By Hillel Aron
By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
Nonprofit organizations operate the Boston and New York marathons, two of the oldest and largest races in the nation. The New York Road Runners covers its costs and has a “charitable component,” said Amie Fisher, a club spokeswoman. Boston’s marathon — founded in 1896 — is a charitable event operated by the Boston Athletic Association. Corporations pay between $1.5 million a year to “the low five figures,” and what’s left over after the race pays for 10 year-round youth sports programs that serve 2,000 middle-school students. The association fully reimburses the eight cities through which the Boston Marathon runs.
In Los Angeles, sponsors pay cash to Burke’s company and in some cases provide in-kind services. Honda, for instance, not only pays a cash sponsorship fee, but also provides posters, hats, lapel pins and “goody bags” to marathon participants, according to Karen Kim, administrator of corporate advertising. “It is one of our largest sponsorships,” she said. “Our goal is to promote the image of Honda in terms of environmental and good corporate citizenship.”
The magnitude of the marathon’s success seemed far away in its early days. In 1986, the council gave Burke a three-year contract and charged him a licensing fee of $50,000 or 3 percent of gross receipts, whichever was greater, increasing to no more than $70,000, or 5 percent, the third year. City expenses were estimated at up to $200,000.
The first marathon drew nearly 11,000 runners, and Burke said he lost $30,000. The city extended his contract for five years and charged him $70,000, or 5 percent of gross receipts. In 1987, he paid the city $79,000 and took in some $2 million.
City expenses increased, from $75,000 in 1986 to almost $177,000 in 1990. Instead of covering those expenses directly, the marathon offered to provide free advertising to city departments, such as the zoo.
A 1995 audit by the city controller found that Burke’s company neither adequately reimbursed the city nor fulfilled the advertising requirement. Auditors reported that, between 1992 and 1994, the marathon failed to provide $300,000 in advertising and claimed an inflated value for the advertising it did provide. Instead of running ads for the city on billboards, for instance, the marathon worked a trade with a local dairy that ran ads on milk cartons in exchange for being listed as a sponsor of the marathon. He claimed the value of the milk-carton ads to be $450,000, 10 times their real value, the controller said.
Instead of tightening the reins, the council renewed his contract through 2005 for an annual licensing fee of $100,000 a year. Last month, when asked about all of this, Burke said the marathon was never audited and that he had no knowledge of the 1995 audit report.
But he did rail against the $100,000 fee. “I think that that $100,000 belongs to my organization,” said Burke, who maintains he has received “no subsidies for the marathon” and could file a “lawsuit against the city” for unequal application of the law because other events and organizations receive fee waivers.
Now, Burke’s marathon attracts nearly 30,000 participants a year at up to $70 per entry and 1.5 million spectators. Moreover, the company makes money selling marathon merchandise and running a Quality of Life Expo packed with paying exhibitors at the Los Angeles Convention Center days before the marathon.
“This was the face of L.A.,” said Ben Bycel, the first director of the L.A. Ethics Commission, of the L.A. Marathon. “Here you have this guy who’s basically bought himself a contract and is making a bundle off it.” Bycel examined Burke’s books from the 1991 race, at a time when Burke was under pressure to reimburse the city of Los Angeles for marathon-related expenses.
Bycel, who now is a rural lawyer in Vermont, said his investigation uncovered evidence that Burke’s company made campaign contributions exceeding legal limits to marathon supporters at Los Angeles City Hall while those members were busy waiving fees for his private corporation. Under the law, the marathon could contribute no more than $4,000 in the April primary election and $2,500 in the June general election.
The Los Angeles City Ethics Commission, along with the Fair Political Practices Commission, fined Burke’s corporation $436,250 in 1994 for laundering campaign contributions. The company paid $200,000 in fines to the city commission for illegal campaign contributions to members of the Los Angeles City Council in 1991 and $236,000 to the state commission for illegal contributions to other elected officials.
Around the same time that some on the City Council were pressing for more fees from the marathon to cover the city’s growing expenses for the foot race, Burke’s company gave $3,500 more than the law allowed to Hal Bernson, $5,500 to Mark Ridley-Thomas, and $9,000 to Nate Holden, all council members. He also gave to several other council members, who, while generally supportive of the marathon, did not take a lead role in sponsoring city concessions to his enterprise. Holden said the marathon produced tax revenue for the city and that the marathon has had “no fee breaks.” Ridley-Thomas did not return numerous calls seeking his comment.
Burke’s company used employees to funnel campaign contributions above the legal limit for any one contributor. Marathon employees wrote a series of checks to council members for their election campaigns in 1991 and were reimbursed from Los Angeles Marathon Inc.’s bank account.