Thursday, December 23, 2010

Is EY and Lehman a Red Flag for the Auditing Industry?

An article in the Wall Street Journal discusses Cuomo's EY-Lehman fraud case and quotes some very prominent observers of the auditing profession as saying that this is a sign that auditors are not holding the line. To be fair, the article quotes others as saying the profession has been vigilant; I'm hoping they are right! Here are a few key quotes by Lynn Turner and others who believe the profession has let down their guard:

Tuesday, December 21, 2010

More on Ernst and Young and Lehman Brothers (links)

Going Concern recently interviewed us about E&Y and Lehman--check it out here.  The accounting news source also has a great roundup of other thoughts and opinions on the case from around the blogosphere.  I would also encourage readers to check out David Zaring's thoughts on the matter over at The Conglomerate.

Monday, December 20, 2010

Ernst & Young and Lehman: A Not-So-Happy New Year is in Store

The Wall Street Journal and other news sources are reporting today that Ernst and Young is about to be hit with a civil lawsuit for its dealings with Lehman Brothers before the investment bank filed the largest bankruptcy in history ($691 Billion). We posted a few times earlier in the year on Lehman's use of Repo 105 and 108 transactions (hereafter Repo transactions) and how EY will be perceived in these transactions but it's been quiet for some time now and I was starting to wonder what would become of it. The lawsuit will certainly claim that EY was helping Lehman be obscure in their financial reporting by allowing them to hide debt through the Repo transactions. Here is an excerpt from the Wall Street Journal article:

Sunday, December 19, 2010

Floyd Landis Worked Undercover to Assist in Doping Raid

It appears that, last Spring, about the time that Floyd Landis alleged that Lance Armstrong was involved in doping, Floyd was helping Jeffrey Novitzky to investigate systematic doping in pro cycling. New York Daily News reported today that an unnamed source has revealed that Floyd Landis wore an undercover microphone and took undercover videos in Michael Ball's apartment. Michael Ball was the owner of the pro cycling team known as Rock Racing that filled its roster with pro cyclists who had been caught doping including Floyd Landis, Tyler Hamilton and others. The articles say this video and audio evidence was used by Jeffrey Novitzky to get the search warrant to raid Ball's apartment. Here is a blurb from an article in VeloNation:

Friday, December 17, 2010

How to Avoid Becoming a Fraud Victim

Since Bernie Madoff's massive Ponzi scheme hit the news two years ago, there have been countless other Ponzi or pyramid schemes that have quietly failed under the radar. For example, have you heard of Sir Allen Stanford's Ponzi scheme? If you read this blog, you probably have but others I talk to haven't heard of Stanford's $7 billion Ponzi scheme. This is a new phenomenon brought about by the shear size of Madoff's scheme. Anything else seems insignificant. Prior to Madoff, a $10 million Ponzi scheme that came to light in a community would be big news and a $50 million scheme would make national news. Nowdays, a $200 million local Ponzi scheme gets mentioned by a small blurb in conjunction with the weather forecast: "Rain in the forecast tomorrow and investors lost $200 million in local Ponzi scheme. More on the forecast at 10pm." That's it--not even a complete sentence about the scheme!

So many Ponzi schemes have come to light in the past two years or so that I hope people are becoming wiser to the con artists who were thriving before the great recession. I'm also hopeful that the silver lining in the great recession is that these economic parasites will be cleansed from our colon and the economy can be more productive as a result. Unfortunately, unless we learn some basic lessons, my hopes may be unfounded. Here are my top five tips to keep the scammers away from your bank account.

Sunday, December 12, 2010

Madoff's Anniversary: Oldest Son Commits Suicide

Saturday, December 11, 2010 was the two-year anniversary of the day when Bernie Madoff's sons, Mark and Andrew, contacted law enforcement officials to notify them that their father was running the largest Ponzi scheme in history. On this same day, Bernie and Ruth's oldest son, Mark, decided he could no longer take the emotional trauma and he took his life. Unfortunately, this is the second suicide linked to Bernie Madoff's scam. Just a few weeks after the Madoff scam came to light in 2008, one of his investors who managed others' money in the scame Rene-Thierry Magon de la Villehuchet, was found dead after he slashed both of his wrists. Here are the gory details of Mark's suicide and some thoughts on this tragic disaster that Bernie left for others to clean up.

Wednesday, December 1, 2010

Lance Armstrong Investigation Appears to be Much Wider than I Imagined

An unnamed source who is said to have collaborated with the FDA in the past has told CyclingNews that Jeffrey Novitzky's investigation is probably not focused on individual dopers but, rather, on the suppliers of doping products to athletes. The source said that Novitzky's trip to Europe is an indication that the investigation is much bigger than just investigating Lance's doping and that Novitzky would not have travelled to Europe unless there was some compelling evidence that they are collecting.

This theory sounds very plausible to me. Remember, the investigation began with Rock Racing and looking into their use of, and presumably their supply of, doping products. Soon thereafter came Floyd Landis making allegations about systematic and widespread doping on Lance's team and in the peloton in general. Interestingly, the source speculates that the investigation may also be looking at the supply of not only approved drugs but experimental drugs. I've often wondered if the top athletes, such as Lance, may be able to obtain experimental drugs that are not even on the banned list or being tested for by WADA or other anti-doping agents. Here are some major quotes from CyclingNews:

Sunday, November 28, 2010

More from the dopers from the Papp investigation

Last week I blogged about two individuals who were caught purchasing performance enhancing drugs after officials apparently obtained leads from Joe Papp's records. As in the past, the reaction we typically hear is some story about why they are innocent. We've heard it from numerous top American pro cyclists including Tyler Hamilton, Floyd Landis and even Lance Armstrong with the 2005 tests of his 1999 specimens showing EPO in his urine. More recently, Alberto Contador is claiming innocence too.

Now, since these guys were not caught with drug tests they can't use some conspiracy theory about the French labs having some reason to frame them or some Spanish farmer who put the drugs in their beef. Neither can they claim they took a supplement that had the drug and they weren't aware of it. Instead, they need a new story. Here it is:

Lance Armstrong Investigation: Floyd Speaks Again

Floyd Landis broke months of near silence to accuse Lance Armstrong and his team of systematic doping in the 2004 tour. An article in VeloNation quotes Floyd in explaining how the team bus arranged for blood doping through transfusions that Landis described as "part of the job." The article said that Landis "spoke about a specific incident when he alleges a transfusion involving several riders was carried out on the morning of the first Alpine stage in the 2004 Tour de France." Here are some of the better quotes:

Thursday, November 25, 2010

Domestic Cyclists Caught Doping

So I've been waiting for some news from the Joe Papp investigation and yesterday we heard about two riders who were sanctioned for EPO use: domestic pro, Charles "Chuck" Coyle, and masters rider, Neal Schubel. As for Coyle, he not only used EPO but he also purchased insulin growth factor, whatever that is. Coyle raced for several pro teams. A VeloNation article discussing Coyle said that his team's website listed some of his career highlights as:

Wednesday, November 17, 2010

WADA Rejects Contador's 'Contaminated Meat' Defense

The World Anti-Doping Agency has reportedly rejected Alberto Contador's claim that contaminated beef resulted in his failed drug test.  Via the Washington Post:

A Spanish newspaper says the World Anti-Doping Agency found no evidence to support Alberto Contador's claim that contaminated meat caused his positive test at the Tour de France.

El Pais says WADA went to the meathouse in Irun, Spain, that provided the meat that Contador contends led to the positive finding for clenbuterol.

The paper says WADA's own tests showed no signs of the banned drug in the meat.

The paper quotes a leaked WADA report as saying Contador's intake of clenbuterol "could not have come from possibly contaminated meat." It also ruled out asthma medication as a cause.

