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: