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For Cycling's Big Backers, Joy Ride Ends in Grief
By REED ALBERGOTTI And VANESSA O'CONNELL
They gathered outside an Arizona resort in skin-tight clothing and aerodynamic helmets, standing astride pro-quality racing bikes. They could have been mistaken for local cycling fanatics preparing for a Saturday spin.
What they were, however, was a cadre of elite businessmen who had supercharged American cycling with cash infusions, helping to turn Lance Armstrong and a handful of other American riders into stars. The February 2003 gathering was their chance to enjoy the dividends: to pound the pedals for 60 miles with Mr. Armstrong, the reigning Tour de France champion, and other U.S. Postal Service team members such as Floyd Landis and George Hincapie.
"There was a lot of macho that day," says one of the riders, Kenneth Barnett, chief executive of a Michigan marketing firm, of his fellow executives. "These fairly accomplished people were like little boys with big toys."
Over the course of a half-dozen years in the early 2000s, a small group of wealthy executives—including San Francisco investment banker Thomas Weisel and shopping-center magnate John Bucksbaum—turned their hobby into the ultimate fantasy camp. They helped put together one of the best pro cycling teams ever assembled and basked in the glow, going behind the ropes at the Tour de France and riding hard in amateur races on Postal team bikes.
After a record seven Tour wins, the joy ride turned bumpy. The investors never made back the money they put in. The Postal team they helped finance stands accused by one of its former riders, Mr. Landis, of systematic doping. And now, federal criminal investigators looking into the allegations want to know, among other things, whether any owners knew about doping on the team while team representatives were assuring sponsors that riders were clean, according to one person familiar with the matter. It isn't clear whom among the owners investigators are focusing on.
San Francisco ad executive Richard Silverstein, who donated to U.S. cycling but didn't invest in the Postal team, has fond memories of the early days. "You don't go to spring training of baseball and throw the ball around with the guys," he says. "We got into the spring training of cycling and were able to ride with the guys. Being on the inside of the sport like that was seductive."
The scandals, he says, have left a bad aftertaste. "I think that doping has been just awful. I have to say, it's embarrassing to me."
Bike racing used to attract little financial support in the U.S. Mr. Weisel, currently co-chairman of Stifel Financial Corp. and a former amateur cycling champion, played a key role in changing that. Rather than relying solely on corporate sponsors, he decided to try to bankroll the sport with contributions from rich cycling enthusiasts.
Mr. Weisel set out to create a world-class cycling team in 1987. His team got a boost in 1995 when the U.S. Postal Service agreed to sponsor it. In 1997, he took a chance by hiring Mr. Armstrong, who was recovering from cancer. In 1999, stunningly, Mr. Armstrong won the Tour de France.
Around that time, Mr. Weisel helped to form a group to raise money for USA Cycling, the sport's governing body. Donors of $200,000 and up became "Champions Club" members, earning invitations to rides like the one in Arizona.
For enthusiasts craving deeper involvement, he offered another option. He and five other investors had put up about $2.5 million to finance what later became Tailwind Sports, a cycling-management firm that owned the Postal team. The ownership group eventually numbered at least 20.
Among those who invested in 2002 were businessmen such as Mr. Bucksbaum, 54, former chief executive of General Growth Properties; two-time Olympic rower Richard Cashin, Jr., 57, chairman of a private-equity unit of J.P. Morgan Chase & Co.; David "Tiger" Williams, 48, founder of Williams Trading LLC, a Connecticut firm; and Ward W. Woods, Jr., 68, former chief executive of Bessemer Securities LLC.
Tailwind investors and Champions Club members had close access to the team during the Tour de France. As the race wound through the Alps, the American aficionados pedaled segments of the course. Cars carried their food and water bottles. The group got massages, haute cuisine and prime viewing of the race's mountaintop finishes.
Some investors who weren't diehard riders were somewhat befuddled by their hard-charging colleagues. Mr. Barnett, the Michigan marketing executive, joined the group ride in Arizona. After about 200 yards, he says, the pro riders were out of sight. After another 200 yards, the investors who took their riding most seriously also had disappeared. Mr. Barnett, who says he never had a voice in Tailwind operations, went back to the hotel to eat breakfast with his wife.