Lance Armstrong Investigation: Evidence in Europe

Jeff Novitzky's investigation of Lance Armstrong and doping in cycling has apparently moved to Europe to gather evidence. The NY Times and other news outlets are reporting that investigators are in France to collect evidence from the anti doping officials there. One interesting question will be whether a civil or criminal suit will allow evidence such as Armstrong's 1999 urine samples that were tested for EPO in 2005 to be admitted as evidence against Armstrong. While the samples were disregarded for purposes of sanctioning him because of a technicality in anti-doping rules, experts in anti-doping have said that this evidence shows there is no doubt that Armstrong doped (see this post for more information). If Novitzky proceeds first with a civil suit on behalf of the U.S. Government, then this 1999 evidence could help tip the scales such that a jury will conclude that a preponderance of evidence exists against Armstrong.

Another interesting question is whether Novitzky's investigation is gathering any samples from the European labs to have analyzed again. Today there are new tests that weren't available during the time period when Lance was racing for U.S. Postal so if Novitzky's team can get some of the specimens that Lance left behind and test them using new technology, it's possible that we could see evidence of blood doping, EPO or other doping agents that scientists can now detect.

Also, it will be interesting to see if the raid this week on Lance's former teammate, Yaroslav Popovych's Italian home, leads to evidence against Lance. ESPN reported that the police confiscated computers, phones and substances from Popo's home. If Popovych was purchasing drugs for the team or kept other records that could lead to doping, the investigators will probably find them and this could open up new sources of information to use against Lance. Right now we don't even know if the Popovych raid was associated with Novitzky's investigation but my guess is that it has something to do with it...

Monday, November 8, 2010

Contador Case Moves to Spain

It was reported today that the UCI turned Contador's case over to the Spanish federation to determine what, if any, penalty the Spaniard should face. Time will tell what this means for Contador. I doubt he will get the maximum two-year suspension so if he gets one year they will back date it to July and he could be racing next August. Some people are speculating that if the Spanish federation is too easy on Alberto then WADA could get involved.

Does anyone of you know what the potential outcomes of this case are? Could the Spanish federation decide Alberto ate a bad steak and tell him to be more careful where he buys his steak next time? Maybe give him a six month ban starting last July?

Lance Armstrong Investigation: Praise from Abroad

Jeffrey Novitzky's investigation into Lance Armstrong's alleged doping while racing for U.S. Postal is getting some praise from around the globe. A recent article said the following:

Wednesday, November 3, 2010

Lance Armstrong Investigation: Grand Jury is Still Working

The LA Times is reporting that two anonymous sources have told them that "Yaroslav Popovych, a teammate of Lance Armstrong on the Discovery Channel, Astana and RadioShack squads, will appear Wednesday before a grand jury in Los Angeles." This is the first news I've heard about the investigation for some time.

Meanwhile, the NY Times is reporting that Floyd Landis and his former coach, Arnie Baker, are being tried in France for computer hacking. According to the article:

Tuesday, November 2, 2010

Tension Between Corporate and Government Whistleblowing Programs

Whistleblowing is considered the most effective method of detecting large corporate frauds. For example, Cynthia Cooper and Sharon Watkins are famous whistleblowers who spilled the beans on the frauds at WorldCom and Enron, respectively. Unfortunately, the corporate world, and society in general, hasn't always treated whistleblowers as heroes. In fact, many whistleblowers are blamed for the negative effects of fraud (such as job layoffs) when fraud comes to light. For example, Cynthia Cooper experienced this and speaks about being shunned by the people in her town after she brought WorldCom's massive fraud to light. Basically, society seems to perpetuate the Kindergarten stigma of being a "tattle tale" and, as a result, they shoot the messenger when it comes to reporting fraud.

Since Enron and WorldCom, many government regulations have been established to provide incentives to whistleblowers. The Sarbanes-Oxley Act requires internal whistleblowing programs at publicly traded companies while the False Claims Act and, more recently, the Dodd-Frank Bill provide incentives for whistleblowers to tell government officials about fraud. The False Claims Act applies to acts that defraud the Federal Government while the Dodd-Frank Bill applies to any public company who commits fraud and involves basically any fraud that is regulated by the federal government. As we've discussed before, the government incentives can lead to millions in rewards to an individual who blows the whistle if the government collects more than $1 million from the company.

The WSJ has an interesting article that talks more about the tension these regulations have led to. Basically, SOX has led public companies to have internal whistleblowing systems while Dodd-Frank leads whistleblowers to go outside the company to blow the whistle. Unfortunately, I'm not sure there are any easy answers since it seems both programs are important. The internal program is needed for smaller amounts (frauds that lead to less than $1 million in fines to the Federal Government don't apply to the Dodd-Frank Act) while it seems that whistleblowers of large frauds may not be treated fairly at a corporate level, especially if top management is involved.

I guess there are no simple and profitable solutions for preventing and detecting fraud in a business environment that is ethically bankrupt. In my opinion, as long as families fail to instill ethical values in the home, the forecast for this tension and cost is not looking good. If society continues to deteriorate because families fail to instill ethical values in the home, regulation will either cripple business or fraud will become more rampant.

Monday, November 1, 2010

Doper Di Luca Shunned by the Tour of Italy

VeloNation is reporting that the promoter of the Tour of Italy is basically keeping Danilo Di Luca out of his race and off any pro teams that want to race in the Tour of Italy. Di Luca has been found doping twice at the Tour of Italy and the promoter wants nothing to do with him.

I wish more teams would pass this message on to doper cyclists. This promoter believes Di Luca is bad for his event because he is a fraud. The UCI needs to figure out that dopers are ruining pro cycling and do something serious about it. For example, they could start imposing the 4-year bans that they are authorized to impose. I would use these bans for marginal violations (when some ever so slight potential for doubt exists, as in the Contador case) and change the rules so if you're caught even one time in an obvious and indisputable case of doping you are banned for life. Di Luca should be out of cycling forever, in my opinion.

Some serious penalties just might clean things up! Until changes like this, I expect the UCI to slap Contador's hand and doping to be in the news for a long time...

Chemists Skirting the Law to Sell Mind-Altering Drugs

The WSJ has an article about a chemist, David Llewellyn, who is developing new, legal, drugs that are similar to cocaine, ecstasy and others. The drugs are currently legal because he sells them as "not for human consumption." In the meantime, people are dying from these drugs and who knows what types of side effects they have on those who are not dying. He does have some quality control though. Here is what the article says:

Thursday, October 28, 2010

Charlie Chaplin's Time Traveller

A friend pointed me to an article on that discusses a YouTube video that has gone viral on the web. In the video, a guy named George Clark analyzes a Charlie Chaplin film scene where a person that appears to be a woman walks by while talking into something that Clark concludes must have been a cell phone. Since cell phones were non-existent in Chaplin's day, Clark concludes that the woman must be a time traveller.

Well, let's think about this for a minute. How would a time traveller be able to talk into a cell phone back in Charlie Chaplin's day? I may not understand time travel well enough--even though I have watched Napoleon Dynamite several times---but I don't think this woman could use her iPhone from 2050 when she was back in the 1920s. Are we asserting that her cell coverage also travelled forward in time? If not how did this phone work.

One possibility is that two people travelled back to 1920 with their cell phones. This sounds good if we think our cell phones just work between themselves like walkie-talkies. However, unless the technology changes dramatically between today and when time travel is perfected, these two time travellers would have needed to bring at least one cell tower, a satellite and the equipment to communicate to the satellite and a rocket to launch the satellite into space. They also would need computers and people to keep all that running.

Well, I'm wondering why this video is going viral on the web. Is it because people are that gullible and don't think enough about the implications that they think this guy might have discovered evidence of time travel? If so, there is little hope that the Ponzi schemers of the world will be out of business any time soon...In fact, as soon as a fraud perpetrator watches that video, he will probably set up a Ponzi scheme that guarantees 25% per month returns on a company that has discovered time travel!

