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Wheelmen: Lance Armstrong, the Tour De France, and the Greatest Sports Conspiracy Ever

Page 16

by Reed Albergotti


  Johan Bruyneel, in a white button-down shirt, sat at a table near one of the tall, gold-framed windows, grinning broadly as he accepted congratulations from the team’s sponsors and other guests. Bill Stapleton and Chris Carmichael sipped wine while standing on a balcony overlooking the Seine. Mark Gorski walked around the main room with an unlit cigar in his mouth, reflecting on how far Lance and his supporting riders had come. Tyler Hamilton had finished in 13th place in the Tour, and twenty-five-year-old Kevin Livingston had finished in 36th place, an amazing result for someone riding in his very first Tour. The two would have had even better finishes if they hadn’t spent all of their energy and effort working for Lance.

  Dr. Luis Garcia del Moral was there, too. Dressed in a dapper green suit and tie, he was seated at a table with his assistant, Pepe Martí.

  Now that Lance was the defending champion and no longer the underdog in the sport, there would be a lot more pressure to win the race again the following year. And the pressure began immediately. In a toast, Steve Disson, Weisel’s business partner, called for a second Tour victory in 2000. By the time of the party, the team had already lined up six of the seven US riders for the Postal team’s 2000 season, including Armstrong, Hamilton, and Livingston. It also had an agreement in principle with Christian Vande Velde, a goofy twenty-three-year-old from the Chicago suburb of Lemont, whose father, John Vande Velde, a two-time Olympic track cyclist, had played one of the evil Italian cyclists in the 1979 hit movie Breaking Away.

  Armstrong’s victory had earned him a $1 million bonus from the team, plus additional “salary enhancements” of $50,000 for winning the leader’s yellow jersey, and $25,000 per day for successfully defending the yellow jersey—thanks to a new deal between Armstrong and Gorski, reached just days before the Tour began. That deal also extended Armstrong’s contract for two more years, and offered him as much as $2.5 million annually.

  His newfound fame had a trickle-down effect for the team. Once Lance had agreed to sign on to the team for the 2000 and 2001 seasons, Gorski, the master salesman, turned to US Postal Service and pitched it on a two-year extension of its sponsorship, with an outlay of $3.3 million to back the team for the 2000 season. That was more than three times its initial $1 million outlay, back in 1996. Winning the 1999 Tour also made it easier for Gorski to line up more than twenty other companies to sign on as sponsors. The significant expansion of the team budget, in turn, made it possible for the organization to begin scouting for high-performing free agents, riders whose special talents could make a big difference in future races.

  After the victory party, Kristin returned to Austin, and Armstrong left Paris for a series of criterium races in the Netherlands and Belgium. As the winner of the Tour, he now automatically earned appearance fees of $25,000 for every criterium he rode in, regardless of how he performed.

  From the Netherlands, he flew on a jet chartered by his personal sponsor, Nike, arriving in New York at about 1:00 A.M. Now an internationally acclaimed celebrity, Armstrong was becoming a major media phenomenon. He appeared on all three major network morning shows and Larry King Live, taped a David Letterman show appearance, did a Nike satellite media tour, and rang the opening bell at the New York Stock Exchange. He then returned to his home in Austin for a day to see Kristin before heading to Washington, DC, where he presided over a question-and-answer session about his cancer with reporters at the National Press Club.

  While in Washington, Lance met with President Clinton in the Oval Office and then appeared in the Roosevelt Room with Vice President Gore, who pledged to make the fight against cancer a part of his upcoming presidential campaign.

  After the Tour victory, Bill Stapleton’s answering machine was flooded. Everyone wanted a piece of Lance. He appeared in TV ads for Bridge Infor- mation Systems, then the largest provider of financial news and information in North America, which purchased a large video screen in New York’s Times Square to play its Armstrong commercial. He also appeared in ads for American General Insurance, and of course the US Postal Service. In the week after his victory, he was the star of a “Just Do It” commercial by Nike.

  With his astonishing comeback from near death to the top of his field, Lance had the best underdog story in sports since Seabiscuit. And on top of that, the Lance Armstrong Foundation to benefit cancer patients made him seem even more of a hero.

