Washington Blade - May 3, 2002
Mike Fleming

The lawsuit comes as Pallotta officials distributed two e-mails last week threatening that the AIDS vaccine rides would be discontinued and "unrestricted grassroots funding" for vaccine research would dry up if supporters didn't meet their fund-raising goals.

"The promise of the AIDS Vaccine Ride was that it would help raise much-needed funds for research and development of a vaccine for HIV/AIDS," Cloutier said after filing his lawsuit. "I was greatly disappointed and so were many other well-intentioned riders who were misled."

The beneficiaries for three vaccine rides in 2001 received 21.37 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, the for-profit company that stages the events.

Pallotta has faced criticism from AIDS activists for events that spend as much as 88 percent of proceeds on overhead costs, with less than 12 percent going to beneficiaries.

Pallotta TeamWorks is "extremely disappointed about the lawsuit," and the company has "always been forthcoming about returns," according to Lisa Cohen, press officer for Pallotta.

"Pallotta TeamWorks goes out of its way to not guarantee a percentage of donor dollars returned to the beneficiaries," Cohen said. Victor Schachter, Cloutier's attorney, said that a guarantee isn't as important as accountability.

"People have a reasonable expectation that a fair share of the proceeds in any fund-raising endeavor goes to the beneficiaries," Schachter said. "This kind of pathetic financial result becomes particularly abysmal when there is no accountability."

Schachter is seeking class-action status for the suit. He has heard from "a great number of people who are angry, upset and bitterly disappointed," he said.

The lawsuit comes as Pallotta officials attempted to rally ride participants to sign up friends and meet their fund-raising goals.

"If we fail to meet our fundraising goals for the year, we'll be forced to discontinue these events forever," Stephen Bennett, Pallotta's president, wrote in an April 22 e-mail. "That means no more money raised next year for AIDS vaccine research -- or the year after that."

Bennett, along with company founder Dan Pallotta in an e-mail three days later, told supporters that ending the rides will severely impact funding for AIDS vaccine research.

"Millions of dollars in funding will be lost, and the charities will have to make do with restricted grants and government scraps. Brilliant scientists will suspend their research and return to writing grant proposals," Bennett wrote.

While some big-name beneficiaries such as the Aaron Diamond AIDS Research Center in New York City withdrew as beneficiaries citing returns from previous events, others like the Emory Vaccine Center in Atlanta have stood by the rides.

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 $6.4 million in funding from Pallotta.

Government funding for AIDS vaccine research this year is $357 million, according to the National Institutes of Health. Pallotta contributed an additional $8.25 million.

The goal of the letters was to "emphasize the urgency for raising money and the importance of finding a vaccine," and it has stimulated a "slight increase" in participation in the upcoming European AIDS Vaccine Ride, Cohen said.

Pallotta cancelled two vaccine rides this year as a result of low participation.

The next scheduled vaccine ride rolls in June from Amsterdam to Paris.

"Atlanta Guys Cycling believes that Pallotta is putting forth sufficient effort to improve their results this year," said Todd Wiggins, founder of Atlanta Guys Cycling, a 17-member team that is training and raising funds for the European ride.

Bennett's e-mail to riders outlined 10 actions the company has taken to cut costs, including low-cost or no-cost marketing endeavors. AOL/Time Warner is running free ads on cable television to promote the European event, which is helping improve participation, according to Dan Pallotta's e-mail.

AOL/Time Warner officials did not return calls for comment by press time.

Mike Fleming can be reached at mfleming@sovo.com.
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