Lance Armstrong Investigation: Novitzky May be Taking a Vacation

Today's CyclingNews has an article that talks in length about the history of Jeffrey Novitzky's investigations of doping in sports. If you've read the many articles that describe Novitzky's history as an investigator, there is not a lot that is new in this regard. However, the article does make one main assertion that is new. The article claims to have sources that say Novitzky is heading to Europe, presumably in pursuit of evidence against Lance Armstrong. Here is the key quote that I'm referring to:

Monday, October 25, 2010

New Finding: HGH Leads to Nose Growth

A new, double-blind, study shows that using HGH along with EPO injections and testosterone patches can, in extreme cases, lead to extensive nose growth. The study shows that when these drugs are used over a lengthy time period--say 15 years--the lateral nasal cartilage can, in the words of one author, "grow like a weed." Apparently, the "rapid and extensive" nose growth can come on quickly and often starts growing shortly after the person quits using the performance enhancing drugs.

The authors showed pictures of one of the participants in the study who had an excessively long nose caused by over 15 years of using every type of performance enhancing drug that he thought would benefit him. You can see the picture below.

Friday, October 22, 2010

Numerous Dopers Returning to Pro Cycling

In addition to the long list of pro cyclists being prohibited from racing because they were caught doping, a friend and former pro cyclist pointed out that the pro cycling peloton has had a long list of dopers that have recently returned to racing. For example, just last week it was reported that Danilo Di Luca is ready to return to the peloton after serving his suspension. Di Luca is only one of many high profile pro racers that have returned recently including Alexander Vinokourov, Ivan Basso, Riccardo Ricco, Michael Rasmussen, Stefan Schumacher, Alessandro Petacchi and numerous others who are not as high profile.

My friend also asked a very good question about this observation. He said: "Why don't the clean riders refuse to race with these guys?" He continued by saying that the racers should just protest that the dopers are returning and proclaim that they won't race against cheaters!

There are several possible reasons why the clean riders in the peloton are not being more vocal including the possibility that there aren't enough clean pro cyclists to put their foot down. However, putting aside the option of refusing to race, I wonder if the pro cyclists who are clean and have raced clean for their careers couldn't be more instrumental in cleaning up the sport if they were more vocal. For example, these riders could petition the UCI to make the sanctions longer, instead of the opposite trend of short sentences. In this regard, Pat McQuaid stated this week that the UCI would support four year bans. An article covering McQuaid's statements in VeloNation says that the longer bans have been an option for some time but no sanctions over two years have been given out. Why not?! If I was racing in the pro peloton, I would be lobbying for the UCI to get with it and give out the four year sanctions. Walk the talk McQuaid! Let's get serious.

Sadly enough, it may be that the clean riders are too far down in the pecking order to have much influence. After all, if doping improves your performance as much as they claim it does then the clean guys are probably domestiques who would be quickly replaced if they put their foot down. That's a pitiful possibility that may be the most likely reason given that the top racers seem to have a pretty poor record when it comes to doping. As more of the top riders dope, it puts pressure to dope on anyone who wants to compete at the pro level making it hard to even be a domestique without doping.

Whether there is just one or 100 of these riders in the pro peloton, the clean riders need to stand up and be counted. If they did then they might just find they are more competitive than they thought. If they were shunned and knocked off by the cycling mafia then so be it. There is more to life than being a domestique (or a yellow jersey winner) in a corrupted sport...

Saturday, October 16, 2010

Foreclosure Fraud and the Economic Recovery

Real estate industry analysts are looking at the foreclosure fraud allegations and saying that this is a huge game changer in the economic recovery that is (or was) under way. If you've heard a bit about this and have been wondering what is going on, here is a short overview from what I can gather.

First, anyone who was foreclosed on during the past three years has a chance that the bank that foreclosed on them did not cross the i's and dot the t's during the foreclosure process. According to one article:

Friday, October 15, 2010

$67.5 Million Settlement for Former Countrywide CEO

The economic crises resulted in many fraud allegations--now we are seeing some of the fallout of those allegations.  Angelo Mozilo has agreed to a $67.5 million settlement with the SEC over allegations of civil fraud and insider trading charges.  Mozilo did not admit to any wrongdoing in the settlement.  Via NYT:

Tuesday, October 12, 2010

Teaching by Example: Fraud in Public Schools

NPR is reporting that over 50 schools in Georgia have been found manipulating students' test scores by erasing erroneous answers and replacing them with the correct answers. As in any fraud, pressure and opportunity have become too much for teachers and administrators in the Georgia school system to resist making these changes. Here is a quote from the article:

Monday, October 11, 2010

Alberto Contador Investigation: Odds of Eating Tainted Beef and Other Updates

According to NBC Sports, the chance that Alberto Contador got clenbuterol in his urine from eating a tainted steak are very slim. The article came out today. Here is a quote:
(T)he European Union outlawed clenbuterol for animal fattening in 1996 and systematically monitors farms to ensure that the ban is enforced. Only once did clenbuterol show up in 83,203 animal samples tested by EU countries in 2008 and 2009, says the European Commission's directorate for health and consumer policy. 
Spain tested 19,431 samples in those years; none were positive for the drug, it adds. Illegal use of clenbuterol in European farming "has indeed become rare," says the office's spokesman, Frederic Vincent. 
Which suggests that Contador would have been extremely unfortunate to stumble across a tainted steak. That's one reason why Fernando Ramos, a food contamination specialist at Portugal's Coimbra University, doesn't buy it. 
"It's not impossible but improbable," he says. "In my opinion, it's just a story."
In other bad news for Contador, it was reported last week that an anonymous insider from Astana has said that Contador took clenbuterol to lose weight prior to the Tour de France and then gave blood for use in the Tour de France. VeloNation reported that the insider give some incredible details on Contador's blood doping and clenbuterol use. Here are a few quotes:

Documentary of the Crazy Eddie Fraud

A documentary of the Crazy Eddie fraud has recently become available on YouTube (clips embedded at the end of this post).  Sam Antar, Crazy Eddie's former CFO described the motivation behind the fraud as follows (via White Collar Fraud):

Saturday, October 9, 2010

How can Doping in Cycling be Cleaned Up?

I had a reader recently ask me why I don’t blog about ways to clean up pro cycling. Unfortunately, I have not seen a lot of news about ways to clean up cycling. I’ve been looking for ideas and thinking about how to prevent other forms of fraud and decided to throw together a few thoughts. I’m sure my thoughts are initial ideas at best so, in doing so, I hope the rest of you will add comments below or send us an email if you have other ideas. Here are my initial thoughts...

Thursday, October 7, 2010

Floyd Landis Hopes to Repay Contributors to his Defense Fund

VeloNation reported last night that Floyd Landis is planning to take claims and repay those who contributed to his legal defense fund known as the "Floyd Fairness Fund." The fund was established to provide resources to fight charges that he used performance enhancing drugs in the 2006 Tour de France. For years, Floyd claimed to be innocent of the charges but now has admitted to doping for several years as a pro cyclist. As such, he says that he wants to repay those who contributed to his defense.

The article notes that he doesn't currently have funds to repay donors but he hopes to make enough money to do so at some point. The article notes that the estimated total contributions were $1 million that Floyd would need to repay. A good chunk, or all of that amount, may be awarded to him if the whistleblower lawsuit he filed against Lance Armstrong and associates comes to fruition. If that doesn't pan out, it may be a long while before donors see any refunds. If you contributed to his fund, I wouldn't advise holding your breath in anticipation of your refund. Even so, I think it's another step in the right direction for Floyd.

I personally never contributed to Floyd's defense fund and if Contador was to set up a similar fund, I wouldn't contribute to it either. Not that I don't believe a false positive is out of the realm of possibilities but Alberto has a lot to explain before I send him any money...

Wednesday, October 6, 2010

Lance Armstrong Investigation: Results of New Doping Test will be Crucial

If you've been following the Alberto Contador investigation, you've read that a new doping test has quietly been in development to catch athletes doing blood transfusions. The test is designed to look for signs of transfusions by detecting high amounts of plastic metabolites in urine and blood. Apparently, similar tests have been used for our food supply for some time but now it is being applied to look for blood doping in cyclists. The test has not been approved by WADA yet but the scientists working on it say they are close to establishing the cutoff for evidence that a blood transfusion was used.