  Even before he had in fact won the race, he and Stapleton had turned their attention back to the idea of capitalizing on his victory with inspirational dramas in both book and movie form. They had been talking again about a possible autobiography and even a TV biopic.

  As Lance was racing in the three-week Tour, Stapleton began conversations with publishing houses in New York about selling the rights to Lance’s memoir. This time a bidding war ensued. The price was up to $300,000 after Lance won the first stage, the race against the clock. But about a dozen days later, after he had gained a 6 minute, 15 second advantage over his rivals, the price shot up to $400,000. After Lance won, he signed a deal with Putnam. In announcing the book, Putnam vice president and senior editor Stacy Creamer said he had “given the world hope by example through this amazing comeback from cancer,” adding that his autobiography would convey the inspiring message of his accomplishments, bringing the intimate details of his emotional, spiritual, and physical journey to a wider audience. She noted that Lance himself viewed his 1999 Tour win as “a miracle.”

  Soon after the book was announced, Stapleton arranged for Sally Jenkins, a native of Fort Worth and the daughter of bestselling author and sportswriting icon Dan Jenkins, to cowrite it. At the time, Sally Jenkins was a little-known writer for Women’s Sports and Fitness. She and Lance had never previously met. Their collaboration, It’s Not About the Bike: My Journey Back to Life, eventually sold more than a million copies and became an international bestseller that stayed on the New York Times bestseller list for roughly a year.

  Stapleton also brokered a $500,000 TV movie deal with legendary sports producer Bud Greenspan, who worked on the Lance biopic with producer Edward R. Pressman of the movie Wall Street. Greenspan hired screenwriter Stanley Weiser (who had cowritten the script for Wall Street). Shooting was to begin in the fall of 1999 and the movie—Second Life—was scheduled to air on Turner Network Television during the 2000–2001 season. But within months, as the monies and offers coming their way kept snowballing to ever larger numbers, Lance and Stapleton seemed to think Lance’s story might be worth more than what they had originally envisioned. By the end of 1999, they decided to hold off on the made-for-television movie, figuring it might merit a big-budget Hollywood production, perhaps starring Matt Damon or another of Lance’s new celebrity friends. Stapleton informed Greenspan that Armstrong wouldn’t cooperate, which left Greenspan’s project inactive.

  For Stapleton, controlling Lance’s image and story was paramount. When Tom Clynes called Stapleton after the Tour, seeking to be reimbursed for his $8,000 outlay for the first book proposal, Stapleton agreed to pay him—Clynes suspects he did so out of his own pocket—but required Clynes to sign a nondisclosure agreement preventing him from using any of the material he had gathered on Lance. Even the owner of Armstrong’s team had only limited access to the use of Lance’s name and image. His new contract with Disson Furst mandated that before entering into any agreement with a team sponsor who wished to use Lance’s likeness in any of its marketing efforts, Disson Furst would have to negotiate a separate marketing agreement with Lance himself.

  Capitalizing on the public’s intense interest in Armstrong, Stapleton mobilized quickly and made sure that the price of having a product associated with him went up—way up.

  In the ten months following his win, Lance signed new endorsement deals, some going through the year 2004, with a total value of more than $7.5 million. By February 2000, Armstrong had signed a deal worth over $500,000 a year, and a total of several million dollars over the course of the contract, to be the cancer spokesman for the health website WebMD.com, and
was appearing in commercials for drugmaker Bristol-Myers Squibb and AIM Mutual Funds, as well as on two Wheaties boxes. In all, about sixteen companies were paying Lance for the use of his image. He was also going on the road to make speeches about his amazing comeback, commanding $100,000 for a one-hour speech, up from about $30,000 per engagement before he won the Tour.

  Here is a rough breakdown of the estimated annual value of the individual deals that were struck during those first ten months after the Tour:

  Disson Furst/ US Postal Service team

  $2,000,000–$2,500,000

  Bristol-Myers Squibb

  $700,000

  Penguin Putnam Books

  $525,000 (including estimated royalties for six months through year-end 2000)

  Kickstart.com (Denver-based fund-raising site)

  $500,000—new in February 2000

  Nike

  $500,000

  BrainLab (medical products maker)

  $500,000 ( + stock)

  Bridge (financial website)

  $500,000—since August 1999

  WebMD (online health content site)

  $500,000 (+ stock)—new in January 2000

  Trek (bicycle maker)

