The world according to Dan: Dan Pallotta invented AIDS Rides, which have raised more than $100 million for charity. But with former allies now battling him in court, he finds himself once again defending his for-profit vision for improving the human race. (Cover Story).
But to Pallotta, his efforts were more than just the heady stuff of a 20-something Ivy Leaguer. This was about the future. The funds he helped raise demonstrated that people were willing to shell out large sums of money to help others make extraordinary treks in the name of charity. A decade later, that cross-country bikeathon served as the blueprint for the American AIDS Rides, a series of multiday bike rides that since 1994 have raised around $100 million to fight HIV and AIDS. And they in turn sparked Pallotta's own vehicle for changing the world, the 300-employee for-profit fund-raising company Pallotta TeamWorks.
Now that vehicle is running at full speed. And it seems Pallotta is not about to let anything stand in its way, even if it means going to court--during one of the leanest times in the history of AIDS fund-raising--to try to block a competing event.
"If we can create an engine called Microsoft that can put a computer in virtually every home in America, if we can create an engine called Nike that can put sneakers on the feet of people all over the world, then we have to begin to create engines--multibillion-dollar engines--that are addressing the great social causes of our time," the impassioned 41-year-old says when describing his Los Angeles based company in an exclusive interview with The Advocate. TeamWorks today specializes in organizing and marketing fund-raising excursions aimed at fighting everything from AIDS to suicide.
It's hard to disagree with his thinking. Why shouldn't the charity world employ the business practices of BMW and Apple, as he suggests, so that people "are talking about hunger and breast cancer as much as they're talking about Lord of the Rings, Harry Potter, and Pokemon?"
Nevertheless, this dark-haired gay man, who speaks of his extraordinary dreams in a measured and very commonsensical tone, has become the most controversial man in AIDS fund-raising. It seems changing the world is a contentious and expensive business. And even though TeamWorks has raised over $100 million for AIDS, sometimes less than 50% of the money goes to the benefiting charities. (The general standard, according to the Better Business Bureau's Wise Giving Alliance, is 65%.) The rest is used to cover the company's fee--up to $450,000 per AIDS Ride--and production expenses.
Those expenses have not only put Pallotta in a lot of hot water with some AIDS service organizations around the country but have also led the company into a very public legal battle. In January, TeamWorks lost in its attempt to get a judge to block the Los Angeles Gay and Lesbian Center and the San Francisco AIDS Foundation from organizing a bikeathon that will compete with this year's California AIDS Ride.
The center and the foundation have relied on the proceeds from the TeamWorks-produced California AIDS Ride for 13% and 25% of their respective AIDS service budgets for close to a decade. But now the groups say the cost of working with TeamWorks has become prohibitive, in part because of the company's growing emphasis on other causes. Essentially, they seem to be arguing that Pallotta is a man who may be too fixed on changing the world to continue to effectively help them in their very focused goal of raising money and providing services to fight HIV and AIDS.
Pallotta TeamWorks events are custom-made to elicit extreme emotions. By pushing their bodies to previously unimaginable levels, participants gain a new appreciation for suffering as well as a dedication to ending the suffering of others. In the case of the AIDS Rides--four of which will be held around the country this year--riders have baked in 100-plus temperatures as they've pedaled through California's central valley and have fought near-torrential downpours as they've pushed their way between New York and Boston. Still, they keep coming back. Registration for the four- to seven-day rides, which require riders to raise a minimum of between $2,100 and $2,700, almost always fills up before the scheduled deadlines.
Participants talk of the life-changing experiences they've had on the AIDS Rides, but the events have been a favorite target of critics. This has been especially so since 1996, when TeamWorks returned only 28% of a ride's revenue to the benefiting Philadelphia charity and as a result ended up paying a $110,000 court settlement to the state of Pennsylvania, which charged that the rate of return was too low. Similar returns after rides in Florida and Texas have generated their own share of negative press.
"It's hard when somebody looking at it from the outside doesn't understand and they think you're up to something suspicious," says Pallotta, who is himself often the target of that attention. AIDS activists especially have criticized him for getting rich off money they say is meant for AIDS work.
But while giving no apologies for making what he says is a healthy living by raising millions for charity, he consistently denies requests to disclose specific numbers. (Because his for-profit company is privately owned, it is not required to share such information.) In fact, prior to the current controversy, Palotta has shied away from interviews with the gay press, instead letting TeamWorks officials give the company response to what are sometimes very personal attacks.