While it is clear that Alberto's levels of plastic in his urine probably spell doom to his steak story, it may not be as clear what this test has to do with Lance Armstrong. Well, first, Floyd Landis has alleged that many in the pro peloton, including Lance, turned away from EPO as the preferred doping method in the early 2000's and, instead, reverted to transfusing their blood. The reason for this change was that an effective test for EPO came out. As such, Floyd alleges that Lance, Levi and others transfused their blood around the rest days in the Tour de France. The test for this has been to look for excess mature blood cells relative to immature cells or reticulocytes. Floyd alleges that cyclists got around this test by micro-dosing EPO at night in amounts that would were undetectable by morning. The EPO would lead to new reticulocytes and keep the blood looking normal. This plastic test is a new way to detect blood transfusions.

But, you ask, how can this affect the Lance Armstrong investigation? One very good deterrent to doping that was adopted by pro cycling in the past few years is a requirement that blood and urine samples be maintained for future testing. I recall that at some point in the past decade, cyclists had to agree to this requirement. An article from NY Daily News makes the point that hundreds of Lance Armstrong's urine and blood "specimens are in storage, where they are fair game not only to anti-doping agencies but to" Jeffrey Novitzky and his associates at the FDA who are investigating Lance for fraud. I assume that the same is true for others who Floyd alleges were taking transfusions including Levi Leipheimer, George Hincapie and Dave Zabriskie.

In my opinion, this new test is great news for either Lance or Floyd and horrible news for the other party, depending on who is telling the truth. I believe this new test could be a game changer. In the past, I have said that I didn't think Lance would ever go to jail because he's been able to get the tests that showed he was doping thrown out on technicalities. I've also said that there is so much smoke around him that I don't think he's innocent. 

Assuming this new test is deemed strong evidence of doping and assuming Novitzky gets a hold of several of his specimens, I believe this evidence could resolve any remaining doubts about these allegations. From what I've read, the plastic from these blood bags should still be in the frozen urine and blood. As such, if Novitzky can show a pattern of plasticizers spiking around the rest days to show that Lance was transfusing his blood then Floyd's story will be validated.

I also believe that this evidence could change the tide of belief that he is guilty if enough specimens were tested and showed he had no unusual spikes or amounts of the plastic in his urine or blood. As such, if he is really innocent, he ought to be thrilled at this new test and begging Novitzky to test his urine and blood for these plasticizers. On the other hand, if he is guilty, he ought to be holding a press conference any day now to let the truth prevail.

In the end, this test has serious implications for all those who Floyd alleges were involved in doping. If Levi, George, Dave and others were transfusing their blood they will now want to think twice about how they answer the Grand Jury's questions. There may not be as many urine or blood specimens out there to analyze for these riders as there are for Lance but, this test could lead to time in jail for perjury if they are not telling the truth...

Tuesday, October 5, 2010

More Details on Contador's Doping Tests

The NY Times reported that an anonymous source provided details about Contador's doping tests. It appears that Contador has failed several tests. The initial failure was on the evening of a rest day when a new test for blood doping that looks for a chemical called a plasticizer revealed that the Spaniard had eight times the minimum amount in his urine. This test is new and not yet validated for use. This explains why Contador may have been caught with the test as he may not have anticipated it. However, because it's not yet validated, he may challenge it in court. However, the article quoted the chief of the World Anti-Doping Agency accredited lab in Rome as saying:

Friday, October 1, 2010

More on Contador's Beef Story

Several theories about about how Contador (AC) may have ended up with the trace amount of clenbuterol in his blood. One possible theory being explored is that AC was using clenbuterol weeks before the Tour de France and thought it had cleared his system when he then gave blood for future blood doping.  Then, on the rest day, he transfused his blood (with the trace amount of clenbuterol) and the clenbuterol showed up the next day in his urine.

Some experts are alleging that those who transfuse blood have higher amounts of plastic residues from the blood transfusion bags and reports are going around that AC showed a high concentration of plastic in addition to clenbuterol. (Interestingly, one reader pointed out to me that this may be what happened to Floyd when he ended up with excess testosterone in his blood. It's possible that the reason he is still claiming he didn't take testosterone the night before he failed the test is that he transfused his blood from a prior period and the blood had excess testosterone in it.)

Apparently, the UCI has another theory that allows Contador to keep the yellow jersey and for pro cycling to save some face. To have another Tour de France winner lose his yellow jersey would be bad for business and would reflect poorly on the UCI. As for the UCI's theory, Contador gave the following account:

Thursday, September 30, 2010

The UCI Caught Lying About Contador

Okay, I need to quit posting about cycling fraud and get back to some of my academic fraud research. Before doing so, I want to point out this article on VeloNation which discusses how the UCI lied yesterday about Contador's positive test. This makes the UCI look as corrupt as Floyd Landis and others are accusing them of being. It appears that the UCI is simply the marketing arm of pro cycling and is all about creating the image that the athletes are not doping (as opposed to stopping doping). It's no wonder the French doping authorities don't like the UCI's anti-doping efforts!

Floyd Landis says that Armstrong and his teams paid the UCI to give his teams preferential treatment and even sweep drug findings under the rug. As I mentioned in a recent post, they admitted to giving Astana extra notice before being tested, etc. Read this article for the latest lies from the UCI.

I (along with other readers who have emailed me) predict that Contador's positive test will be found by the UCI to be so small that it must have come from a burger he ate. As such, Contador will keep his yellow jersey.

If so, I have little or no hope that pro cycling will ever be a sport that I follow because I admire the athletes. Instead, I will follow it because I study fraud.

We will see...

Update on Lance's Podium Finishers

Remember the post that analyzed Armstrong's podium finishers and showed that most of them have been shown to be dopers? Given the news on Contador's doping, the graphic I used on that post has been updated courtesy of one of the followers of doping in cycling. Check it out.

More Doping Cases Coming to Light in Pro Cycling

I have a feeling that the next few months will be filled with news about doping in Pro Cycling. The NY Times and other news agencies are reporting that Jeffrey Novitzky's investigation is getting closer to Lance's inner circle all the time. This is the typical fraud investigation process.

Best practice in any fraud investigation is to start interviewing those who are most distant from the suspect but who may be able to give you information to build on. Start with people who can tell you about Lance but are not close to him any more--Floyd Landis, Betsy Andreu, Lance's former wife, Kristin, etc. Then you gradually get closer and closer, gathering facts and testimony along the way. By the time you get to the inner circle, you have a lot of evidence in the way of testimony and, perhaps, hard evidence such as documentation, that you can hold over the heads of the people you are talking to. Imagine

Wednesday, September 29, 2010

Contador Found Doping at 2010 Tour de France

This one is hot off the press. VeloNation is reporting that the yellow jersey winner, Alberto Contador, tested positive back in July when he was racing in the Tour de France. Apparently, the tests and re-tests have been going on behind the scenes and the news just became public. Contador's spokesman is saying that Contador believes the banned substance must have come from something he ate. Sound familiar? This is the modus operandi for pro cyclists when they are caught doping. Most deny it like Floyd Landis and Tyler Hamilton and Ullrich and Basso and...In any case, Alberto may be the second Tour de France winner to have his title taken away from him. Disappointing for sure but not at all surprising...

Bell California City Officials Arrested

This graphic from the NY Times about says it all! This tiny town of about 38,000 people fell victim to a greedy Mayor, City Manager, Police Chief and five other individuals who are alleged to have turned the "city into their personal piggy bank" according to the Times article. The article also explains that the group of eight individuals took high salaries and got illicit loans all in return for attending meetings that lasted a few minutes or were not held. Apparently, Bell (a suburb of LA) is a working class city that is overwhelmingly Hispanic. Most of the residents live below the poverty line. This makes the greed even more tragic as the residents went without needed services or gave up money needed for basic living expenses because these individuals couldn't control their greed. The residents are starting to feel a bit better now that these eight individuals have been arrested. Some won't be happy unless they are all locked up and the key is thrown away. Can you blame them?

Tuesday, September 28, 2010

How Should Madoff's Victims Be Compensated?