As Mr. Armstrong began racking up Tour wins, Mr. Weisel reveled in the team's success. But Tailwind couldn't turn a profit. It lost between about $200,000 and $1 million a year through 2003, according to deposition testimony of a former team manager in a 2005 arbitration case related to Mr. Armstrong's bonus pay. "We were always deficit spending," Mr. Weisel said in a 2008 interview.
After the team began winning, controversies emerged. In 1999, a drug test showed traces of corticosteroids, a banned substance, in Mr. Armstrong's urine. Mr. Armstrong said it was the result of a cream used for saddle sores. He was cleared by the International Cycling Union, the sport's governing body.
In 2000, a French TV reporter followed two Postal team staffers to a rest stop miles from the race, where they dumped trash. The reporter found packaging for a drug called Actovegin, which, if injected, can cause the body to process oxygen more efficiently, improving performance. Team officials said the drug was on hand for treating skin abrasions. French police opened an investigation, which went nowhere.
The doping controversies didn't go unnoticed by the team's lead sponsor, the U.S. Postal Service. Gail Sonnenberg, senior vice president of sales for the Postal Service at the time, says some members of its board wanted to end the sponsorship after doping stories hit the press.
Ms. Sonnenberg says the consensus among the investors was that the French were out to get Mr. Armstrong because he was an American dominating their national race. Ms. Sonnenberg says she was assured several times by Mr. Weisel and by two part-owners who were team managers, Mark Gorski and Dan Osipow, that the team was not doping.
The managers told her, she says, that Mr. Armstrong was living like a "monk" somewhere in the French Alps, and that some other teams were "dirty," but that everyone knew the good teams from the bad ones. Ms. Sonnenberg says she believed the Postal team was clean.
A lawyer for Mr. Weisel said his client declined to respond to written questions, saying they contained "statements or assertions" that are "factually inaccurate." He declined to elaborate. Messrs. Gorski and Osipow didn't respond to requests for comment.
In January 2005, team sponsors met at a hotel in Ojai, Calif. At a dinner meeting, sponsors asked about doping, recalls one attendee. Johan Bruyneel, the team's director, told sponsors that the team had a "zero tolerance" policy toward doping, and violators would be dealt with harshly, this person recalls. Mr. Bruyneel declined to comment.
Some owners spoke up when outsiders criticized the team. In 2001, the Sunday Times of London reported that Mr. Armstrong had worked with Michele Ferrari, who had been investigated in Italy for working with cyclists and doping. Mr. Armstrong acknowledged he had worked with Dr. Ferrari but denied breaking any rules. (Dr. Ferrari later was convicted by an Italian court of malpractice and sporting fraud; an appeals court threw out the verdict.)
A few weeks later, Greg LeMond, the first American to win the Tour de France, told a British newspaper he had been "devastated" when he found out about the link between Mr. Armstrong and Dr. Ferrari and was "disappointed in Lance." Mr. Armstrong told reporters he was "surprised" and "upset" by Mr. LeMond's comments.
Days later, according to Mr. LeMond's sworn deposition in the 2005 arbitration case, he got a phone call from Mr. Weisel. According to Mr. LeMond, Mr. Weisel said: "You know, what you're saying about Lance isn't good for you. You better be careful." Mr. LeMond said he considered Mr. Weisel's statement "a threat."
Mr. LeMond said another Tailwind partner—Terry Lee, former CEO of helmet maker Bell Sports Corp., who with his then-wife held a 4% stake—beseeched him days later to stop casting aspersions on Mr. Armstrong, as did Mr. Bucksbaum, who hadn't yet acquired his 7.7% stake in Tailwind.
In a 2008 interview with the Journal, Mr. Weisel said he believed doping in cycling should be handled internally. "Handle the problem below the surface and keep the image of the sport clean," he said. "In the U.S. sports—baseball, basketball, football—most fans couldn't care less."
The Postal Service ended its sponsorship in 2004. Mr. Armstrong won the 2005 Tour, his record seventh in a row, then retired. Tailwind folded in 2007.