  $500,000

  AIM Mutual Funds

  $300,000

  American General Insurance

  $300,000

  General Mills/Wheaties

  $200,000

  Bike.com (e-commerce site)

  $150,000 ( + stock)

  Giro (bike helmet maker)

  $150,000

  Oakley (sunglasses maker)

  $125,000 (+ stock)

  Shimano (bike component maker)

  $100,000

  Grand Total

  $7,550,000

  Expensive as these deals were, the sponsors felt they got their money’s worth. The Postal Service’s senior vice president Gail Sonnenberg estimated that it had gotten “millions and millions” of dollars’ worth of new business specifically because of its association with Armstrong and sponsorship of his team. In retrospect, the Postal Service’s decision in 1996 to put its brand on the start-up US cycling team appeared remarkably prescient—and cost-effective.

  Even at the price they had to pay when they renewed, the Postal Service was getting a great deal, spending only about $8 million per year of its $146 million advertising budget to sponsor the team.

  The US Postal Service, a brand once completely unknown in Europe, was suddenly becoming recognizable all over the world, and also a newfound source of pride to its own employees. The Topeka, Kansas, postmaster B. Steven Pinkerton raised a unique blue-on-yellow flag featuring a likeness of the Postal team jersey to celebrate National Postal Worker’s Day in 2002. Pinkerton said the flag was intended to remind Americans of the “hard work” of the Postal Service Pro Cycling Team riders, who competed in more than fifty-eight races all over the world. (Lance sat out most of those races, conserving energy for the Tour de France.)

  In hindsight, marketing was really the least of the Postal Service’s worries. The digital age was pushing the agency’s core business—delivering letters—into obsolescence, and it had already fallen hopelessly behind private sector competitors like Federal Express in the one area of the parcel industry that was growing—express package deliveries.

  Armstrong’s victory also had a big impact on Wisconsin-based bike maker Trek. Soon it became widely known as the builder of the bikes on which Lance rode to his Tour victories. Sales of Trek’s most expensive bicycle line—bikes that sold for up to $4,000 each—more than doubled from 1998 to 1999; its total sales of road bikes rose 143 percent from 2000 to 2005.

  Even Lance’s face on a Wheaties box pushed product. Boxes with Armstrong’s image sold about 10 percent better than other Wheaties boxes.

  Overall, the “Lance effect” was profound. Between the time he began winning the Tour de France and his retirement, companies that made everything from bikes to helmets, cycling shoes to pedals, saw tremendous growth.

  And no wonder! “He’s the all-American, Norman Rockwell–like embodiment of what people want their heroes to be,” marketing expert David Carter proclaimed in May 2000.

  Nike in particular backed America’s newest hero in a substantial way. With Michael Jordan having retired, Nike had been searching for the next big name in sports to help market its products. Rather than presenting Armstrong as merely a champion cyclist, which would have limited his usefulness to selling biking apparel and gizmos, a very small part of the sports marketplace, Nike launched a campaign that incorporated his image into the very identity of the company. To showcase the qualities that made up the “real Lance Armstrong,” Nike dispatched film crews to Nice to show him at his cliffside villa with a panoramic view of the French Riviera, eating his breakfast, receiving an intense chiropractic treatment in his workout room, and changing the diaper of his newborn baby, Luke. Then, two producers for Nike’s website spent the next three hours in a convertible filming Armstrong biking up and down the back streets in and around Nice.

  Meanwhile, Thom Weisel was enjoying a comeback story of his own. After selling and then getting bought out from the investment bank he had founded, he started a new one. This time, he called it simply Thomas Weisel Partners (TWP). In 1999, the same year Armstrong won his first Tour de France, Weisel’s new investment bank was the hottest shop in Silicon Valley for hyping previously unknown tech companies and taking them public. Weisel was making hundreds of millions of dollars handling initial public offerings for companies like Akamai Technologies, Drugstore.com, Fogdog .com, FTD.com, InfoSpace.com, MapQuest.com. And the investing public was eating the stocks up. In 2000, TWP’s revenues reached $476 million. In January of that year, the nation’s largest and most influential public pension fund, the California Public Employees’ Retirement System, or CalPERS (with $136 billion in assets), announced it would invest $100 million for a 10 percent stake in TWP, doubling the firm’s valuation to $1 billion. Investment Dealers’ Digest awarded Weisel its coveted Banker of the Year award.