The government has an insurance fund that covers broker-dealer accounts known as the Securites Investors Protection Corp. (SIPC). The SIPC generally covers victims' losses up to $500k. As such, victims who had more than $500k invested with Bernie Madoff, will receive $500k from the SIPC plus the law allows for recovered assets to be divided among the victims based on a weighted average of their actual funds over $500k that they had deposited with Madoff.

There are two groups of victims in a Ponzi scheme such as that run by Madoff: net winners and net losers. The net winners took out more money than they put in. Under the current rules, this group gets nothing when a Ponzi scheme collapses and they may be asked to give some of their assets back to the net losers in what is known as a "clawback."As for the net losers, they are covered by SIPC and get a share of the recovered assets.

Some victims of Madoff are saying that they should be entitled to recoup what Bernie's statements showed they had in their account. In other words, suppose they put in $500k and never took any out. If they had the money with Bernie for, say, a dozen years or so, it would have supposedly grown to about $2 million. Now, these victims would love to get the SIPC to give them $500k and then to get some share of the recovered assets based on the additional $1.5 million that Bernie said was in their account. Under the current rules, they will get $500k and nothing else.

The question some lawmakers are asking is whether this is fair? Apparently, a few of our esteemed representatives in Washington don't think so. The WSJ reported recently that Rep. Paulk Kanjorski (D., Pa.) "would pursue changes to require the SIPC to fulfill claims of customers based on the account statements they received from failed broker-dealers." Well, I'm afraid the good Senator is confused about where money comes from. He must think the government can just print some up and give it to these victims without it hurting anyone else. Let's consider the options.

Monday, September 27, 2010

What do Arnold, Floyd, Lance, Johan & George have in common?

That is, Arnold Schwarznegger (Governor of California and body builder), Floyd Landis, Lance Armstrong, Johan Bruyneel, and George Hincapie. Check out their jaw and chin bones.

A reader sent me some pictures along with this excerpt from Wikidpedia about human growth hormone:
"Prolonged GH excess thickens the bones of the jaw, fingers and toes. Resulting heaviness of the jaw and increased size of digits is referred to as acromegaly. "
Do any of their jaw / chin bones look unusually thick? I'm not sure what you can conclude but they don't look thin to me. Maybe that isn't too surprising for a body builder or a retired cyclist who has put on a few pounds. However, Floyd, Lance and George are all pretty lean in these pictures.

See what you think...

Sunday, September 26, 2010

Alexi Grewal: Comeback is Planned by the Confessed Doper

Remember Alexi Grewal? VeloNews has an article about his planned comeback into pro cycling at the age of 50. Grewal won the Olympic gold medal for the road race at the 1984 Olympics. (However, another pro who is racing in his mid-50s beat him that year as Colorado's Best All Around Racer. I'll let the readers figure out who that was.)

In 2008, Grewal wrote an essay (also published on VeloNews) and confessed to doping during most of his cycling career. He even admitted that his first time doping was as a junior when he raced against Greg LeMond. I found the following statement in his essay on doping especially interesting:

Saturday, September 25, 2010

Lance Armstrong Investigation: PED Allegations Against 2009 Astana Team

I had a reader send me a link to an article on CyclingNews that discusses an investigation against Astana during the 2009 Tour de France. Racing for Astana in 2009 was Lance Armstrong, Levi Leipheimer and, overall winner, Alberto Contador. The CyclingNews article states that French authorities have...

Thursday, September 23, 2010

Lance Armstrong Investigation: McIlvain's Testimony

Stephanie McIlvain is reported to have met with the Grand Jury investigating Lance Armstrong's use of performance enhancing drugs. According to an article on VeloNation, McIlvain's attorney said that McIlvain told the Grand Jury that she had "no personal knowledge of Lance Armstrong using or taking performance-enhancing drugs." (As a side note, I wonder what definition they are using for the phrase "no personal knowledge." Does she have any impersonal knowledge? This reminds me of President Clinton's statement that it depends on how you define the word 'is.') McIlvain is also reported to have said that Greg LeMond's recordings of her talking about Lance's discussions in the hospital room were "gossip sessions that just weren't true." At the same time, Lance is saying that there was no conversation about doping in the hospital.

In the end, it sounds like McIlvain has taken her stand. If she is lying, she is gambling that Novitzky won't be able to prove she is. If McIlvain's testimony is the truth then it implies that Greg LeMond, Frankie Andreu and Betsy Andreu are all lying about this. Also, adding Lance's claim that there was no conversation implies that Frankie and Betsy are lying about two things: 1) that the conversation existed and 2) that Lance admitted to using PEDs and LeMond is lying about his conversation with McIlvain.

Time will tell whether Novitzky gets enough evidence to prove which of these individuals will serve time for perjury. Perhaps he won't be able to put any of them in jail and we will be left knowing only one thing for sure: someone is not telling the truth.

Tuesday, September 21, 2010

Lance Armstrong Investigation: What's It Doing to His Image?

VeloNation has an interesting article discussing the effects of Jeffrey Novitzky's doping investigation on Lance Armstrong's image. The article cites data from the marketing firm, Zeta interactive, that shows Armstrong's image has been suffering lately. In particular, his popularity rating has dropped from 92% in 2008 to the low to mid 50% range this summer. Here is a quote that sums up Armstrong's position:

"He's flirting with 50-50," said Zeta Interactive CEO Al DiGuido, according to the Associated Press. "For someone trying to build themself as a brand, that's not a good place to be."

Monday, September 20, 2010

Lance Armstrong Investigation: Remember the Actovegin Incident?

Last year, Actovegin (an extract of calf blood) received some press as Tiger Woods was, allegedly, using it along with HGH. Actovegin has been in the news again as NY Daily News is reporting that a Russian cross country skier was found with the substance.

Interestingly, Actovegin has been around for some time. In fact, Lance Armstrong's U.S. Postal team was caught throwing away Actovegin wrappers in 2000 and, the team's manager, later admitted that the team used Actovegin. Of course, he stated that none of the Tour de France riders were using it, even though the team was caught discarding the wrappers in France during the tour. Supposedly, one of the team mechanics was using it for diabetes. After they were accused of this, it took the team a year to come up with this story...Hmmmm...Anyone want to buy some beach front property in Nevada?

One interesting thing about the latest news about Actovegin is what Mr. PED dealer himself, Joe Papp said about it. Papp is the guy who had 184 customers including pro and amateur masters cyclists buying EPO and other PEDs from him (see this prior post for more information). Here are a few quotes from the NY Daily News article that I found of interest:

Friday, September 17, 2010

Betsy Andreu Opens Up to VeloNation

A few weeks ago, we mentioned that Betsy Andreu, wife of former Lance Armstrong teammate Frankie Andreu, was cooperating with Jeffrey Novitzky in Novitzky's investigation of Lance Armstrong.  VeloNation has scored an exclusive interview with Betsy, and the interview is a must read for anyone following the Lance Armstrong doping investigation.  Among other thing, Betsy talks about her motivation for cooperating with Novitzky, the backlash she and her husband have faced, and where she sees the investigation leading.  Here are a few quotes from the interview I found particularly interesting.  Check out the full interview at VeloNation.

Thursday, September 16, 2010

Lance Armstrong Investigation: What Is Novitzky Up To?

The Novitzky prosecution team has been hush hush for some time now but a few bits of information of what they are up to came out today.

First, we learned that Stephanie McIlvain is expected to testify to the Grand Jury. McIlvain is the Oakley rep who was in the hospital room when Frankie and Betsy Andreu say they heard Lance admit to his doctor that he used EPO and other doping agents. I already expected that McIlvain would be asked to testify but the NY Times article also gave some information about the recorded conversation between McIlvain and Greg LeMond. The article says that "LeMond asks McIlvain if she would tell the truth about what she heard in the hospital room if a lawsuit between LeMond and Armstrong ever arose" and McIlvain said:

Monday, September 13, 2010

New Cases of Doping in Cycling

VeloNews is reporting today that the U.S. Anti-Doping Agency is about to release the names of "15 to 25 masters, elite and pro cyclists" who have been notified of violations because they allegedly conspired with a former pro cyclist, Joe Papp. The article explains that Papp pleaded guilty earlier this year to distributing HGH and EPO to 187 customers, including cyclists, and implies that Papp entered a plea arrangement and may be providing information on his customer list in order to obtain leniency.

