Outside Magazine, February 2012
Sunday, January 08, 2012
If Lance Armstrong went to jail and Livestrong went away, that would be a huge setback in our war against cancer, right? Not exactly, because the famous nonprofit donates almost nothing to scientific research. BILL GIFFORD looks at where the money goes and finds a mix of fine ideas, millions of dollars aimed at “awareness,” and a few very blurry lines.
It’s a journalistic axiom that when your phone rings early on a Monday, from a blocked number, it’s generally not because somebody loves your work. I picked up to hear an angry Lance Armstrong on the line, along with Doug Ulman, the CEO of the Lance Armstrong Foundation—a.k.a. Livestrong. It was 8 a.m. in Austin. They were calling to berate me about what they considered my bias against Livestrong and Lance.
Which seemed strange, since I wasn’t working on a Livestrong article. Not yet, anyway. Granted, I’d been sniffing around and had posted a tweet or two, but nothing more. One of those posts was written on April 17, 2011, the day 60 Minutes aired its report on Greg Mortenson and the Central Asia Institute. According to allegations made by Steve Kroft and Jon Krakauer, Mortenson had used foundation money to fly himself around and promote his books, which were full of lies about his adventures in Pakistan and Afghanistan. Meanwhile, the charges went, the organization wasn’t operating nearly as many schools as Mortenson liked to claim.
“60 Minutes takedown,” I tweeted, “just goes to show that ‘awareness’ is the last refuge of a scoundrel.” Admittedly, I had both Mortenson and Armstrong in mind when I wrote this: both were facing legal investigations, and both would end up using their philanthropic work as part of their PR defense. The “awareness” wording was a jab at Livestrong, since raising cancer awareness is a major part of the organization’s mission.
A lame joke, perhaps, but that’s all it was. Still, it made Armstrong livid. “You need to come down here and see what we do,” he said sternly. “Ask us the hard questions.” It was more a command than a request. “I know you’re a hater and you’re gonna write what you write, but I just want you to see it.”
At the time, Armstrong was starting to take some serious flak of his own. The Jeff Novitzky–led federal investigation into his past was dragging former teammates and associates in front of a Los Angeles grand jury. In January, Sports Illustrated published an exposé that supported Floyd Landis’s claims that Armstrong had doped to win his seven Tour de France titles. Now 60 Minutes was said to be working on its own, more damaging story.
In the wake of the Mortenson report, bloggers and journalists (not just this one) were asking pointed questions about Livestrong, the disease-fighting charity that Armstrong founded in 1997, during his recovery from testicular cancer. Cynics wondered whether Armstrong was another Mortenson, living large on his foundation’s dime. After all, Armstrong had recently spent $11 million on a personal jet. Was he really rich enough to pay for that out of his own pocket?
“The issue with Lance Armstrong isn’t whether he has done good for cancer victims,” accounting professor Mark Zimbelman wrote on his blog Fraudbytes, in a post comparing Mortenson to Armstrong, “but rather, whether he first cheated to beat his opponents, then used his fraudulent titles to help promote an organization that appears to do good but also enriches a fraudster.”
Others noticed an annoying tendency: whenever questions about doping arose, Armstrong and his supporters changed the subject to his cancer work, a tactic that the bicycling website NY Velocity called “raising the cancer shield.” After the 60 Minutes segment on Armstrong aired in May—complete with damning claims from ex-teammate Tyler Hamilton that Armstrong had cheated—Armstrong’s lawyers denied the allegations and quickly invoked Livestrong in his defense. In their one legal brief to date, they blasted the feds over alleged leaks to 60 Minutes that, they said, were intended to legitimize “the government’s investigation of a national hero, best known for his role in the fight against cancer.”
But what did that fight amount to? Did Livestrong actually do much to eradicate cancer, or did it exist largely to promote Lance? If and when any indictments came down, would his good deeds help him escape conviction or jail time? It seemed likely that this theme could come up. Barry Bonds’s lawyers recently asked for probation instead of prison time as punishment for the baseball star’s 2011 Balco conviction, citing his “significant history of charitable, civic, and prior good works.”