When presented with some of that criticism today, he chooses instead to discuss the sacrifices he's made for his company and the causes it supports. "I've put everything that I own on the line for the vaccine rides," he says, referring to a series of events aimed at supporting AIDS vaccine research. "And there are days where I go, `God, how can I just tell people [what I'm trying to do]?'
"Have we made mistakes? Absolutely we've made mistakes," he continues. "But we've also had a lot of success. And I'm proud of the results that we've produced."
Until last fall, a person needed only to go to the Los Angeles Gay and Lesbian Center or the San Francisco AIDS Foundation for assurance of those results. In 1998, Lorri Jean, then executive director of the L.A. center, told the Los Angeles Times that Pallotta had "raised millions for AIDS" and that "the people who suggest he isn't committed are cruel and misinformed." In 1997, Pat Christen, executive director of the AIDS foundation, told the Orange County Register, "the ride has proven to be very successful in bringing new donors into the fight against AIDS." Indeed, in the eight years since starting the California AIDS Ride, TeamWorks has helped the two agencies net more than $40 million.
But Christen and the L.A. center's current executive director, Gwenn Baldwin, started telling a different story last October, when they announced they were ending their association with the 2002 AIDS Ride, scheduled to start June 2 in San Francisco. And in what appeared to be the second part of a one-two punch aimed at TeamWorks, the agencies announced they'd stage a competing California bikeathon, the AIDS/LifeCycle, just two weeks before the AIDS Ride.
Christen denies that she and Baldwin had any vindictive motive in scheduling their event so close to the AIDS Ride; the rain in spring, the heat in autumn, and calendars packed with gay pride observances left only a very small window in which to hold the ride. She adds that the escalating expense of the TeamWorks-run event gave the foundation and the center little alternative but to break out on their own.
"Over a two-year period we had seen the cost of fund-raising effectively go from 35 cents on the dollar to about 50 cents on the dollar," she says. "That means a million and a half dollars that otherwise would have gone to HIV services went to produce the event."
TeamWorks overspent the logistics budget it agreed on with the foundation by nearly $399,000, or 41%, for the 2001 AIDS Ride, Christen says. The center's agreed-upon logistics budget was overspent by $377,000, or 34%, according to Baldwin. Logistics was the largest budgetary item in each case. Both women say careful accounting found that their agencies were also being asked to cover expenses for other events, including concrete barriers for a ride in Chicago and tax penalties stemming from the 1996 Philadelphia ride. "After eight years, I don't understand why you would have major spikes in expenses and, at their own admission, such a lack of financial control," Baldwin says.
She and Christen also say their agencies were flooded with complaints after the 2001 ride because of what appeared to be a shift in focus from AIDS prevention to the cross-promotion of Team Works' growing list of other events. Red ribbon banners were replaced with TeamWorks banners; evening rallies traditionally used to celebrate the riders' commitment to AIDS prevention were instead used to explain the company's other commitments, including its breast cancer walks, AIDS vaccine rides, a kids' march, a walk for suicide prevention, a self-improvement practicum, and a "weekend to end poverty."
"We are a new and different kind of business," TeamWorks' 2002 catalog explains. "Some people think we're a fund-raising company. Some people think we're an event productions outfit. While we're experts in both of these areas, they are only components of our real work. Our real work is the work of human potential, and the potential of the human race."
TeamWorks officials admit to overspending their overall budgets by 8% or 9% at last year's California AIDS Ride. They also acknowledge that the cross-promotion of other events may have come across as overwhelming and could have hurt the more pressing messages about HIV and AIDS. But what's important, Pallotta says, is that his company learned from its mistakes--and, for example, tempered the cross-promotion in subsequent rides that year.
"Society expects charities--and companies like ours, which work in the realm of charity--to perform perfectly 100% of the time," he says. "But if you look at the great businesses of the world--at Paramount Pictures, for example--they may put out a dozen movies a year, but their revenue is based on the three or four that hit. Making mistakes, experimenting, is how they learn and part of how they grow."
