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From The Southern Voice [Atlanta] at http://www.southernvoice.com/southernvoice/news/record.html?record=19214
Net return plunges for AIDS vaccine rides
by Lou Chibbaro Jr.
Friday, 8 March 2002
To some, Dan Pallotta, the charismatic man behind AIDS rides held throughout the country, is a hero who has raised millions to battle the epidemic. To others, he is a profiteer who has made millions in 'production fees' while turning over only a small percentage of funds raised to AIDS beneficiaries.
WASHINGTON -- Three highly publicized AIDS Vaccine Rides organized last year by the for-profit fund-raising firm of Pallotta Teamworks pulled in more than $19 million in contributions from riders and corporate sponsors, but incurred millions in overhead expenses and production fees, according to a finance statement released Feb. 26.
That left only $4 million for the three vaccine research institutions designated as recipients for the rides, according to the financial statement.
The designated beneficiaries for the three rides received only 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 Pallotta Teamworks, as a "production fee."
The results from the three AIDS Vaccine Rides in 2001 represents a decline from the 50.42 percent that went to beneficiaries for the single vaccine ride held the previous year.
The 2000 AIDS Vaccine Ride, which took place in Alaska and attracted 1,494 riders, raised $8,558,000 in income, and generated $4,163,000 in net proceeds for the vaccine research institutions. In a development that will likely raise concern among AIDS activists, the three 2001 vaccine rides combined raised $151,000 less in net proceeds than the single vaccine ride in 2000, even though the three rides in 2001 attracted 3,972 riders, who raised nearly $18.8 millions in contributions.
Gustavo Suarez, a spokesperson for the San Francisco AIDS Foundation, called the recently released Pallotta finance statement for the vaccine rides "stomach turning."
"Its not fair for the riders, who worked so hard to raise all that money," Suarez said. "You have less than 25 cents to the dollar going to the charities."
Steve Bennett, president of Pallotta Teamworks, said that while the overhead expenses for the 2001 vaccine rides were higher than the firm had expected, the low return from the rides was due almost entirely to a lower than anticipated income.
According to Bennett, the Pallotta firm budgeted for 8,600 riders, which the firm anticipated would generate a net return of $12.2 million. Although almost 8,000 registered to participate in the vaccine rides, to the dismay of the Pallotta organizers, only 3,972 riders showed up for the three events. Most of those who failed to show up also failed to do any fund-raising, Bennett said.
"We spent about $150,000 more on logistics for each ride than we had planned, even after significant cost-cutting," the Pallotta firm said in a February 2002 letter to riders who requested information about the results of the 2001 vaccine rides.
"Still, it was the income, not the logistics costs, that put us so far behind where we hoped to be," according to the letter.
Despite the poor showing for the three AIDS vaccine rides last year, the Pallotta firm extracted virtually the same "production fee" from each of the three 2001 rides as it did from the single, more successful ride from the previous year.
In 2001, the three rides yielded more than $1 million in production fees to Pallotta Teamworks, about one-quarter the combined total that went toward AIDS vaccine research.
Bennett said the low return prompted the firm to discontinue two of the three vaccine rides -- the Montana ride, from Missoula to Billings; and the Alaska ride, from Fairbanks to Anchorage. The third ride, known as the Canada to USA AIDS Vaccine Ride, from Montreal to Portland, Maine, "carried its own" and will be held again in 2002, Bennett said.
The three institutions designated as recipients for the $4 million raised by the 2001 vaccine rides are the Emory Vaccine Center in Atlanta; the Aaron Diamond AIDS Research Center in New York City; and the UCLA AIDS Institute in Los Angeles, Calif.
But Pallotta plans to replace the poorly performing domestic vaccine rides with more exotic rides in 2002. One is set to take place in Europe, where riders are expected to travel 575 miles from Amsterdam to Paris.
A 75-mile vaccine "Africa AIDSTrek," or walk, is scheduled to take place in a wilderness park in South Africa, the literature says. In addition, the firm will produce a three-day AIDS Vaccine Walk from West Point, N.Y., to New York City.
Atlantans pedal for Pallotta
The European AIDS Vaccine Ride, set for June 30 to July 7, will include a group of gay cyclists from Atlanta, known as Atlanta Guys Cycling. Team members have committed to raising more than $80,000, according to team member Todd Wiggins.
But the low rate of return on fund-raising has Wiggins concerned, he said.
"I certainly didn't know about their low return last year, however," Wiggins said. "That's something I would have to take back to the team and we'd have to discuss. We're definitely doing this to help raise money. A 35 percent expense rate I can understand, but anything over 50 percent certainly makes me concerned."
Officials with the Emory Vaccine Center, which received $1.2 million of the $4 million in proceeds from last year's ride, said the money comes with no strings attached, unlike federal funds, and has helped the center to provide seed grants for smaller research institutions like Hope Clinic in Decatur, which opens next month, according to Holly Korschun, director of science communications at Emory.
"Our feeling is that we're really grateful for whatever money they are able to give us. We have been able to begin and continue many new programs that we would not have been able to otherwise," Korschun said.
Emory was "not aware" of the rate of return on Pallotta events, she added.