Writers who’ve dealt with Lance and his associates are familiar with their aggro style, but it seemed strange that they’d come on so strong that morning. Still, Lance had a point: if I wanted to write about Livestrong, I needed to go see things for myself.
FOR VARIOUS REASONS, I’m not Lance Armstrong’s favorite journalist. In 2006, I profiled Michele Ferrari, his longtime Italian trainer, for Bicycling. Researching that story left me with serious doubts about whether Armstrong had competed clean, as he continues to insist. In 2009, I wrote a Slate story called “JerkStrong” that likened his media relations style to Sarah Palin’s. But my skepticism about Armstrong as an athlete did not extend to the cancer arena. More than once, I have given his book It’s Not About the Bike to friends stricken with the disease. Not all of them survived, but I know that none of them cared whether he doped to win the Tour.
Make no mistake, though: if Armstrong is indicted, the survival of Livestrong will hang in the balance. It seems obvious that Novitzky, an aggressive former IRS agent, would be keenly interested in the organization and how it operates. If so, he’s not alone. At least two other major publications have done serious reporting on Livestrong—that is, they started to. In both cases, Livestrong lawyers succeeded in shutting down the stories before they were published. They applied the same pressures to Outside, blitzing my editors with pissed-off e-mails, phone calls, and, eventually, a five-page letter from general counsel Mona Patel complaining about “Mr. Gifford’s conduct, professionalism, and method of reporting.” One of my crimes was a failed attempt to get a source to talk off the record, an ordinary journalistic practice.
All of which now makes me wonder if I missed something. During an investigation that played out over several months—involving dozens of interviews and careful examination of Livestrong’s public financial records—I found no evidence that Armstrong has done anything illegal in his role as the face of the organization. As far as I can tell, he paid for the private jet himself—which is now for sale, by the way, along with his ranch outside Austin—and he’s apparently been scrupulous about his expenditures as they relate to the nonprofit. When Armstrong travels on Livestrong business, the foundation insists, he picks up his own tabs.
“Since day one, Lance has never been reimbursed for an expense,” says Greg Lee, Livestrong’s CFO. “Period.” Armstrong told me that Livestrong’s board—which includes venture capitalist Jeff Garvey, CNN medical reporter Sanjay Gupta, and Harlem cancer fighter Harold Freeman—“would resign immediately if any of that shit happened.”
The financial records appear to back up Armstrong’s assertion, and if there’s a more nefarious reality behind the curtain, it may take someone with subpoena power to bring it to light. In addition to Novitzky’s investigation, the IRS examined the foundation’s 2006 returns, although Livestrong officials say it was a routine review.
On the program side, I learned that Livestrong provides an innovative and expanding suite of direct services to help cancer survivors negotiate our Kafkaesque health care system. Beyond that, though, I found a curiously fuzzy mix of cancer-war goals like “survivorship” and “global awareness,” labels that seem to entail plastering the yellow Livestrong logo on everything from T-shirts to medical conferences to soccer stadiums. Much of the foundation’s work ends up buffing the image of one Lance Edward Armstrong, which seems fair—after all, Livestrong wouldn’t exist without him. But Livestrong spends massively on advertising, PR, and “branding,” all of which helps preserve Armstrong’s marketability at a time when he’s under fire. Meanwhile, Armstrong has used the goodwill of his foundation to cut business deals that have enriched him personally, an ethically questionable move.
“It’s a win-win,” says Daniel Borochoff, head of the American Institute of Philanthropy, a watchdog group. “He builds up the foundation, and they build up him.”
Equally interesting is what the foundation doesn’t do. Most people—including nearly everybody I surveyed while reporting this story—assume that Livestrong funnels large amounts of money into cancer research. Nope. The foundation gave out a total of $20 million in research grants between 1998 and 2005, the year it began phasing out its support of hard science. A note on the foundation’s website informs visitors that, as of 2010, it no longer even accepts research proposals.
Nevertheless, the notion persists that Livestrong’s main purpose is to help pay for lab research into cancer cures. In an online “60 Minutes Overtime” interview after the May broadcast, CBS anchor Scott Pelley said Armstrong’s alleged misdeeds were mitigated because “he has raised hundreds of millions of dollars for cancer research.”
