The Pallotta Teamworks Thing

As the exclusive organizer of all the AIDS Rides since the first California AIDS Ride in 1994, Dan Pallotta and his company have been accused by many people of making huge profits at the expense of the charities who were the beneficiaries of the ride. It is certainly beyond my meager abilities to get to the real truth of the situation, but "expenses" on some of the rides did seem extraordinarily high. On at least one of the rides (Texas in 1998) the expenses were so high some of the smaller charities were forced to shut down. This is hardly the result one would expect from a fundraising event.

But the California AIDS Ride is the oldest of the AIDS Rides and has been the most efficient with expenses chewing up around about 35% of the income. That is high, but it's low for an AIDS Ride. And one would think that with a little effort that rate of expenses ought to come down a bit over time. After all, nothing really changes on the California AIDS Ride from year to year. They know how many Clif bars to bring, how much water to carry, how many tents to buy. There shouldn't be any surprises, right?

So imagine their surprise when last year the expense ratio on last year's California AIDS Ride shot up to about 50%! Imagine! Even though they had a big turnout and the level of donations exceeded that in previous years, the net to the beneficiaries declined! Not acceptable!

What accounted for the rise in expenses? Was it Pallotta's luxurious entourage of personal vehicles which he used to promote other Pallotta events? Was it some magical accounting? [Note to self: find out if Pallotta uses Arthur Andersen]. Was it those gorgeous and very obviously expensive promotional coffee table books they sent out to everyone who had ever done any Pallotta event (if you want to see mine, just let me know; it's too lovely to throw in the trash).

Hey! I don't know the answer. But this is still a free country and you don't always have to know why somebody has done a sucky job, you just fire 'em! And that's exactly what the LAGLC and the SF AIDS Foundation did. They fired Pallotta Teamworks and decided to organize their own ride: California AIDS/LifeCycle, being basically the same event, but without Pallotta Teamworks.

Whereupon Pallotta Teamworks sued. Oh my yes, I'm not making this up. Pallotta didn't sue for a broken contract (LAGLC had already paid him to leave). No, he sued saying nobody else could organize a bike ride from San Francisco to L.A. to raise money to fight AIDS. That was a sad day for anyone who thought Dan Pallotta was due any respect.

Pallotta had his one quick day in court and the judge tossed him out (not quite literally, I'm afraid), clearing away any legal barriers. Unfortunately, it cost AIDS/LifeCycle $600,000 to succeed in this fray. About all Pallotta could do now to stop the ride would be to have his attorneys stuff their pockets with tacks and broken glass and then lie across the highway in front of us. If that happens, count on me to get pictures for you!

So, the California AIDS/LifeCycle ride is not a Pallotta Teamworks event. Does that mean it is guaranteed to have an amazingly low expense rate and an astonishingly efficient rate of return? Sorry, but there are no such guarantees. However, I can guarantee you that the people in charge of the ride are the very beneficiaries themselves and they'd much rather buy a supply of anti-HIV medication than buy me a box of Clif bars just so I can get my fat ass down the road. So I expect to lose weight and I expect a lower level of expenses. And I expect a more open accounting after the ride is over.