Relatedly, last week, we learned in several news reports that a 41 year old amateur racer, Duane Dickey, was given a lifetime ban for refusing to submit to a doping test. Dickey was found to fail a test years earlier and his refusal this year constituted his second violation. Apparently, Dickey was one of Papp's clients and Papp is now leading the authorities to other clients. Interestingly, Dickey was not a very successful amateur but still was found doping. This suggests doping in cycling may be among the amateur ranks.

The article also says that Papp indicated on Twitter that a pro cyclist in the top 5 at one of the stages in the Tour of Utah this year was doping. The top five at that stage included: Levi Leipheimer, Francisco Mancebo, Ian Boswell, Darren Lill and Phil Zajicek. Levi Leipheimer was also named in the Lance Armstrong investigation when Floyd Landis made his claims earlier this year.

Wednesday, September 8, 2010

Lance Armstrong Investigation: What We May Learn in the End

Note: Fraudbytes encourages contributions from readers. The following post is from a guest contributor, Reed Dempsey.

As findings from Jeffrey Novitzky’s investigation come to light, there are several things that I expect to come out. Here is a short list of potential findings.

Sunday, September 5, 2010

Lance Armstrong Investigation: Expert Says No Doubt He Took EPO

If Jeffrey Novitzky and his legal team are looking for an expert witness to appear before the Grand Jury and give his opinion on whether Lance Armstrong took EPO while riding for U.S. Postal, he may want to consider Dr. Michael Ashenden. Ashenden is one of the scientists who designed the tests used to detect EPO and has gone on record as saying:

Saturday, September 4, 2010

U.S. Justice Department May Join The Fun in the Lance Armstrong Investigation

The WSJ reported today that Floyd Landis filed a whistleblower lawsuit under the Federal False Claims Act. This act encourages whistleblowers to report when the government has been defrauded. Similarly, I blogged before that the recently passed Dodd-Frank bill also encourages whistleblowers for cases subject to litigation by the SEC. As it turns out, whistleblowers are the number one way that fraud is detected and the government has decided to reward whistleblowers for coming forward. In this case, if the government sues Lance or the former U.S. Postal Team for fraud and is able to collect then Floyd will get 30% of the money. Of course, Landis will have to hire a legal team to make his case so government incentive is justified in my view.

Predictably, the reaction from the Armstrong PR campaign was twofold: First, why is the U.S. government spending money investigating a philanthropist athlete who races his bike on foreign soil. Second, this shows that Floyd Landis is a money grubbing liar like we've been saying all along. However, the Justice Department may not be listening. Here is why.

Friday, September 3, 2010

More on Lance Armstrong's Podium Finishers

This post is a follow up to a post from August 9th, 2010, where I discussed the eight podium finishers who joined Lance Armstrong in 2nd and 3rd place in the Tour de France during Lance's glory years of 1999-2005 (see this link). A reader commented about a similar analysis by Bicycling Magazine's Bill Strickland and found on the NBC Sports' website and I wanted to make you aware of Strickland's analysis.

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Friday, August 27, 2010

Lance Armstrong Holds Press Conference to Discuss Investigation

This one is hot off the press on the Lance Armstrong investigation. The ONN is reporting that Lance held a press conference today and said: "that it would probably be best if everyone sat down for this."  According to ONN, Armstrong began the press conference by saying:
"Look, I'm not going to sugarcoat this. It's bad," Armstrong said during the nationally televised press conference. "But you have to swear to God that you won't get mad when I tell you, because if you get upset and yell about how you're really disappointed I'm just going to walk out of here."
Since the article is fairly short and hard to summarize, I am including the remainder verbatim from OSN:

Monday, August 23, 2010

My experience with Asea

After my first post on Asea (see this link), my friend asked me to try four bottles with a money-back guarantee if I didn't see significant gains in my cycling performance. She asked me to try all four bottles and keep track of my wattage and performance to see if it made any difference. I could then decide if I saw any improvement and pay her cost of $30 per bottle if I did.

Friday, August 20, 2010

Lance Armstrong Investigation Update

The news on the Lance Armstrong fraud investigation has been non-existent lately. However, some news came out today that Lance has hired a big gun to help him with public relations and legal defense. His new special counsel and media expert is Mark Fabiani. Apparently, Fabiani worked for Bill Clinton during the Whitewater investigation and more recently helped Goldman Sachs keep their image intact while they were being investigated for fraud by the SEC. This guy must be pricey! I take it Lance is nervous about this investigation.

Also, the same article said that George Hincapie also hired a big NY law firm. This news broke about the same time that George crashed out of the Tour of Utah and needed 18 stitches. It seems to me that Lance and George have had more accidents since Floyd Landis alleged they cheated for years. Sorry to hear about it George.

As for improving Lance's image, Fabiani got right to work and continued the same old story: Floyd has no credibility (see this link for more on that) and investigating athletes for doping is a waste of taxpayer money. Nothing new here. I hope Lance gets his money's worth from this guy.

As for a waste of money, I personally think paying a media expert to make you look better is money that could have been better used. Image is everything to fraudsters. Con men build confidence in themselves. Smooth talkers with little or no character...

In the end, I doubt the government will get a verdict against Lance and I doubt Fabiani will keep the majority of the public from believing Lance is a fraud. It reminds me of the OJ Simpson case. He was never convicted criminally for murder but if you think he's innocent then I'm sure there is a nice Ponzi scheme waiting to get your money.

Tuesday, August 10, 2010

Madoff Net Winners Want More from Net Losers

Today's WSJ is reporting that the 'net winners' in the Madoff scam (i.e. those who withdrew more than they invested) are suing in an effort to collect more money. I find this amazing. First, these people got assets from the net losers already and now they want more. To get more, they will need to take it from someone else: either more from the net losers or from taxpayers. I personally hope they are required to give back through clawbacks any excess that they got above their investment so the losers have more to make them whole. If so, this group would break even which is better than all the others who are net losers. Maybe everyone should end up getting an equal percentage so everyone is an equal net loser. Then, in addition they could recover up to $500k from the government. That sounds fair to me...

In any case, the real losers are taxpayers. They didn't put in anything and have to give up some of their money.

Monday, August 9, 2010

Lance Armstrong's 8 Podium Finishers Includes 7 Dopers

(Thanks to Reed Dempsey for emailing me the figure above. Reed saw a link to Fraudbytes on Greg LeMond's facebook page where Greg said: "Very interesting blog." We are honored to have Greg as a fan of our Fraudbytes' Facebook page.)

This analysis shows the eight riders who finished on the podium next to Lance during Armstrong's seven yellow jersey years. These eight riders include three very gifted riders who finished more than once next to Lance including Jan Ullrich (on the podium four times), Joseba Beloki (on the podium three times), and Ivan Basso (on the podium twice) along with five other riders who finished one time on the podium including Zulle and Escartin (1999), Rumsas (2002),  Vinokourov (2003), and Kloden (2004).

Interestingly, seven of these eight individuals have been shown to have doped and five served suspensions. The only one who was never associated with doping was Escartin. Reed also mentioned in his email that the power data over the past 25 years shows a "bubble" over the last 15 years as:

Friday, August 6, 2010

More on Levi Leipheimer's doping allegations

Yesterdays news revealed that Levi Leipheimer's former team manager said that Levi was almost pulled from the Tour de France because his blood off-score coefficient was 132.8 and at 133 you are considered doping. Since I wasn't familiar with this "blood off-score coefficient" I looked in Wikipedia under "Blood Doping" and found the following:

Thursday, August 5, 2010

Levi Leipheimer accused of doping

When Floyd Landis accused Lance Armstrong and his US Postal team of widespread doping, he also named other Americans as cheaters including Levi Leipheimer. Apparently, Floyd Landis isn't the only one claiming that Levi Leipheimer also doped. Now Leipheimer's former team manager is saying that Leipheimer was doping after he was on the US Postal team with Lance Armstrong. Here are some key quotes from an article on CyclingNews:

More Smoke from the Lance Armstrong Investigation: Fire or Conspiracy?