Pelley isn’t alone in getting that wrong: a search of The New York Times turns up dozens of hits for “Armstrong” and “cancer research.” An Associated Press story from August 2010 described Livestrong as “one of the top 10 groups funding cancer research in the United States.” The comments section of any article about Armstrong will inevitably include messages like this one from ESPN.com: “keep raising millions for cancer research lance, and ignore the haters.” At one point, the foundation brought in a PR consultant to try and clarify the messaging, but Armstrong himself says there’s only so much they can do. “We can’t control what everybody says they’re wearing the bracelets for,” he told me.
At the same time, though, Armstrong and his supporters help perpetuate the notion that they are, in fact, helping battle cancer in the lab. “I am here to fight this disease,” he angrily told journalist Paul Kimmage at a press conference held during his 2009 comeback. In 2010, the foundation agreed to let an Australian hospital call its new research facility the Livestrong Cancer Research Center. And when I recently visited my local RadioShack, a major Armstrong sponsor, the clerk asked, “Would you like to make a donation to the Livestrong foundation to help support cancer research?”
No wonder people get confused.
WITH ITS RECLAIMED-WOOD SURFACES and industrial-chic design, Livestrong HQ resembles a cutting-edge Whole Foods—another signature Austin institution. Here in East Austin, the poorer side of town, there’s no Whole Foods, just dusty carnicerías that sell fantastic tongue tacos. A renovated warehouse, the $9 million building opened in 2009.
In the lobby, I meet Livestrong spokeswoman Katherine McLane and Chris Dammert, head of what’s known as navigation services. Our first stop is the building’s walk-in navigation center, adjacent to the main entrance, where bilingual staffers offer cancer patients financial consultation, help with insurance issues, and counseling. Since the center opened in late 2010, Dammert says, some 207 families have come in—lower traffic than he’d like. “We’re hoping to build awareness over time,” he says.
The walk-in center is a hands-on version of the online and telephone support services that Livestrong has offered since 2005. Dammert leads me upstairs to an area where two “navigators” are settling into their cubicles. This is where patients or loved ones can phone in to a hotline with questions. Depending on their needs, callers are either directed to one of two in-house social workers for emotional support or referred to outside agencies.
Livestrong sends about two-thirds of the callers to organizations like the Virginia-based Patient Advocate Foundation (PAF), which deals with insurance and billing issues. In 2010, Livestrong paid PAF $727,000 for helping its clients; the organization even has a staffer on-site in Austin. In addition, Livestrong helps connect people with clinical trials and offers assistance to patients who (like Lance did) need help learning about sperm banking or egg freezing. Last year, the foundation says, it saved its members more than $2 million on fertility services.
Lastly, Livestrong publishes a set of cancer guidebooks, which include a journal, a record keeper to help organize paperwork, and a manual walking readers through the many steps of treatment. These are available from the Livestrong website for free.
One unlikely “nav” beneficiary is cycling journalist Charles Pelkey, diagnosed last summer with male breast cancer. Pelkey has been a critic of Armstrong—“I don’t particularly like the man,” he says—but after he tweeted about his cancer, a Livestrong navigator contacted him to offer assistance. “There are really wonderful people who work there,” Pelkey says. “I respect everything they do.”
Dammert hands me off to McLane for the rest of the tour, and it’s clear Armstrong didn’t hire a milquetoast for the job. Tall and serious, she came to the foundation in 2007 from the Bush Department of Education. “My job was to defend the No Child Left Behind law,” she says. “Every teacher in America hated it, including my parents.”
Armstrong is a visitor, not a daily presence; when I was there in June, he had already decamped to Aspen for the summer. But his handprints are all over the place, from the framed yellow jerseys outside the staff gym to the enormous yellow chopper (a gift from the guys on Orange County Choppers) parked near the lobby. Every available surface is occupied by pieces from Armstrong’s art collection—including the Shepard Fairey “Lance face” poster and a wooden carving of a female torso emerging from a globe.
