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Livestrong Struggles After Lance Armstrong's Fall

Lance Armstong Illustration - P 2013
Illustration by: Edel Rodriguez

Funds are dropping, celebrities like Ben Stiller and Robin Williams have fled -- and one expert predicts there's just 2 1/2 years of money left.

This story first appeared in the Aug. 2 issue of The Hollywood Reporter magazine.

On the back of an athlete who won seven consecutive Tour de France cycling competitions from 1999 to 2005 after conquering his testicular cancer, Lance Armstrong's eponymous charitable foundation was rolling in the dough.

By 2012, the Lance Armstrong Foundation reported net assets worth more than $103 million. But that all changed when Armstrong admitted this year that he had doped, leaving his charity on its own to show it has the endurance to survive the scandal.

Livestrong -- the foundation changed its name in November -- now must find a way to move forward without its charismatic founder. Once boosted by sales of millions of yellow bracelets, part of a prized Nike sponsorship the sportswear company says will end in 2014, and the ability to attract thousands to celebrity cycling events, the brand has been tarnished.

Case in point: Catherine Migliano, whose father was diagnosed with a rare form of sarcoma. Armstrong helped him find a doctor, and when she later became ill with breast cancer, volunteers from the foundation drove her to treatments and helped with paperwork. Now one of the charity's strongest defenders on Twitter, Migliano worries that the public cannot separate the foundation from the disgraced cyclist.

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"The general public doesn't understand that Livestrong isn't about Lance," she says with frustration.

Livestrong's troubles are evidenced not only by slipping support from the likes of Ben Stiller and Robin Williams, who declined the foundation's invitation to walk the red carpet at its fundraising event in October. The intense media scrutiny of Armstrong also has expanded to include the charity. Journalists and bloggers have pored through its IRS filings and questioned why the organization spent so much on marketing and gauzily defined cancer-survivor programs, rather than focusing on cancer research. Did it really need to pay $3.8 million to advertising giant Ogilvy & Mather in 2009 for a global cancer-awareness campaign, or was the money wasted on an attempt to rehabilitate Armstrong's reputation amid the accusations?

And it's not just the media who are asking tough questions: Claiming they were misled about the charity's mission and practices, a small but vocal number of former supporters are demanding their donations be returned, which Livestrong says is not an option.

The charity's leaders acknowledge public confusion about the foundation's mission. When it applied for tax-exempt status during the late 1990s, the Lance Armstrong Foundation listed cancer research as one of its goals. But through the years, the organization mainly has focused on cancer survivors and improving quality of life.

In hindsight, say Livestrong's leaders, relying so heavily on Armstrong and other celebrities to drive the foundation's message might have been a mistake. "When you have a famous face as the head of your organization, the urgency to explain what you do isn't that great -- but now the urgency is really great," says Katherine McLane, vp external affairs at Livestrong.

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McLane adds that Livestrong's board -- from which CNN's Dr. Sanjay Gupta took a leave of absence as the doping allegations gained credibility -- is in the midst of drawing up a new strategic plan. Although she won't offer many specifics, she says there has been "belt-tightening," with an eye toward increasing efficiency.

Contributions in 2012 declined to $22.7 million, down 8.1 percent from 2011 and 45 percent from 2009, according to IRS data. Licensing revenue fell another $5 million last year, according to an independent auditors' report. The foundation was boosted by a much better return in its investment income, but overall has reported about $2 million less in net assets from the previous year. Meanwhile, financials for Livestrong also show the foundation is devoting more of its money toward program services and fundraising and less in management.

And whether it's out of necessity as much as a considered change in strategy, McLane expects that going forward, Livestrong's approach will be less about celebrities. She says the foundation has not reached out to other famous athletes to become the new faces of the organization. "Our supporters tell us that they would rather see faces of everyday people," says McLane, mentioning online peer-recommendation engine Yelp as a possible low-cost model toward a more community-centric approach to charity.

With more than $100 million in total assets, the nonprofit foundation remains in a fairly strong financial position. In late May, Livestrong also reported that it had generated $16.4 million in revenue in 2013 -- but the news came the same day Nike announced it was terminating its lucrative sponsorship. Nike will stop making Livestrong apparel by year's end and will halt its financial support of the foundation when the parties' deal expires in 2014.

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Analyzing the foundation's financial position, including assets like real estate that aren't particularly liquid, Daniel Borochoff, president of CharityWatch -- which provides information about activity in the nonprofit sector -- estimates Livestrong has 2.7 years of existence remaining before it is hit with an emergency cash crunch.

On the bright side, he says, Livestrong still is regarded highly by its clients -- cancer survivors who have turned to the foundation for help. Borochoff compares Livestrong to another troubled cancer-related nonprofit, the Susan G. Komen for the Cure foundation, which ran into a firestorm after the group announced it no longer would provide funding to Planned Parenthood because of its abortion policies.

Says Borochoff, "At least Livestrong wasn't politicized -- it was just too tied in to one individual."

Doug Kingsriter, who departed as Livestrong's chief development officer in 2007, says the foundation always was searching for a clear identity.

"There was an intense debate going on between two camps when I was there," he says. "On one side were those who believed the message should be, 'This is what Livestrong should mean to you,' and the other side argued for, 'What does Livestrong mean to you?' "

The latter, more nebulous message won out, says Kingsriter. Without clearly defining its mission to the public, Livestrong rode a wave of popularity by selling millions of fashionable bracelets to those who wanted to be connected to the cause, whatever it might be. But even before Armstrong's denials of doping collapsed in the face of overwhelming evidence, the bracelet phenomenon had ebbed. By about 2008, the foundation began leaning more heavily on promotions like offering opportunities to ride in charity races with Armstrong and other celebrities to fund its endeavors. At a certain point, Livestrong's leaders, including Armstrong, knew its future would have to go on without its famous leader.

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"Lance was in favor of that," says Kingsriter.

Others who have worked for the foundation -- including Brendan Burns, Livestrong's grassroots advocacy manager from 2007 to 2009 -- defend the good work done. Burns notes the charity's efforts the year he joined to help create the $3 billion Cancer Prevention & Research Institute of Texas (more recently, that agency became embroiled in a scandal and criminal investigation). Although Livestrong has been criticized for its enormous devotion to "branding" campaigns, Burns says the asset of having a passionate group of folks shouldn't be underestimated.

"It might lose its celebrity status, but at end of day, they still have a core group that is stronger than anything I've ever seen," says Burns, now a director at Stand for Children, a charity devoted to improving education. "This allows Livestrong to focus."

Still, not everyone is convinced that removing its disgraced founder assures Livestrong will survive. Borochoff says if the foundation could get a celebrity to replace Armstrong as its ambassador, it would. He cites Michael J. Fox's work on Parkinson's disease and Jerry Lewis' efforts on behalf of those with muscular dystrophy as powerful examples of the value of having the right spokesperson.

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Today, Armstrong remains a supporter of the foundation he founded -- according to Livestrong's website, he "remains the foundation's single biggest donor." But both agree it is best he stay away from its day-to-day activities as Livestrong tries to move forward.

"I think people vote with their pocketbooks," says Kingsriter. "I think that if enough people say, 'This is meaningful to me, and I want to leave Livestrong in my will,' then they can continue to do what they are doing."

Tina Daunt contributed to this report.

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