The NY Times is reporting that they interviewed one of Lance Armstrong's former teammates who corroborated the story that Floyd Landis is telling about rampant doping on the U.S. Postal team under Lance's encouragement. Here is the key quote from the article:

Wednesday, July 28, 2010

How to Lose 95% of $9.1 Billion (i.e. that's $8.7 Billion with a B)

Leave it to the Department of Defense (DoD)! That's right. A new audit was released today shows that "the Pentagon cannot account for over 95 percent of $9.1 billion in Iraq reconstruction money, spotlighting Iraqi complaints that there is little to show for the massive funds pumped into their cash-strapped, war-ravaged nation" according to this article. The report states that the "breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss."

Unfortunately, this is not the first time that the DoD has been shown to be fertile ground for fraud and abuse. In fact, the DoD has never received a clean audit opinion. Never!!! Basically, the DoD has so many holes in their internal controls that you could fly a fleet of B-1 bombers through their financial safety nets.

Monday, July 26, 2010

Clawback Lawsuits For Madoff Victims Who Were "Net Winners"

Trying to clean up after a fraud is a messy affair.  Trying to clean up after the world's biggest ponzi scheme collapses is just downright nasty.  The WSJ reports that Madoff trustee Irving Picard is preparing to sue many of the Madoff victims who ended up in the black when all was said and done:

Dodd-Frank and Whistle-blowing to the SEC

I just read an interesting post in the NY Times about how the new Dodd-Frank financial regulations bill will provide an incentive for whistle-blowers to give information about various frauds to the SEC. Apparently, deep in the bowels of the 2,500 page Dodd-Frank bill that overhauls our financial regulatory system is a provision that requires the SEC to award whistle-blowers 10-30% of monetary sanctions collected by the SEC that exceed $1 million.

 The NY Times post also said that while the amount of the award must range from 10-30% of the sanctions, the exact amount awarded is up to the discretion of the SEC. Also, the whistle-blower must meet certain conditions in order to collect under Dodd-Frank.  Here is what the post said about the requirements:

Saturday, July 24, 2010

Is Floyd Landis credible?

We've probably all heard Lance Armstrong point out the fact that Floyd Landis took millions and wrote a book under the guise that he did not use performance enhancing drugs (PEDs). Here is a quote from May when Lance first pointed this out:
"I'd remind everybody that this is a man that's been under oath several times and had a very different version,'' Mr. Armstrong said. "This is a man that wrote a book for profit that had a completely different version. This is somebody that took, some would say, close to $1 million from innocent people for his defense under a different premise. Now when it's all run out the story changes.''
Lance is challenging Floyd's credibility by pointing out that Landis's story has now changed dramatically. This week, as Landis was interviewed on Nightline, the reporter told him that he has zero credibility because he has admitted to lying about his own use of PEDs. While that is what Lance and his attorney are saying, I personally think Landis's history gives him more credibility. Let me explain.

Lance, Santa Claus, and Livestrong

“Look. At some point, people have to tell their kids that Santa Claus isn’t real. I hate to be the guy to do it, but it’s just not real.”
-Floyd Landis, talking about doping in cycling.

Yup, Landis is still talking about Lance and about doping in cycling as a whole, this quote came from an interview on Nightline (via VeloNews).

I've been thinking about reasons why people might be hesitant to accept that Lance might have doped. While I agree that Landis lacks credibility, the body of evidence is pretty overwhelming against Lance. Aside from how inspiring Lance has been in his victories, I think we also tend to want to give Lance the benefit of the doubt because of his charitable work. Truly, Lance has done some great things through Livestrong, however, at times I wonder if his motivation may be (at least in small part) an attempt to ease his conscience.

Looks like the Tour de France racers may not be doping this year...

I just read an interesting analysis of Thursday's race up the Tourmalet that suggests that the riders are slower this year and the power outputs of Schleck and Contador are more reasonable than they have been in the recent past. For example, an analysis last year suggested that Contador had an unbelievable VO2 max approaching 100! If the analysis was correct, this is strong evidence of doping. On the contrary, this year they are estimating VO2 max values in the high 80's. While also high, these numbers are more reasonable and suggest that the level of doping is significantly lower than in prior years. The author also said that when Lance Armstrong was winning around the turn of the millennium the values looked significantly higher than they do this year.  Check out this year's analysis here.

Friday, July 23, 2010

Light from Lance's Investigation: Concealing Doping, Protecting Against Perjury, and More...

Here are a few pieces of information that I've gathered from some recent articles on the Lance Armstrong fraud investigation. First, I discuss an article quoting David Millar as to how cyclists have avoided getting caught doping in the past. Then, the post discusses various legal aspects of Lance Armstrong's fraud investigation including what Lance is doing to protect himself and the likely strategy of the prosecution.

First, a recent NY Times article quoted pro cyclist, David Millar, as saying that back in Lance's heyday, before being tested, cyclists would put a protein on their hands that would allow them to conceal their use of EPO from the testing process. Millar would know since he admitted using EPO after his apartment was raided and they found EPO and syringes. After confessing, Millar was banned from racing for two years but is now racing again. He is a member of WADA's athlete committee and he explained why pro cyclists have a chaperone assigned to them after their race is over who watches what they are doing and requires them to wear gloves so they can't put the protein on their hands to conceal the EPO from the test. (For a more thorough analysis of some of the things pro cyclists have done to avoid getting caught doping, see the links to the article linked here.)

The purpose for assigning a chaperone these days is to keep riders from doing other things to conceal their drug use. Millar explained that concealing their drug use from the tests was not much problem back when Lance Armstrong was being tested. He said: “There was absolutely no guarantee that riders who were doping back then were caught.” Here is an interesting quote about one time Millar won a stage in the Tour de France and was able to avoid detection:

Thursday, July 15, 2010

$550 Million Settlement for Goldman Sachs

Goldman Sachs will settle with the SEC for $550 million over charges of fraud related to Goldman's sale of subprime mortgage products.  Goldman neither confirmed nor denied wrongdoing, but "acknowledged that its marketing materials for the subprime product contained incomplete information."  The SEC seems pretty proud of the settlement, noting:

Wednesday, July 14, 2010

The latest on the Lance Armstrong investigation

Note: click this link for a list of all other posts on the Lance Armstrong fraud investigation.

The NY Times reported yesterday that a grand jury issued subpoenas for several people that Jeffrey Novitzky would like to talk to about the accusations made by Floyd Landis regarding Lance Armstrong's involvement in doping. The article does not list who was subpoened but it does say that several are in the Tour de France right now and that at least two former teammates from Lance's U.S. Postal team have already talked to Novitzky.

We can probably guess who many of the the current Tour riders are that have been issued subpoenas. For sure Levi Leipheimer, Dave Zabriskie, and George Hincapie will get subpoenaed unless they have already talked. My guess is that Novitzky has obtained some corroboration of Landis's story from those he has already spoken to or he would not be getting subpoena help from a grand jury.

The investigation appears to be focusing on the potential that government funds were used to purchase doping products. Armstrong's sponsor around the millenium was the U.S. Postal Service. Apparently, if Novitzky can prove that Landis's allegations are true it could mean Armstrong and Bruyneel broke the law by using the U.S. Postal Service team for illegal doping.

Interestingly, today's NY Times reported that Lance had the following to say about this matter:

Saturday, July 10, 2010

A little progress in the Lance Armstrong investigation

Today's Wall Street Journal reported that both George Hincapie and Tyler Hamilton have been approached by Jeffrey Novitzky in the doping / fraud investigation that revolves around Lance Armstrong and Floyd Landis. Apparently, both racers are probably going to cooperate but it will likely be after the Tour de France for George. The WSJ also reported that a few other racers have already cooperated. Overall, we knew Novitzky would be talking to these guys so the article doesn't have a lot of new information.