  Weisel brought his business acumen and ingenuity to the Postal team. He and Gorski thought they could parlay Armstrong’s success into the creation of a timeless sports franchise like Manchester United or the New York Yankees. And he hoped that the sports marketing company partnership he had entered into with Mark Disson and Allen Furst would continue long after Armstrong had retired. But even after the 1999 win and all the money that came rolling in as a result—the new sponsorships, the Postal Service’s renewal of its sponsorship for a total of $30.6 million between 2001 and 2004—the team was operating at a loss. And a few months after Armstrong’s second Tour de France victory in 2000, Steve Disson decided he was fed up with the way Gorski and Weisel were running the business as if it were all about Lance. He felt that all the hard-earned cash Disson Furst brought into the business through its other deals was going into the cycling side of the business, paying for Armstrong’s salary—as much as $9.5 million over the 2001–2004 period, depending on how many Tours de France he would win—and for all the perks he demanded. Armstrong also demanded that the team hire eight of the world’s top cyclists to ride alongside him. The last straw was when Gorski and Weisel wanted to put Armstrong on Disson Furst’s board of directors. Disson thought that was just ridiculous. “I’m trying to run a business here!” he told them.

  In October 2000, Disson pulled out of his arrangement and parted ways with Gorski and Weisel, who renamed the company Tailwind Sports in January 2001. Gorski became CEO of the new company.

  According to notebooks containing team finances that were given to Tailwind investors, which included copies of the team’s contracts and financial statements, the company seemed to be heading toward solvency by 2003. Buried in the fine print, however, was one item, hidden in plain sight, that presaged looming trouble. Under the heading EUROPEAN ADMINISTRATIVE STAFF COMPENSATION, the report listed a payment of $185,054 to the Institute de Valencia/Medical in Spain—the sports clinic operated by Dr. L
uis Garcia del Moral.

  As the expenses of the Postal team approached $10.5 million in 2002, Weisel knew he had little choice but to find some new investors to help cover the budget. He turned to a small group of brash, hard-charging American financiers, venture capitalists, investment bankers, CEOs, and fund managers, nearly all avid amateur cyclists. These CEOs, hedge fund managers, and titans of industry, as well as some of their offspring, flocked to cycling at a critical juncture and helped to prop up the sport.

  Investing in cycling would have been laughable prior to the arrival of Armstrong and the Postal team. But Armstrong’s string of victories had significantly shifted the demographics of the cycling audience. From the early 1990s to the early 2000s, cycling morphed from a quirky working-class hobby to one of the favorite pastimes of the Masters of the Universe set. Wealthy middle-aged men all over America were ditching their golf courses for the open road, pedaling away on their expensive bicycles while wearing their Euro-chic spandex regalia. Participation in races and group bike rides exploded, especially in corporate America.

  By courting some of these highfliers, Tailwind Sports drew about twenty-five wealthy investors, mostly in their forties, fifties, and early sixties. They included General Growth CEO John Bucksbaum and former United States Olympic Committee executive director Harvey Schiller, who at Gorski’s urging put $100,000 into Tailwind. Among others who invested in 2002 were two-time Olympic rower Richard Cashin Jr., chairman of a private-equity unit of JPMorgan Chase & Co.; David “Tiger” Williams, founder of Williams Trading LLC, a Connecticut firm; and Ward W. Woods Jr., former chief executive of Bessemer Securities.

  Many of these investors started out as donors of sums of $200,000 and up, in support of US cycling in general, through the Champions Club, an organization created by Weisel in 2000 to help raise money for the sport’s governing body. Word of the Champions Club spread through cycling circles on group rides in San Francisco, New York, and other cities. Both the investors in the team and the members of the Champions Club got a lot of fancy perks, including close access to the Postal team during the Tour de France. As the race wound through the Alps, the American aficionados pedaled segments of the course, trailed by cars carrying their food and water bottles. The group got massages, haute cuisine, and prime views of the race’s mountaintop finishes. There were also invitations to gatherings where they got the chance to pound the pedals for 60 miles with Armstrong and other US Postal Service team members including Floyd Landis and George Hincapie.

 

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