The Court of Arbitration for Sport ruled that Lund should serve a one-year suspension, retroactive to Nov. 10 and enforced immediately.
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Lund told CAS that he was misled by the Web site for the governing body of his sport, which listed finasteride both as a "prohibited substance" and a "specified substance." Lund told CAS he failed to check the prohibited list in 2005.
"I'm very sad and disappointed in the outcome," Lund said. "I feel like the anti-doping system really let me down as an athlete. As I sit here talking to you right now, I sit here as an Olympian and I believe no one can take that away from me."
The CAS panel believed Lund and wrote in its ruling that "it was entirely satisfied that Mr. Lund was not a cheat."
"But, unfortunately, in 2005, he made a mistake," CAS wrote.
Last month, the U.S. Anti-Doping Agency decided Lund deserved only a public warning for ingesting finasteride and should forfeit his second-place finish from the season's opening World Cup event in Calgary, where he tested positive.
But the World Anti-Doping Agency wanted a tougher sanction and appealed to CAS, which partially agreed. WADA asked for a two-year ban. Lund will be able to compete again on Nov. 9, but will not have to forfeit any other results from this season aside from Calgary.
After packing his bags and leaving the athletes' village, Lund will voluntarily return his accreditation for the Olympics Friday and remain in Turin for a couple days in accommodations provided to him by the U.S. Olympic Committee.
He will not watch the skeleton races next week in person.
"I want to get home with my family as quickly as possible," Lund said.
WADA director general David Howman said the organization was "comfortable" with the one-year ban.
"The correct process was followed," Howman said. "CAS functioned in the way we have come to expect of them. ... Once the offense is established, then the onus goes on the athlete to convince the panel that there was no fault or no significant fault. The panel found no significant fault."
The decision — issued hours before Lund was to participate in the Olympic opening ceremony — is another blow to the reeling U.S. skeleton program, which has endured recent scandals prompting the departure of both coach Tim Nardiello and now its top slider in Lund, who led the World Cup standings at one point this season.
The U.S. still should be able to have three sliders in the men's skeleton event on Feb. 17. Eric Bernotas and Kevin Ellis will now be joined by Chris Soule, who was seventh at the Salt Lake Olympics four years ago. Soule will be traveling in from Lake Placid, N.Y.
Skeleton racers slide headfirst on a thin sled down the same track used for bobsled and luge, exceeding 70 mph. Lund was the Americans' best chance for a medal in the sport.
CAS heard WADA's appeal on Thursday afternoon at a Turin hotel. Lund attended with his attorney, Howard Jacobs.
WADA has authorization to appeal any doping-related sanction that it finds too lenient or incorrect.
"The current anti-doping rules lack any notion of common sense. ... He had a well-documented reason for the positive test," Jacobs said. "It had nothing to do with performance enhancement."
Meanwhile, the U.S. Bobsled and Skeleton Federation now finds itself dealing with more drama.
Last year's World Cup champion Noelle Pikus-Pace missed the first half of this season after breaking her leg in Calgary when an out-of-control U.S. bobsled smashed into her.
On Dec. 31, Nardiello was suspended over sexual harassment allegations; he was later reinstated but ultimately fired after ignoring orders to stay away from the American team during its final Olympic preparations in St. Moritz, Switzerland last week.
And Lund's saga began on Dec. 15 in Sigulda, Latvia, when he learned of the positive test. He was later barred from two races by the International Bobsleigh and Skeleton Federation (FIBT) over the test, which the USBSF did not promptly report to the U.S. Olympic Committee.
"On a whole, his skeleton teammates and coaches are devastated by this decision," said Terry Kent, the USBSF sports director.
Finasteride has been on the banned list since 2005; Lund has said he last checked the list in 2004 because the product was legal for the first four years of his usage. Two athletes, Argentine tennis player Mariano Hood and German soccer player Nemanja Vucicevic, were banned for taking the same drug last year.