We end up in a conference room with 34-year-old Doug Ulman, Livestrong’s $320,000-a-year CEO. Earnest and intense, he looks like he could be Lance’s younger brother. Ulman was a sophomore soccer player at Brown University when he was diagnosed with a rare tumor and two types of melanoma. After successful treatment, he started his own foundation for young adults with cancer; Armstrong read about him in the Brown alumni magazine and sent an admiring e-mail. They hit it off, and Ulman came aboard in 2001. At the time, Livestrong had four staffers and a budget of about $7 million. Now it has a staff of 88, and it took in $48 million in 2010.
Like his boss, Ulman is energized by adversity. Tacked to the wall of his cube is a photo-copied quote from Ken Berger, the head of Charity Navigator, an influential ratings and watchdog group. “It is just going to devastate them,” he said in an Associated Press article.
“It” is the federal investigation against Armstrong, which Livestrong staffers have tried to compartmentalize. “We can’t predict what’s going to happen in the world of cycling,” Ulman says. “We have to stay focused on fulfilling our mission.”
THAT MISSION HAS EVOLVED considerably. In the early years, Ulman says, the foundation awarded grants for research on both testicular cancer and cancer survivors. The grants were small, in the low six figures or less, and were aimed at scientists pursuing cutting-edge ideas.
“For a young researcher it was great,” says Julien Sage, a Stanford professor who received a total of $150,000 from 2004 to 2005. “I had no data, just an idea.” Small, speculative grants like his, he explains, are essential to young scientists who are developing the data they need to apply for more substantial government funding.
The main reason for the shift, Ulman says, was scale. The American Cancer Society raised $900 million last year. And the National Cancer Institute awards nearly $2 billion a year in research grants. Ulman says Livestrong was too small to make a difference in such a big pond. “We started to realize that there’s literally billions of dollars in cancer research, and we asked, Is that the best use of the money we’re raising?”
Point taken. It’s worth noting, though, that the Michael J. Fox Foundation had about the same revenue as Livestrong in 2008—$40 million—and gave away $33 million of that in grants for Parkinson’s research. The Susan G. Komen foundation also does a huge amount of pink-ribbon “awareness” work, but it still dished out $145 million in breast-cancer research grants over the past two years. With Livestrong gone, there is no equivalent private funder for testicular-cancer research.
Sage says that the kind of contribution Livestrong was making is still needed. “It’s a mistake to stop supporting basic research, because there are a lot of things we can learn,” he says. “There are still people who die from testicular cancer, and we need to look for better ways to treat them.”
Ulman doesn’t see it that way. “We are all about people,” he says. “Most organizations are about the disease. They’re about trying to solve a disease, and we are about trying to improve the lives of people that are battling the disease.… What can we do today to improve their lives? As opposed to saying we’ll fund research that in 15 years might help somebody live a little longer.”
McLane agrees. “If we applied the science we already have, we could cure almost everybody,” she says. “The search for a cure could have already been successful. It’s removing the barriers to the treatment that can cause that cure that is the real problem for many people all over the world.”
AFTER ARMSTRONG RETIRED FROM CYCLING, the only direction his foundation seemed to be moving was down. In 2005, the last year he won the Tour, revenues grew to $52 million, fueled largely by the famous $1 Nike Livestrong wristband. But when Armstrong left the spotlight, the wristband fad waned and foundation revenues sagged by $20 million the next year.
They stayed lower despite a notable success in 2007, perhaps Livestrong’s greatest achievement. Armstrong spent much of that year campaigning for Proposition 15, a Texas ballot initiative to create a huge pool of public money for cancer research and prevention. He worked the Texas legislature and traveled the state by bus with then state representative Patrick Rose, and the measure passed. “There is no chance that Prop 15 would have become a reality but for Lance’s personal involvement,” Rose says today.
But it took Comeback 2.0 to put Livestrong on people’s radar again. Armstrong announced his plans in a September 2008 Vanity Fair interview, in which he said his return would be built around what he called a “global cancer summit.” The comeback was portrayed as a completely charitable mission. “I am essentially racing for free,” he told the magazine. “No salary. No bonus. This one’s on the house.”
His reboot was a smashing success: huge crowds and adoring headlines greeted Armstrong’s return to racing at the Tour Down Under in Australia. In Sacramento, fans lined the prologue course of the Tour of California waving yellow signs with the Lance face and the slogan HOPE RIDES AGAIN. He ended up with a podium finish at the 2009 Tour de France, and Livestrong revenue surged back over the $40 million mark.
