Washington Blade - July 5, 2002
Mike Fleming

"We had budgeted to register 2,615 riders for the European Ride," Pallotta wrote in the June 25 e-mail. "Right now, we have registered 1,270 riders. ... You are our heroes, and we're totally behind you.

"However, we want to let you know that, with these numbers, we now know that returns to charity from the Ride will be extremely low -- below 10 percent at best."

As recently as a March 25 letter to participants in the Vaccine Ride, Pallotta said that the ride had more than 1,100 people registered, and that if they all show up, "the ride will be a great success."

The latest communication from Pallotta contradicts the March letter because riders didn't fulfill their individual fund-raising commitments, said Lisa Cohen, press officer for Los Angeles-based Pallotta TeamWorks.

"What has happened is that the registration number increased [since March], but the 'unable to participate' number also increased," Cohen said. "So we know that the number of actual participants is going to be lower than we had hoped."

The economic downturn and public fears resulting from the Sept. 11 terrorist attacks created an environment for failure, Cohen said.

"Sept. 11 and the terrorist attacks around the world have affected people's willingness to travel," she said. "Sept. 11 also forced us to put off our advertising for the rides by four months, which helped in recruitment. The weak economy has made fund-raising in general and for AIDS related causes in particular more difficult."

The Europeans AIDS Vaccine Ride now underway will be the last for Pallotta TeamWorks, company officials said, meaning the Canada to U.S. Vaccine Ride set for later this summer will be canceled.

The AIDS Vaccine 3-Day, scheduled for July 19-21 in New York and similar to the Avon-sponsored breast cancer walks produced by Pallotta, apparently will continue.

Returns below 10 percent

While other Pallotta TeamWorks AIDS rides, including last month's seventh annual Washington, D.C. AIDS Ride benefiting Whitman-Walker Clinic and Food & Friends, raise money for AIDS agencies and services for people living with AIDS, the vaccine rides raised money specifically for research into a cure for AIDS.

The beneficiaries for three vaccine rides in 2001 received about 21 cents for every dollar raised, while 78.63 cents on the dollar went to expenses. Roughly 5 cents of every dollar raised went directly to production fees for Pallotta TeamWorks.

Pallotta TeamWorks has faced criticism for organizing and taking production fees from events that spend as much as 88 percent of fund-raising proceeds on overhead costs, with less than 12 percent going to beneficiaries.

Since 1994, the company's AIDS-related events have averaged 60 percent returns to beneficiaries with 40 percent going to overhead, according to financial statements from the company.

That figure still falls short of the range of acceptable returns for fund-raisers, said Bennett Weiner, chief operating officer of the Wise Giving Alliance, a division of the Better Business Bureau that advises donors on charities.

"We like to see fund-raising costs will not exceed 35 percent of total contributions," Bennett said. "That is a minimum."

A cyclist who participated in a 2001 AIDS Vaccine Ride filed suit April 23 against Pallotta TeamWorks for allegedly misrepresenting how much of ride proceeds land in medical research coffers. The company has faced similar charges in the past.

In 1997, the attorney general of Pennsylvania found that Pallotta TeamWorks "failed to adequately disclose to Pennsylvania consumers the impact of unforeseen circumstances on the actual percentage of monies which would be given to the charities."

Vaccine Riders react

Pallotta TeamWorks sent the June 25 e-mail notice to riders in an effort to be forthcoming, Cohen said.

"Many people have said that they appreciate the open lines of communication and honesty about the returns," she said. "They want to make a positive statement on their last ride."

But the announcement was a bombshell for some riders, many of whom were already in Europe for this weekÆs ride.

At least one cycling team and another individual rider expressed a "loss of faith" in Pallotta TeamWorks, and implored the for-profit company to forfeit their production fee and pledged to find other outlets for their philanthropy in the future.

Julia Harrison and her husband Jeff Grady of Connecticut raised about $10,000 for Grady's ride -- more than twice the amount required by Pallotta TeamWorks to participate.

"We are absolutely furious," Harrison said last week. "And with my husband leaving tomorrow [June 27] for Europe, we are desperately trying to figure out whether he should go or not -- and what recourse we have to redress this."

Grady decided to fulfill his commitment to the ride, as did Atlanta Guys Cycling, a 17-member team that raised more than $100,000 for the event.

Todd Wiggins, team captain of Atlanta Guys Cycling, rallied his teammates and wrote a response to Dan Pallotta.

"The timing of your e-mail is unbelievable," Wiggins wrote. "The first two of our team are already in Amsterdam. ... To send out this e-mail less than a week before the rides is a slap in the face."

Wiggins admonished Pallotta TeamWorks for misleading riders amidst public criticism.

"We countered a negative ad campaign," he wrote. "We convinced our friends that this year would be different for Pallotta TeamWorks' AIDS Vaccine Rides. Our friends opened their hearts to encourage us, and they supported us generously -- not for you, not for Pallotta TeamWorks, but for us.

"Now we have to look them in the eye, and admit that our faith was misplaced. The nay-sayers were right," he wrote.

In response to critics, Pallotta had previously promised to cut costs for the European ride, including low cost marketing endeavors, reusable signs and generic snacks for riders.

"You led us to believe that this year would be different," Wiggins wrote. "We believed in you and in Pallotta TeamWorks, and now we have taken $100,000 out of our community -- the same community that we have to face when we return from our trip to Europe."

The ride should have been cancelled, and now Pallotta TeamWorks should forfeit their production fee, Wiggins said.

"There is no conscionable way for them to justify keeping the production fee for this event," Wiggins said.

After announcing the expected results of the European ride, Pallotta TeamWorks decided to forfeit its fee, Cohen said. The flat fee is estimated to be about $325,000 per ride.

"The fee is the same whether the event raises $20 million or $5 million," she said. "Pallotta TeamWorks has cancelled the vaccine rides and has guaranteed that the beneficiaries won't lose money. Pallotta TeamWorks will take the financial hit."

Beneficiaries stand by Pallotta

Last year's first vaccine rides benefited Emory Vaccine Center in Atlanta, the Aaron Diamond AIDS Research Center in New York City and the UCLA AIDS Institute in Los Angeles.

Diamond dropped out of the events this year, citing low returns from 2001. The New York center placed ads in newspapers across the country explaining that to stick by Pallotta was "unconscionable."

But officials with Emory and UCLA this week confirmed their continued relationship with Pallotta TeamWorks, saying even low returns still mean valuable resources for research.

Pallotta funds helped the Emory facility provide seed grants for smaller research institutions, according to Holly Korschun, director of science communications at Emory. Last year, the center received $1.2 million of its $7.6 million in funding from Pallotta.

"We at Emory University understand these latest concerns, but the money we receive from the AIDS Vaccine Events has allowed the Emory Vaccine Center to make real progress in AIDS vaccine research," said Rafi Ahmed, director of the university's vaccine center.

The vaccine rides have contributed critically to Emory's vaccine research, and the funds will be sorely missed, Ahmed said.

UCLA officials did not return calls for comment, but expressed disappointment in the end of the rides in a one-sentence written statement.

"While returns did not meet our expectations, we believe that Pallotta TeamWorks is committed to an AIDS vaccine, and we know that their contributions have been invaluable to our work," the statement said.

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