Palotta points out that the center and foundation's decision to schedule their own ride is a violation of their contract with TeamWorks, which stipulated that neither agency could employ the "bikeathon concept at any time" if they were to cut ties with TeamWorks. But in denying TeamWorks' effort to block the AIDS/LifeCycle from taking place, California superior court judge David Yaffe ruled on January 14 that state law may invalidate the noncompetition clause in TeamWorks' contract. The judge also denied TeamWorks' request to place a gag order on the agencies to keep them from talking about the AIDS Ride. The three parties are still in mediation over hundreds of thousands of dollars TeamWorks says the agencies owe it for work the company did on the 2002 ride prior to their pulling out.
Both sides expressed a sense of relief upon Yaffe's ruling--each saying they were eager to put the legal battle behind them in order to focus on their impending bikeathons. But a more ominous statement was made by one of Pallotta's attorneys during the court hearing. "One, if not both, of these rides is going to fail," Jayne Kacer told the judge. "There just isn't enough community."
According to Lorri Jean, who worked with TeamWorks on five AIDS Rides as executive director of the L.A. Gay and Lesbian Center and who now serves as executive director of the National Gay and Lesbian Task Force, "Any time nonprofit organizations and the for-profit companies that produce events for them get in fights, it hurts fund-raising."
There could not be a worse year for such a fight. The 1990s boom that helped fill the coffers of many charitable groups has abruptly ended. "The economy started slowing before September 11, and we were starting to see repercussions [in fund-raising] from that," says Marty Algaze, communications director for New York City's Gay Men's Health Crisis, which has never worked with TeamWorks but is facing a crisis of its own: Algaze says GMHC has taken in double the usual number of new clients since the World Trade Center attacks, and donations have not kept up. "Our biggest concern now is that donations continue to come in and that our loyal donors remember that we're doing what we normally do but doing it for more people," he says.
At press time, AIDS/LifeCycle had about 800 registered riders, and the AIDS Ride, which will now benefit TeamWorks' new partner, AIDS Project Los Angeles, had signed up 475 riders. That's a far cry from the 4,500 riders TeamWorks officials say were registered by the same time last year. If the two rides together can only just match the number of riders who participated in last year's ride, it's feasible that it could cost double what it did last year to safely get those riders from San Francisco to Los Angeles.
It's not a prospect that frightens Baldwin or Christen, who both say they are confident AIDS/LifeCycle will be a successful event. Nevertheless, they're not expecting the first-year event to be as lucrative as the unscathed California AIDS Ride might have been--both say they have contingencies in place so their agencies won't have to take a hit.
APLA, meanwhile, has had provisions written into its contract with TeamWorks that it says not only ensures that the 2002 AIDS Ride stays on a scale that reflects the number of riders who sign up but also makes TeamWorks financially responsible for any cost overruns tied to the event "We were certainly aware of the political consequences of signing on [with TeamWorks]. I've worked with Pat and Gwenn for years," says APLA executive director Craig Thompson. "I think when you use outside folks [to produce fund-raising events] you have to remember that their interests may not always be aligned with yours." In addition to the added protections in its contract, APLA negotiated a way for more than half of the proceeds to be distributed among approximately 19 AIDS service organizations throughout the state rather than being split between Los Angeles and San Francisco, as had been done in the past. "This is truly going to be a California AIDS Ride," he says.
Beyond saying that he doesn't see the sense in having two identical rides in California, Pallotta doesn't want to speculate on how the competing events will affect his business or AIDS fund-raising. "I don't have a crystal ball," he says. "I just want to reiterate that the best solution for people with AIDS and the best solution for all of our organizations is to have the center and the foundation come back with us and do this thing together." After the January court decision, that scenario is unlikely.
But neither that setback nor his lack of a crystal ball will stop Pallotta from talking about the vision he started formulating back at Harvard. "My dream with these events is to see if, in the course of 20 to 40 years, if we can create a critical mass of people doing really outrageous things in the name of others. I want families, when they're planning their vacations, to not only plan a trip to Disneyland but to also say `We're going to take three days to participate in this long walk [for charity],'" he says. "I know that it's controversial when you try to do something so different, but that's what we need to do if we're really going to create change in our society."
Find links to Pallotta TeamWorks and the AIDS agencies mentioned in this article at www.advocate.com
THE ADVOCATE POLL
Before you make a donation or buy a ticket to an AIDS fund-raiser, do you consider how much of your money will go to pay for the cost of the event?
Sign on to The Advocate's Web site before February 19 to cast your vote and leave your comments. Results will appear in the March 19 issue.
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|Publication:||The Advocate (The national gay & lesbian newsmagazine)|
|Date:||Feb 19, 2002|
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