But the comeback also saw Livestrong’s final evolution from a research nonprofit into something that looks more like a hip marketing agency. Rather than funding test-tube projects, it was deploying buzzwords like leverage, partnering, and message.
One way to spread the message is to slap Livestrong’s name on just about everything, from Livestrong Survivorship Centers of Excellence (there are eight at major hospitals nationwide) to Oakley sunglasses to, at one point, a Livestrong Build-a-Bear (complete with yellow cycling outfit). The Livestrong label is so appealing that the owners of the Major League Soccer franchise Sporting KC decided to donate the naming rights for its new stadium, guaranteeing the foundation $7.5 million over six years. Normally, a corporation would pay to have its name put on such a venue, but team owners are betting that Livestrong Sporting Park will attract more business and goodwill than, say, AT&T Arena would. (Lance even has his own seat: Box 1, Seat 007.)
Did the doping allegations bother them? “We asked the foundation about that,” says team co-owner Robb Heineman. “They said he’s the most tested athlete in the history of sports, and he maintains he’s never done it.”
LIVESTRONG PRIDES ITSELF on the fact that—on paper, anyway—it spends 81 percent of every dollar on programs. This is a big improvement over 2005, when the American Institute of Philanthropy took Livestrong to task for spending 45 cents of every dollar on fundraising. Now AIP gives Livestrong an A-minus, while Charity Navigator rates it three stars out of four.
But the foundation’s financial reports from 2009 and 2010 show that Livestrong’s resources pay for a very large amount of marketing and PR. During those years, the foundation raised $84 million and spent just over $60 million. (The rest went into a reserve of cash and assets that now tops $100 million.)
A surprising $4.2 million of that went straight to advertising, including large expenditures for banner ads and optimal search-engine placement. Outsourcing is the order of the day: $14 million of total spending, or more than 20 percent, went to outside consultants and professionals. That figure includes $2 million for construction, but much of the money went to independent organizations that actually run Livestrong programs. For example, Livestrong paid $1 million to a Boston–based public-health consulting firm to manage its campaigns in Mexico and South Africa against cancer stigma—the perception that cancer is contagious or invariably fatal.
Livestrong touts its stigma programs, but it spent more than triple that, $3.5 million in 2010 alone, for merchandise giveaways and order fulfillment. Curiously, on Livestrong’s tax return most of those merchandise costs were categorized as “program” expenses. CFO Greg Lee says donating the wristbands counts as a program because “it raises awareness.”
This kind of spending dwarfs Livestrong’s outlays for its direct services and patient-focused programs like Livestrong at the YMCA, an exercise routine tailored to cancer survivors available at YMCAs nationwide ($424,000 in 2010). There’s also a Livestrong at School program, offered in conjunction with Scholastic magazine ($630,000 in 2010). “Explain to students that Lance was very sick with cancer but that he was treated and got better,” begins one sample lesson plan for grades three through six.
Livestrong spends as much on legal bills as on these two programs combined: $1.8 million in 2009–10, mainly to protect its trademarks. In one memorable case, its lawyers shut down a man in Oklahoma who was selling Barkstrong dog collars. Meanwhile, “benefits to donors” (also merchandise, as well as travel expenses for Livestrong Challenge fundraisers) accounted for another $1.4 million in spending in 2010.
There’s still a research department, but now it focuses on things like quality-of-life surveys of cancer survivors. During my visit, I was plied with glossy reports and brochures, which are cranked out by the truckload. The foundation’s 2010 copying-and-printing bill came to almost $1.5 million.
But Livestrong’s largest single project in 2009—indeed, the main focus of Armstrong’s comeback—was the Livestrong Global Cancer Summit, held in Dublin in August. The summit ate up close to 20 percent of the foundation’s $30 million in program spending that year.
To kick things off, Livestrong hired Ogilvy, the famous advertising firm, to create a global cancer-awareness campaign leading up to the summit. Cost: $3.8 million. It spent another $1.2 million to hire a New York City production company to stage the three-day event. Then it paid more than $1 million to fly 600 cancer survivors and advocates to Dublin from all over the world—the U.S., Russia, Bangladesh, and 60 other countries. The former president of Nigeria even showed up.
