enhancing drugs, and he has not been charged.

The foundation has not been accused of wrongdoing, but it is so closely linked with Armstrong it could be hurt.

“They are not going to be able to thrive if the person who is the spirit behind it is in trouble,” said Ken Berger, CEO of Charity Navigator, which analyzes more than 5,000 nonprofits in the U.S. “It is just going to devastate them.”

Just the mere juxtaposition of Armstrong with prosecutors seems to already be harming his image.

Although the investigation is ongoing, public opinion may be starting to shift. Words such as “scandal” and “lie” and “steroids” are now the most popular phrases used to describe Armstrong, according to Zeta Interactive, a marketing firm that tracks online sentiments. In 2008, when Armstrong was the fourth-most talked about athlete, words used to describe him included “hero” and “legend” and “Nike” — a reference to one of his main sponsors.

“Anyone or anything associated with Lance Armstrong should be very worried right now,” Zeta Interactive CEO Al DiGuido said. “He has faced these kinds of allegations before, but the fuel really seems to be kicking in this time.”

Fifty-eight percent of online sentiments about Armstrong remain positive, according to Zeta’s rating system, but that’s down from 86 percent at the beginning of July and the first time that it has fallen below 60 percent.

Armstrong still has legions of fans too, including 2.6 million Twitter followers that track his musings on racing and life.

And his sponsors, for now, are standing behind him. Armstrong’s endorsements include deals with Nike Inc., RadioShack Corp., Oakley sunglasses, 24-hour Fitness, Nissan, Anheuser-Busch InBev’s Michelob Ultra, FRS energy drinks and Trek bikes. Several of them also support Armstrong’s foundation, which he started after he beat cancer.

FRS, a privately held company, is expanding its commitment to Armstrong and the foundation. It plans to feature Armstrong, an FRS investor and board member, in national television ads this October. FRS also recently agreed to support the foundation for at least three more years.

“We believe very strongly in Lance and his cause,” said FRS CEO Carl Sweat. “The work he has done to get the (cancer-fighting) movement where it is much bigger than what he has accomplished in cycling.”

As in his cycling career, Armstrong appears to be past his prime as a pitchman. That means the stakes aren’t quite as high for his personal fortune as they were for golfing superstar Tiger Woods, whose marital infidelities cost him lucrative deals with Accenture LLP and AT&T Inc.

Woods remained the top-paid athlete on a recently released Forbes list showing him with earnings of $105 million during the year ending in June. Armstrong was the 15th highest-paid athlete in the same period with estimated income of $20 million. That’s down from $28 million in the year ending June 2005, just before he won his seventh straight Tour de France.

Armstrong was never going to make as much money as Woods or basketball star LeBron James because his sport is more of a niche, said John Sweeney, director of sports communication at the University of North Carolina at Chapel Hill’s School of Journalism and Mass Communication. What’s valuable about him is his personal story of overcoming cancer.

“Lance is an inspirational story. He’s the man who beat cancer and then won the Tour de France,” he said. “I can’t think of too many people who you’d say transcended into an inspirational category.”

Armstrong’s story still resonates with so many people that his foundation sold out of all 130,000 bracelets that it took to France in July, a 30 percent increase from last year, said foundation CEO Doug Ulman.

Those $1 bracelets, meant to be a testament to courage and determination, could become a symbol of shame if it’s proved Armstrong cheated, said DiGuido, of Zeta Interactive.

Armstrong says that won’t happen because the allegations are unfounded.

“No one on our foundation team is going to be distracted by this witch hunt,” Armstrong said in a statement to The Associated Press.

The Lance Armstrong Foundation, which adopted Livestrong as its operating name last year, ranks among the largest cancer charities in the U.S.

It was the nation’s 10th largest cancer foundation, based on revenue in 2008, according to the most recent data from research firm GuideStar. The 82-employee foundation, which is based in Austin, Texas, grew even larger last year, with $41.8 million in revenue, up 30 percent from 2008, according to its tax records. And through the first half of this year, donations were up 25 percent from the same time last year.

“The foundation is as strong as it has ever been, just not financially, but in terms of the impact that we are having,” said Ulman, who remains in regular contact with Armstrong. “Lance has been, and continues to be, this beacon of hope and inspiration for millions of people around the world.”

Michael Liedtke reported from San Franscisco.

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