SCA Settled With Lance Armstrong for $7.5 Million. Then He Confessed, and the Panel Reopened It.

Somebody has to carry the risk that the contest actually gets won. In Dallas, a firm called SCA Promotions carried it on the bonuses tied to Lance Armstrong’s Tour de France wins.

That is a real line of business. It is called prize indemnity, and it works like this: a company promises a spectacular payout, pays a premium to a specialist firm, and that firm writes the check if the improbable thing happens. Hole in one at the charity golf day. Half court shot at halftime. A cyclist winning the Tour de France several years running.

Armstrong won. SCA refused to pay. And then, almost nine years after the fight was supposedly over, the same private panel that had closed the file reopened it.

The bet was on a repeat, not a race

Prize indemnity is not a wager on who wins one event. It is a wager on a streak, or on a long shot, priced by people who calculate odds for a living.

The structure here was straightforward. SCA agreed to pay specified sums if Armstrong won the Tour de France in successive years, according to the arbitration record and contemporary reporting.

He won the required Tours. SCA then contested its obligation, saying he had cheated to get them.

A prize indemnity contract is a promise to pay on a result. If the result was obtained by fraud, the payer wants to know whether it still has to honor the promise. That is what puts this file in the claims locker rather than the sports pages.

The first proceeding, and the sworn answer

The dispute went to arbitration, which is a private court the parties agree to use instead of a public one.

In January 2006, Armstrong testified under oath before that panel. He denied using performance enhancing drugs.

Before the panel ruled, the parties settled. On February 8, 2006, SCA agreed to pay Armstrong $7.5 million, a sum reported to cover the bonuses, interest and attorneys’ fees, and the file closed.

For most disputes, that is the ending. A settlement is designed to be an ending. It trades finality for certainty, and both sides normally give up the right to reopen the question.

Then the answer changed

In January 2013, Armstrong admitted in a televised interview with Oprah Winfrey that he had used performance enhancing drugs to win the Tour de France.

SCA went back to the same arbitration panel and asked for a sanction, arguing that the settlement it had paid was obtained through testimony that was false when it was given.

This was a genuinely unusual ask. Settlements are supposed to be closed. Arbitration panels are supposed to be done once an award or a settlement ends the matter. Reminger Attorneys at Law, writing about the case, framed the outcome as a panel overturning a decade old voluntary settlement.

February 4, 2015

The final award issued on February 4, 2015.

The panel split two to one. It ordered Armstrong and Tailwind Sports, the company that owned his team, to pay $10 million, an amount reported as approximately the sum SCA had previously paid him plus its attorneys’ fees.

The majority, arbitrators Richard Faulkner and Richard Chernick, described what the record showed in language that does not read like standard arbitration prose. The ruling, as quoted by ESPN and ABC News, called the record “an unparalleled pageant of international perjury, fraud and conspiracy,” and added: “Perjury must never be profitable. Tailwind Sports Corp. and Lance Armstrong have justly earned wide public condemnation. That is an inadequate deterrent. Deception demands real, meaningful sanctions.”

The third arbitrator, Ted Lyon, dissented. ESPN reported that he called the majority’s move far-fetched, on the ground that no arbitration panel had reopened a settled matter to impose such a penalty before.

SCA then asked a Texas state court to confirm the award, which is the step that turns a private arbitration ruling into something a court can enforce.

That court filing is also the reason this document is public at all. Private arbitration is usually invisible. It becomes readable when the winning side needs a judge to make it real.

Why the sworn testimony was the hinge

The panel did not reprice the bicycle races. It did not recalculate what the bonuses should have been. It looked at what happened inside its own proceeding.

The theory that won was about the process itself. A party had come before the panel, testified under oath, obtained a settlement on the strength of that testimony, and seven years later said on television that the testimony was untrue.

The sanction, on that reading, was not about cycling at all. It was about what a sworn answer is worth in a private forum that has no marshals, no perjury prosecutors, and no way to jail anybody.

The only currency such a forum has is money. So the panel used it.

The outer limit of finality

Indemnity contracts have a fraud problem shaped exactly like every other insurance contract. The payer priced a risk using facts supplied by the person who benefits from the payment. When the facts turn out to be manufactured, the price was never real.

A settlement normally ends the argument. The Armstrong award is the case for the other side.

The award summary, the confirmation filing, and the contemporary coverage from three named outlets are in the Sources block.