Often, the main output at gatherings like this is verbiage, and so it was at the summit. Participants declared cancer a “global health crisis.” A report was produced titled “A World Without Cancer.” And delegates called on every country to develop a national cancer plan to deal with the disease. At the end of the summit, 97 percent of participants answering a Livestrong survey said they had “developed a deeper level of understanding about the issues related to cancer.”
“You wonder,” AIP’s Borochoff says. “If they just gave the money to cancer research, would it generate as much great publicity for Lance Armstrong?”
THE FOUNDATION considers this money well spent, but if I were a Livestrong supporter I’d also ask: What’s the product here? If not research, then what do I get for my $100 donation?
“I think the product is hope,” says Mark McKinnon, the renowned GOP political consultant and a Livestrong board member. Armstrong’s team approached McKinnon in 2001, seeking advice on positioning Lance for a postcycling career. McKinnon, a media strategist for President George W. Bush, introduced Armstrong to another client, Bono. The two hit it off, and soon Armstrong seemed to be aiming toward a Bono-like role as a global cancer statesman.
“His goal was to change the way people look at cancer and the way people deal with cancer,” says McKinnon. “In typical Lance fashion, he wanted to have a fundamental impact on the disease: how it’s perceived, how it’s dealt with.”
Done. Thanks largely to Armstrong, we don’t talk about cancer “victims” anymore; they’re cancer survivors. And they don’t “suffer” from the disease; they want to “Kick. Its. Ass”—as ESPN anchor and cancer patient Stuart Scott urged a crowd of high-level Livestrong fundraisers and donors at a dinner before the Philadelphia Livestrong Challenge last August.
Sitting beside me at that event, a man named Scott Joy nodded fervently as he listened. In 2003, Joy was diagnosed with testicular cancer and found his way to Armstrong’s book. “It told me I would get through this,” he said. “I needed to hear that.”
Joy is now a Livestrong Leader, part of an elite corps of fundraisers and organizers. This year he raised more than $42,000 for Livestrong, but perhaps more important, he’s been fiercely defending Lance and the foundation on Twitter and in the comments sections of online articles. Joy is one of many Livestrong Army members who remain passionate about their cause and their hero.
Nobody can doubt Armstrong’s empathy for cancer patients or his power to inspire. In certain instances, though, he has leveraged this charitable appeal for personal gain. During his comeback, the lines between Cancer Lance and Business Lance became especially blurry.
Although Armstrong had told Vanity Fair he would be racing for free, he actually pocketed appearance fees in the high six figures from the organizers of both the Tour Down Under and the Giro d’Italia. An Australian government official told reporters that the money was a charitable donation, but Lance himself admitted to The New York Times that he was treating it as personal income.
It’s a tricky thing. Armstrong is in demand not just as a cyclist but also as a cancer survivor and inspirational figure—in other words, because of the Livestrong Effect—yet he’s never been shy about monetizing this appeal for personal gain. For example, when he spoke at the inaugural Pelotonia cancer ride in Columbus, Ohio, in August 2009, he charged the startup charity his usual $200,000 speaking fee, including $100,000 worth of NetJets time, courtesy of Pelotonia sponsor and NetJets founder Rich Santulli. Pelotonia executive director Tom Lennox considers it worth the expense: the 2011 edition of the ride pulled in more than $11 million—all of which will be spent on cancer research, by the way.
In a sense, Livestrong and Lance are like conjoined twins, each depending on the other for survival. Separating them—or even figuring out where one ends and the other begins—is no small task. The foundation is a major reason why sponsors are attracted to Armstrong; as his agent Bill Stapleton put it in 2001, his survivor story “broadened and deepened the brand … and then everybody wanted him.” But the reverse is also true: Without Lance, Livestrong would be just another cancer charity scrapping for funds.
Nike is the best example of this symbiotic relationship: Armstrong’s longtime sponsor produces a complete line of Livestrong apparel, from shorts and backpacks to running shoes and T-shirts, all of which it pays Armstrong to wear. Under a five-year deal negotiated in early 2010—before the Landis allegations broke—Nike agreed to pay Livestrong a minimum of $7.5 million per year from its merchandise profits.