Mr. Landis had left Postal for a different team in 2005. He won the Tour in 2006, but failed a drug test. After agonizing about what to do, Mr. Landis says, he declared his innocence and vowed to fight the charges. He established the Floyd Fairness Fund and sought financial support.
Backing came from some of the same people who bankrolled Tailwind. Mr. Weisel chipped in $50,000, says Mr. Landis. Mr. Bucksbaum sent tens of thousands to Mr. Landis's law firm. Mr. Williams, the Connecticut businessman, and Mr. Cashin, the private-equity executive, sent money. Mr. Landis says he spent about $2 million on his defense, and that about 70% of the outside money he raised came from this circle of wealthy cycling backers.
Donors interviewed by the Journal say they had no clue Mr. Landis wasn't telling the truth. "I believed him when he said he was innocent, and then was highly disappointed when he later said he lied and cheated," says James Cox Kennedy, chairman of Cox Enterprises, who donated and held a fund-raiser at the company's Atlanta headquarters. Mr. Kennedy was not a Tailwind investor.
Mr. Landis says he doesn't recall when he first revealed to supporters that he had lied. By the summer of 2008, Mr. Landis had lost his challenge of his positive drug test and was gloomy about his chances on appeal.
Mr. Landis says he cooked up a plan: He would make a video in which he would come clean about his doping, and post it on YouTube. He says he talked to Mr. Williams, the Tailwind investor, about the idea, then dropped it.
Mr. Landis lost his appeal. After a two-year suspension, he began racing again in 2009. Mr. Williams paid $200,000 to sponsor his new team.
Mr. Williams, an amateur racer and former captain of the Yale hockey team, also had become friendly with Mr. Armstrong. Mr. Williams pledged $1 million to the Lance Armstrong Foundation, which helps cancer survivors, and raised money from others. But some two years after Tailwind's breakup, his dealings with Mr. Armstrong soured.
A company Mr. Williams co-owned, eSoles, wanted to sell athletic shoe liners bearing the Armstrong Foundation's "Livestrong" logo. Mr. Williams believed he had been given that right in exchange for his pledges to the foundation. But the foundation—which had an agreement with Nike, one of Mr. Armstrong's top sponsors—said no.
On April 29, 2009, Mr. Armstrong was preparing for a race in New Mexico when Mr. Williams emailed asking to speak to him immediately. Mr. Armstrong's response came just over an hour later.
"To be honest, and I say this as a good friend of yours, I don't feel like dealing with this right now," he wrote. "I'm afraid it's up to you guys to sort out. For what it's worth, and maybe a good solution, is to return you all of your money and let's all get on down the road."
Mr. Williams's logo plan unraveled, and the foundation declined to return his donations. A foundation spokeswoman says it doesn't "accept donations with strings attached" and "never had a formal relationship with, or entered into any agreement with, eSoles." Mr. Armstrong's lawyer, Tim Herman, said the foundation released Mr. Williams from the two or three remaining years of his pledge.
Mr. Williams was furious, say people familiar with the matter. He talked about suing Mr. Armstrong and said he considered their friendship over, these people say.
Late last year, after Mr. Landis's comeback fizzled, he again began thinking about speaking out about doping. He reached out to Mr. Williams, who told him the story was bound to come out and that Mr. Landis should make sure whatever he said was accurate, Mr. Landis says. Mr. Williams has said that his advice wasn't influenced by his dispute with Mr. Armstrong, according to Mr. Landis and a person familiar with the matter.
This April, Mr. Landis sent emails to cycling officials alleging doping on the Postal team. Mr. Landis says Mr. Williams's support was one of the main reasons he did so. The accusations went public, sparking the federal probe. A spokesman for Mr. Armstrong called Mr. Landis "a serial liar" and an "epic cheater."
In August, Mr. Weisel was notified that he and Tailwind are among those named as defendants in a suit Mr. Landis has brought under the federal False Claims Act. The law allows Americans to sue on behalf of the government, alleging the government—in this case, team sponsor U.S. Postal Service—has been defrauded. The suit also names Mr. Armstrong. If the government opts to take on the case and wins monetary damages, Mr. Landis may be entitled to collect a portion.