Washington Blade - August 30, 2002
Lou Chibbaro Jr.

The shuttering of the firm's offices was first reported by Associated Press, and Pallotta officials have refused to respond to all other press inquiries, including from the Blade.

Company founder and chief executive officer Dan Pallotta informed employees he hoped the layoffs would be temporary, the AP reported.

Pallotta vowed to press ahead with its popular Avon three-day breast cancer walks set for later this year in Atlanta, Los Angeles and New York, AP reported, even after Avon has announced its separation from Pallotta once those events are completed.

"We were furloughed," Pallotta TeamWorks spokesperson Janna Sidley told the AP. "Their intention is to continue the season and bring us back."

The upcoming breast cancer walks are the last three Pallotta-produced events scheduled for 2002. They come on the heels of a tumultuous year in which critics attacked the company for incurring high overhead costs for many of its events.

Nearly all of the fund-raising firm's clients, including Avon, have ended their association with Pallotta. Avon officials said they would make other arrangements to carry out the three-day breast cancer walks next year in more than a dozen cities.

Big money, big costs

Pallotta's supporters note that Pallotta-produced events have netted more than $222 million for AIDS and breast cancer groups since the company began producing its fund-raising bike rides in 1994 and breast cancer walks in 1996. Supporters also credit Pallotta and his staff with inspiring ordinary people to undertake "life-altering experiences" by training to ride hundreds of miles on their bicycles while raising thousands of dollars each to help people with AIDS.

While acknowledging that the rides incurred high overhead costs, Pallotta officials and their supporters say these events generated millions of dollars in donations for AIDS and breast cancer causes that otherwise would not have materialized.

But critics, including Wayne Turner, an activist with Act UP D.C., said the high-cost AIDS rides diverted contributions away from smaller, grass-roots AIDS organizations while providing large profits for Pallotta TeamWorks. Turner accused Dan Pallotta of attempting to build an "empire," which Turner said was now crumbling.

As of this week, the Gay & Lesbian Community Services Center of New York and the Fenway Community Health facility in Boston, which have been beneficiaries of the Northeast AIDS Ride, were the company's last potential clients for AIDS rides of any kind in 2003. Spokespersons for the two organizations said their boards had yet to decide whether to retain Pallotta TeamWorks for the 2003 Northeast AIDS Ride.

All of the other groups that had retained Pallotta TeamWorks to produce AIDS rides, including D.C.'s Whitman-Walker Clinic and Food & Friends, have either severed ties with the company or were dropped by the firm.

Whitman-Walker said it would seek out other fund-raising activities to offset the funds it received from the ride. Food & Friends, which delivers meals to people with HIV and other illnesses, announced it would produce its own D.C. AIDS ride in 2003. Both groups have praised Pallotta TeamWorks for doing a good job in producing the D.C. AIDS Ride for the past seven years and insisted their departure with the company was amicable.

Faced with an insufficient number of riders and high costs, Pallotta TeamWorks announced this summer that it was discontinuing all of its AIDS vaccine rides in 2003.

The vaccine rides proved to be among the company's most controversial events because they incurred unusually high overhead costs. The three vaccine rides the company produced in 2001 raised more than $19 million from donations by riders and their supporters, but generated over $16 million in overhead costs and fees. Only about 21 cents out of every dollar raised found its way to two vaccine research centers named as beneficiaries for the rides.

The company faced additional problems earlier in the year when two people with grievances over separate rides filed lawsuits seeking millions of dollars in damages. The mother of a young women who died while participating in the 2001 D.C. AIDS ride charged Pallotta TeamWorks with failing to provide adequate emergency medical care when her daughter was stricken and died from what appeared to be heat stroke.

A California man who participated in the Pallotta-produced Alaska AIDS Vaccine Ride sued the company in April, charging that it deceived riders by turning over to two vaccine research facilities less than one-third of the $28 million the riders raised in four vaccine rides in 2000 and 2001. Donations 'squandered'?

The low return on the vaccine rides prompted a group of AIDS activists, led by California-based AIDS fund-raiser Craig Miller, to place full-page ads in gay newspapers denouncing Pallotta TeamWorks for "squandering" contributions by donors to overhead costs and the Pallotta firm's "own profit."

Some AIDS ride supporters blamed negative coverage of the rides in the gay press as a key reason for a drop in the number of riders, which, in turn, led to a decrease in the events' profitability. Some participants noticed a drop in the number of gay riders in this year's D.C. AIDS Ride, which yielded the lowest return for the D.C. event since it was first produced by the Pallotta firm in 1996. The 2002 D.C. ride drew more than 1,000 fewer riders than the 2001 D.C. AIDS Ride.

Spokespersons for Food & Friends and Whitman-Walker cited the weekly barrage of full-page ads that Miller and his group placed in the Blade and other gay papers as having a devastating effect on the D.C. ride.

Miller, one of the founders of AIDS Community Donor Action, the group that prepared and paid for the ads criticizing Pallotta TeamWorks, said the ads were "meticulously researched and 100 percent accurate."

"There would have been no ad campaign at all if it were not for the truly egregious conduct on the part of Pallotta TeamWorks regarding their fund-raising activities," said Miller, whose fund-raising firm MZA Events, Inc., produces fund-raising events, including AIDS walks, in many cities.

"If there's one thing we all should have learned from Enron and Arthur Andersen, it's that leaders have a duty to speak out about practices within their industries," Miller said. "Pallotta TeamWorks had a long record of conduct that really hurt the AIDS community. We had an obligation to speak out."

News reporter Lou Chibbaro Jr. can be reached at lchibbaro@washblade.com.

020830
WB020812

Copyright ©1980, 2002. AEGiS. All materials appearing on AEGiS are protected by copyright as a collective work or compilation under U.S. copyright and other laws and are the property of AEGiS, or the party credited as the provider of the content. .