Nike’s commitment goes well beyond selling merchandise and sponsorship to producing ads that promote Livestrong, Armstrong, and the Nike brand all at once. In one particularly memorable spot from 2009, Armstrong verbally took on his critics. “They say I’m arrogant… a doper… washed up…a fraud,” he said over scenes of himself on his bike intercut with shots of cancer patients getting chemo treatments, crawling out of bed, and unsteadily lifting weights. “I’m not back on my bike for them.”
IT WAS CLEAR WHICH SIDE RADIOSHACK wanted to be on. Not long after the Nike ad aired, during the 2009 Tour, the electronics retailer stepped up to sponsor a 2010 squad built around Armstrong, paying him a reported $10 million to be team leader. The deal was negotiated by L.A.–based superagent Casey Wasserman, who donated $1 million to Livestrong via his family foundation. The RadioShack deal was brilliant in its own way. Not only would the company support Lance and his team, but it also made a major commitment to support Livestrong. The cancer charity, in fact, was the key to the whole thing. “We wouldn’t have done it without Livestrong,” says Lee Applbaum, RadioShack’s chief marketing officer.
But rather than simply donating money outright, RadioShack got its customers to pony up $1 or more at the checkout counter. So far, the Shack’s customers have kicked in more than $10 million, according to company spokesman Eric Bruner. (Sometimes without knowing it: early on, a few customers complained that the $1 donation had been accidentally added to their bill.)
Not all the money goes where Livestrong says it goes, however. In January 2010, after the devastating earthquake in Haiti, Armstrong made a personal video statement: to help earthquake victims, Livestrong would give $125,000 each to the charitable organizations Doctors Without Borders and Partners in Health, which it subsequently did. RadioShack also hopped on board, soliciting $538,000 in customer donations for the Haitian cause. According to Livestrong, it gave $413,000 of the RadioShack money to Partners in Health. And the foundation’s 2010 tax form shows a $458,000 donation to the group. But $333,000 of that had been previously allocated to a separate hospital project in Haiti that “had nothing to do with the earthquake,” says a spokesperson for Partners in Health. That means Livestrong used the RadioShack earthquake donations to cover its prior hospital pledge.
IN ONE CASE, ARMSTRONG himself stood to profit from the sale of a major Livestrong asset: its name. Most people are unaware that there are two Livestrong websites. Livestrong.org is the site for the nonprofit Lance Armstrong Foundation, while Livestrong.com is a somewhat similar-looking page that features the same Livestrong logo and design but is actually a for-profit content farm owned by Demand Media.
In 2008, the foundation licensed the Livestrong brand name to Demand, the online media company behind eHow and Cracked.com, among other properties. Livestrong.com was positioned as a “health, fitness, and wellness community,” offering an online calorie counter, exercise and yoga videos, and articles about such topics as “What Are the Signs and Symptoms of Rejecting Belly Button Rings?”
As compensation for the use of its name, the foundation received about 183,000 shares of stock, which it sold for $3.1 million when the company went public in January 2011. Armstrong also received 156,000 shares of his own as part of a spokesperson agreement. (His agents, Bill Stapleton and Bart Knaggs, also received shares.) After the deal was criticized in the media, Armstrong donated his initial sale proceeds—roughly $1.2 million—to the foundation and said he planned to donate the rest, too.
Livestrong executives describe the deal as good for everyone, a way to spread their message of healthy lifestyles to a wider audience. Under the agreement, Armstrong provided blog entries, videos, and other content to Livestrong.com. “I actually have to do work for them,” he told me in an interview.
Adds Ulman: “They guaranteed us certain levels of traffic. They said, ‘We will build a site, and we will ultimately send people to the foundation.’ ” But traffic to the for-profit Demand Media site has surged, in part thanks to Lance’s promotional work, while the foundation’s traffic has remained essentially flat. And it was the foundation that paid to defend their joint trademark against the Barkstrong dog-collar salesman.
“It’s definitely questionable,” says Mark Zimbelman, the Brigham Young University professor behind Fraudbytes. “Imagine if the American Red Cross sold its name to Americanredcross.com, and you can go there and buy vitamins. You think you’re donating or helping the American Red Cross, but you’re really not. It’s unheard of.”
