Lance Armstrong Investigation: LiveStrong Brought to Light

Outdoor Magazine published an extensive article on Lance Armstrong's LiveStrong Foundation today. I know they have been working on this for a while since the author, Bill Gifford, first contacted me in May 2011. Interestingly, I received several phone calls from investigative reporters around the same time--undoubtedly because they found these posts of interest.

As far as I can tell, Gifford's article is the first one to hit the press. His article notes why this may be the case by saying:

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. 

I recommend reading the article if you're interested in LiveStrong and Lance. For those who want to get a flavor of the article, here are a few highlights that summarize the main conclusions:

The header summarizes it well as follows:

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.

Gifford begins by describing an angry, threatening phone call he got from Lance and, as Gifford notes, LiveStrong's "$320,000-a-year" CEO, Doug Ulman. Apparently, Lance and Ulman called to berate his work because Gifford tweeted about Lance in a way that they found offensive. (I have yet to receive any of these calls and some reporters who have called me have been surprised. I'll let you know if I do!) After reviewing the 60 Minutes expose' on Three Cups of Tea, Gifford turns to the crux of the issue with LiveStrong:

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.”

Gifford ultimately admits that after visiting LiveStrong he could not find any hard evidence of serious wrongdoing. As noted earlier, he also wonders if he missed something because of the way he was threatened by Lance's forces. Even so, this paragraph summarizes his search for the possibility that Lance was using LiveStrong as a personal piggy bank:

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.

As alluded to in the summary quoted above, Gifford does find, however, that LiveStrong doesn't provide funding for cancer research. He notes that the erroneous belief that LiveStrong does support research is perpetuated by Lance and others. He provides many examples to support his claim that "Armstrong and his supporters help perpetuate the notion that they are, in fact, helping battle cancer in the lab." While it once did provide some, limited, research funding, it has now evolved into what Giffords calls a "hip marketing agency" when he says:

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.” 

...(Lance's) comeback (in 2007) 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.

This is still a bit vague so you're probably wondering "if LiveStrong isn't using money to fund research, what exactly is it using the funds for?" Gifford goes on to analyze how LiveStrong funds have been spent in recent years. Here are some good quotes:

(T)he 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.

Gifford then describes other major expenditures such as legal fees and marketing costs.

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. 

 I think this quote summarizes what many people might be wondering when they read this:

“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?”

Gifford also explores Lance's claim that when he returned to cycling it was for cancer funding, not for personal gain. He notes:

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.

Gifford discusses Lance's many business deals with Nike, Radio Shack and others and notes the role LiveStrong plays in those deals. He says:

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.  

In one particular case involving the Haiti earthquake victims, Gifford found the following disturbing account:

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. 

Another questionable action by Lance and Livestrong includes his sale of the Livestrong website. Gifford notes:

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. 

We've discussed this before at this link so I won't review it again here. I will say that I believe it potentially reveals Lance's moral compass and how he views Livestrong. Donors should ask if the foundation is a way to build power and wealth or a way to fight cancer.

In the end, I think the following quote sums up what many unbiased and informed donors to Livestrong ought to be thinking about Livestrong:

“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.”

Unfortunately, fraud leaves a wake of pain and suffering, even when the fraud perpetrator tries to do something good so as to either salve his conscience or to hide his true character.