Thursday, July 8, 2010

Ullrich's manager admits to helping Ullrich dope

Thanks to Michael Shermer for sending me a link to an article on the VeloNation website wherein former Tour de France rider and T-Mobile team manager, Rudy Pevenage, admits that he helped Jan Ullrich dope through the assistance of the infamous Dr. Fuentes of Operation Puerto when Ullrich was competing against Lance Armstrong.

In my view, this is some persuasive evidence to validate the claims by Floyd Landis that Lance Armstrong's team manager, Johan Bruyneel, helped Lance and his teammates dope. Here is a quote by Pevenage that suggests the knowledge of who was doping in the peloton was somewhat common:

More game theoretic analysis of Landis and Lance.

Last Friday, I blogged about an editorial in the LA Times by Michael Shermer where he used game theory to explain why he believes Floyd Landis’ story is believable. Basically, Shermer says that pro cycling would be in a Nash equilibrium that would lead cyclists to be silent about the doping as long as they each had something significant to lose by coming forward. However, once Landis lost his wife, home, and cycling career and, therefore, no longer had anything to lose, Shermer argues that it is expected that he would spill the beans on the “cycling mafia”, as Tyler Hamilton has called it.

Another Game Theoretic Analysis

This week, I received an interesting analysis by my friend and fellow cyclist, Professor Jim Kearl, who teaches economics at Brigham Young University. Jim provided a game theoretic argument suggesting that some of Landis’s story is hard to believe. The crux of his argument, as I see it, is that Landis is claiming that there were people who had knowledge of the doping operation who would not have anything to lose if they came forward. As such, the doping mafia or “cartel of silence” as Professor Kearl says, would not be in equilibrium. Here is Jim's analysis:

Wednesday, July 7, 2010

UCI to adopt doping categories for pro cyclists

Before I discuss the breaking news that the UCI has announced new doping categories for pro cycling, here is an email that a friend and former pro cyclist who has several national or world champion jerseys sent me in response to yesterday’s post:

Personally, I believe most racers want a clean peloton and want a healthy life after their racing careers. If they can be competitive racing clean, they will; however, if other racers are getting an advantage through doping, especially if it's supported or even conveniently "ignored" by their teams, then those who would prefer to be clean "give in" as opposed to leaving.
Although you may not know many people who watch wrestling, I'm guessing it's incredibly popular, especially with the WalMart / NASCAR / Ultimate Fighting crowd. Although I don't hang with this crowd either, I'm guessing many of them would love to see disproportioned, drug-laden riders suffering to their deaths. This crowd may relate to pro cycling more if they saw huge, obese riders banging into each other, leaving huge patches of skin and blood across the pavement as they hooked each other, ala a mix of sumo wrestling and roller derby on wheels.
Basically the idea to legalize drugs is quite naïve in my opinion; it would be a research project in doping and genetic engineering, not a sporting event.

As for the new UCI doping categories, another friend and fellow masters racer, Bruce Bilodeau, wrote a post on this news. This is actually old news as Bruce’s post showed up three years ago. Bruce adds a little more color to my friend’s point (2) above. The post below is an edited version used with Bruce’s permission…

Tuesday, July 6, 2010

Should cyclists be allowed to dope?

Recently, a friend commented that he thinks cyclists should be allowed to dope freely. I've heard this before, including in a recent discussion with one of my competitors in the local cycling scene where I race. This friend who was advocating open doping told me that doping was a gray area anyway so even if pro cyclists are doping today it is no big deal in his mind. He reasoned that people take vitamins for performance so taking other drugs is not much different. Another friend who advocated no rules against doping said using performance enhancing drugs is just "part of the game in my mind." These are his exact words as posted on Facebook.

I have been amazed at these comments. Gray area? Part of the game? Last time I checked there are specific rules prohibiting specific drugs. If you take them, you are violating the rules of the game. No gray area exists and if the rules prohibit the drugs then they certainly not "part of the game."

Today, I read a very interesting post by the author of Freakonomics, Steven Levitt, where he talks about doping in the Tour de France. He makes several good points about Floyd Landis and Lance Armstrong, many of which can be found in previous posts on this blog (click here or see labels with Lance Armstrong on the right). He also suggests that one solution may be to open up cycling to doping. Before I get to that, here are a few of his other points that I want to reiterate.

Friday, July 2, 2010

Floyd Landis gives doping details to Wall Street Journal

I just received a WSJ News Alert email that reads that Floyd Landis provided hours of interviews with The Wall Street Journal that detail how he had used performing-enhancing drugs extensively during his career. A quick scan of the article gives tons of details about how Landis was introduced to doping when he signed with U.S. Postal and how Lance Armstrong helped him dope. Here is a brief summary based on a quick scan.

Game Theory, The Cycling Mafia, and Lance Armstrong

Michael Shermer has completed the Race Across America several times and was one of the founders and early directors of the race. In addition, he founded the Skeptic Society and writes a column for Scientific American nearly every month. He is also an adjunct professor of Economics at Claremont University.

Shermer wrote an editorial today in the LA Times that uses concepts from game theory to explain why pro sports turn to doping to begin with. It's fairly intuitive and sounds a lot like the analysis I gave when Floyd Landis first came out with his revelation. While Shermer doesn't use the fraud triangle, he talks a lot about incentive and opportunity. Here is his reasoning:

Wednesday, June 30, 2010

More evidence on Lance Armstrong

Sports Illustrated published a column today that discusses how the information that Floyd Landis recently provided about how riders get away with doping may change things at this year's Tour de France. For example, Floyd explained how riders combine blood transfusions with micro-doses of EPO at night to boost their red blood cell count and to keep the number of immature red blood cells within normal ranges. The blood transfusions increase the number of mature red blood cells and the EPO produces an increase in the number of immature red blood cells. Because the amount of EPO is small, the tests for EPO show normal levels after a few hours. As such, if riders are not tested in their sleeping hours then they appear to be clean.

The Sports Illustrated column gives more details about Floyd's revelations than I've seen before. For example, it says that Floyd claims that his Phonak team owned a Sysmex machine that he learned to use to monitor his blood count levels. Imagine that--Phonak provides their riders with a sophisticated medical device for blood monitoring! These guys are serious!

One interesting point that the article makes is that the rigor of the Tour de France is such that hemoglobin counts should decline over the race period. Thus, if a rider's hematocrit levels don't decline over the 3-week race period, it's an indication that he is doping. Here is a quote:

Monday, June 28, 2010

Supreme Court gives challengers of the PCAOB an empty victory

The WSJ and other news outlets are reporting that the U.S. Supreme court ruled that the PCAOB is unconstitutional. From what I can tell, the ruling basically changes the structure of the PCAOB so now directors can be fired at will instead of "for cause" as before. In any case, the news reports are saying that the PCAOB can continue operating as is. The main change is that the directors have less job security. Talk about anti-climactic!

Strategic Fraud

Fraudsters go to great lengths to structure their fraud around regulators, auditors, and other interested parties to avoid detection.  Such is the case with an online scam that was recently disrupted by the FTC.  Scammers set up over 100 fake companies and then submitted fictitious transactions to credit card processors.  The transactions were structured to be inconspicuous to the owners of the credit cards--transactions were usually between $0.25 and $9.00 and many of the fictitious companies had names similar to legitimate companies.  Per the FTC, the fraudsters charged 1.35 million credit cards a total of $9.5 million, but only 78,724 of these fake charges were ever noticed.  (via Macworld

Ethics Optional

What good is a public code of ethics ending in a provision saying:
From time to time, the firm may waive certain provisions of this Code.
Sounds pretty shady, right?  At a minimum such a provision seems odd--why even publish a code of ethics when you acknowledge that the code is non-binding?  Actually, these kind of cop-out statements are pretty common for companies who publish their code of ethics.  The above disclosure comes from Goldman Sachs and similar clauses can be found in codes of ethics of companies like Exxon Mobil.  The Motley Fool has a great article discussing these clauses.  Here is one paragraph I particularly enjoyed (referring to waivers of a firm's code of ethics):