ARMSTRONG BENEFITS FROM HIS FOUNDATION in another, less tangible way: everything he does in connection with Livestrong gets him good press, diluting the flow of scandal stories. In September, he made a splash at a UN meeting on noncommunicable diseases, appearing at several forums to, as the foundation put it, “represent the 28 million people around the world living with cancer.” New York City mayor Michael Bloomberg, himself a million-dollar donor, threw a lavish party that featured a Livestrong-produced documentary on young cancer patients in Rwanda and Jordan. Nike put up a three-story billboard near Madison Square Garden with Livestrong’s latest slogan, FIGHT LIKE HELL.
That might as well be Lance’s legal motto, since all signs point to a scorched-earth battle in his near future. At press time, Novitzky had been investigating Armstrong for more than 18 months, with still no indictments coming out of the Los Angeles grand jury. Whether that’s good news or bad news for Armstrong remains to be seen, but most observers think an indictment is coming.
The feds aren’t his only worry. Waiting in the wings is the U.S. Anti-Doping Agency (USADA), which has been conducting its own investigation since it received Floyd Landis’s accusatory e-mails in May 2010. And while it remains true that Armstrong has never tested positive, at least officially, nowadays you don’t need to flunk a lab test to be sanctioned for performance-enhancing drugs.
For the past several years, USADA has been handing down non-analytical positives—sanctioning athletes based on evidence, including testimony from teammates, other than direct positive tests. In 2008, the agency banned the cyclist Kayle Leogrande for EPO use based almost entirely on the testimony of a soigneur and a team administrator. Armstrong now has at least two former teammates, Landis and Hamilton, who say they witnessed him using banned drugs—and there may be more if, as 60 Minutes reported, George Hincapie and others told similar stories to the grand jury.
That means Armstrong could be looking at a doping sanction, possibly a lifetime ban, and the loss of at least two of his Tour titles. (The statute of limitations for doping offenses is eight years.)
And while the foundation takes care to distance itself from the doping drama—McLane calls it “issues in the cycling world”—the potential fallout is considerable. If Armstrong turns out to have used drugs, then It’s Not About the Bike—Livestrong’s creation myth—will ring just as false as Three Cups of Tea.
“It’s going to have a huge impact,” says Michael Birdsong, a former Livestrong supporter, now disillusioned, who estimates that he has given $50,000 to Livestrong over the years. “Who wants to support a foundation that was founded by a cheater? Not only a cheater, but a person who lied about it.”
The foundation says that its 2011 donations are up, year over year. But more than a third of the foundation’s support comes from corporate sources and cross-marketing deals with Armstrong’s sponsors, starting with that $7.5 million from Nike. If he is sanctioned for doping, then that money, and revenue from his other sponsors, becomes vulnerable. While Nike and RadioShack say they are sticking by Armstrong, that can always change: when Marion Jones was busted for doping, Nike dropped her.
More tellingly, the Livestrong Challenge ride and run events—which depend on people asking friends and neighbors for donations—are bringing in much less money these days. The rides raised only $6.3 million in 2011, before expenses, versus more than $11 million the previous year, according to the foundation’s 2010 annual report. “It was a lot more difficult to raise $250 for Livestrong this year,” says one longtime foundation fundraiser. “People asked a lot more questions.”
For his part, Armstrong is staying the course: he’s innocent, he says, and the public backing that he and Livestrong need will always be there. “I can only tell you what people come up and say with regard to that,” he told me. “The support might even go to a place where they say, ‘I don’t fucking know, and I don’t care. I know what Livestrong means to myself and my family. That’s what I care about.’ ”
Still, in a 2006 deposition in another court case, even Armstrong sounded worried about how a scandal could affect his sponsors and followers. “If you have a doping offense or you test positive, it goes without saying that you’re fired, from all of your contracts,” he said. “It’s not about money for me. It’s all about the faith that people have put in me over the years. All of that would be erased. So I don’t need it to say in a contract, You’re fired if you test positive. That’s not as important as losing the support of hundreds of millions of people.”
BILL GIFFORD (@billgifford) is A LONGTIME CONTRIBUTOR TO OUTSIDE.