Pallotta approached AID Atlanta about four years ago for its involvement in a ride, but the financial results of past events worried officials with the AIDS agency, said Tony Braswell, AID Atlanta's executive director.
"It's not like these are monsters," Braswell said. "These are nice people, they just need to do a better job."
High overhead
The Pallotta Teamworks finance statement comes at a time when some AIDS activists have criticized the firm for incurring high overhead costs for many of its events. The firm has acknowledged that its overhead expenses are higher than that of other charitable fund-raising groups, but has said the size of the cash donations it helps to raise for various charities far exceeds that of other groups.
The finance statement shows that since it began organizing AIDS bike rides in 1994, the company's events have netted more than $222.5 million for AIDS and breast cancer charities. The statement says the overall net return for all of these events over this seven-year period comes to 57.25 percent.
Even that total falls below the standard established by one outside fund-raising watchdog. The Wise Giving Alliance, set up by the Better Business Bureau, advises that at least than 65 percent of proceeds from fund-raising events should make it to the actual beneficiary.
In promotional literature, the Pallotta firm also points out that the fund-raising events generate press coverage, and the firm also promotes various events through newspaper, radio, and television advertisements, improving AIDS awareness generally.
"In 2001, an estimated 96,000 people turned out to cheer on our walkers and riders," according to a message accompanying the 2001 finance statement. "In addition, media coverage of our events reached roughly 1 billion people. That's an amazing number of great opportunities to raise awareness for these important cause."
The firm also advertises the events as an opportunity for riders to challenge their own potential, often using a "self-help" language and focus that some riders have criticized as reminiscent of EST, a controversial program popular in the 1970s and '80s.
Critics take aim
Some AIDS activists have argued that the high overhead costs for many of the events raise questions about the ethics of asking donors to give money to events that result in more money going to overhead costs and the Pallotta firm than to the designated charity.
Concerns about high overhead expenses prompted the Los Angeles Lesbian & Gay Center and the San Francisco AIDS Foundation to break away from the Pallotta group and to establish its own San Francisco to Los Angeles AIDS bicycle ride. The new ride is set to take place less than a month before the Pallotta firm's annual California AIDS Ride begins its run between the same two cities.
Organizers for both events predict the individual rides will draw far fewer riders and donors than the single California ride held last year. Animosity between the two competing parties recently reached a high point.
The Pallotta firm has said the L.A. and San Francisco groups will likely ruin the California AIDS Ride for both parties. The two AIDS groups in turn accuse Pallotta Teamworks of refusing to agree to a compromise contract for the ride that would have protected the groups from cost-overruns that the groups say approached $400,000 for the 2001 ride in California.
Bennett of Pallotta Teamworks disputes that assertion, saying that the firm offered to cover all cost overruns. He said the two groups apparently wanted to create a separate ride and are using the cost overruns as an excuse to breach a contract with Pallotta that prohibits them from conducting a competing ride.
A California court voided the contract, saying it violates state antitrust laws.
Expanding the franchise
Pallotta Teamworks began its fund-raising bike rides in 1994, when it produced the California AIDS Ride. Since then it has produced AIDS rides in several other cities, including New York, Washington, D.C., Boston, Minneapolis, and Chicago. Several rides were dropped, including one held in Philadelphia, after returns dropped as low as 30 percent.
Unlike the vaccine rides, which provide funds to university-backed AIDS research centers, the AIDS rides raise money for organizations that provide direct services to people with HIV and AIDS. The breast cancer walks, which are scheduled for 13 cities this year, including Atlanta and New York City, raise money for research and for organizations that provide education and early screening services to low-income populations.
All of the events require participants to raise a certain minimum amount of money in order to be allowed to ride or walk. That minimum ranges from $1,000 to as much as $10,000 for a planned vaccine ride in Africa.
This year, the Pallotta firm has expanded its bike rides and walks to several new causes. A walk to combat suicide is planned for Washington, D.C. A "Kids March" set to be held in Los Angeles will raise money for foster care programs aimed at finding permanent parents for children in need of a stable home. A walk "to end poverty" had also been scheduled to be held in Los Angeles in August, but Bennett said his firm cancelled that event because not enough people signed up for a required pledge to raise $1,900 each.
In a 22-page document posted on its Web site, which includes the finance statement for all of its 2001 events, Pallotta Teamworks says it netted more than $69 million for AIDS and breast cancer charities in 2001.
The finance statement shows that the breast cancer events, which consist of walks rather than bike rides, yielded by far the largest return for their designated charities. The statement shows that breast cancer events in nine cities netted $51.5 million, and garnered a return of 60.34 cents on the dollar, though still below the 65 percent minimum established by the Wise-Giving Alliance.
Atlanta, New York City and Washington, D.C. were among the cities that hosted a Pallotta produced breast cancer fund-raising walk.
The finance statement shows the combined net proceeds for four 2001 AIDS rides -- which raised money for non-profit groups that provide services to people with HIV and AIDS -- came to $13.55 million. Beneficiaries received a total of 46.71 cents of every dollar raised, the statement says.
The finance statement shows the 2001 return represented a decline from a combined return of 52.72 cents on the dollar for the 2000 AIDS rides.
-- Jennifer J. Smith contributed to this report
Southern Voice
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