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Masters of Charity

Photo by Ted Soqui

THE DEMISE OF PALLOTTA TEAMWORKS, the for-profit charity organizer best known for its flagship seven-day, 550-mile California AIDSRide, was as abrupt and controversial as its founder, owner and CEO, Dan Pallotta.

Known for his sometimes preachy, Landmark Forum­like speak, Pallotta loved big statements. Consider this audacious statement in the company's 2002 catalog: "For too long the charitable obsession has been exclusively on saving money. The way to help these causes at the level they need help is not by saving more money, but raising more money."

In eight years Pallotta and his company netted more than $200 million for AIDS and breast cancer charities, a figure that caused some Pallotta fans to call him a visionary. At the same time, the company spent more than $160 million to produce the events, and collected more than $11 million in producing fees, making him a scoundrel to others.

Pallotta created the AIDSRide for the Los Angeles Gay & Lesbian Center. Cycling enthusiasts said it would fail, arguing part-time riders wouldn't have the stamina for a weeklong ride down the California coast. The inaugural event succeeded, attracting hundreds of volunteers, thousands of new AIDS donors, and more than $1 million for the Center and its fellow beneficiary, the San Francisco AIDS Foundation. Soon the company was producing rides in the Northeast, the Midwest and the South by teaming with regional AIDS service organizations to raise piles of money and plenty of awareness.

Almost immediately, critics accused Pallotta of being an "AIDS profiteer" for charging his beneficiaries $180,000 in producing fees and creating sky-high overhead. The AIDSRides were lavish, complex affairs, requiring an army of administrators, ride organizers and technicians to deal with the thousands of riders. The company's movable "tent cities" became the stuff of legend, featuring massage therapists, hot showers, and a full evening of entertainment every night. Others grew tired of the ubiquitous Pallotta, who was a presence on every ride and spoke more about his own personal struggles and desires, and less about the fight against AIDS.

Some embarrassing early missteps included failed rides in Florida, Texas and Pennsylvania (where the state government stepped in and forced the company to pay local charities for promised donations that never materialized). But in California, things went smoothly. Through the late '90s there were plenty of riders and volunteers, the donors gave generously, and the percentage of donor contributions remaining with the charity was about 65 percent, a solid return in most fund-raising circles. ä

THINGS BEGAN TO TURN SOUR IN 2001, JUST AS THE SIZE OF the company peaked. New events, including the highly successful three-day Avon Breast Cancer Walks, went well. But soon every pet cause Pallotta worried about, from suicide prevention to "Personal Empowerment," had its own event on the company's crowded calendar.

A glossy, full-color, coffee-table-sized book proudly heralded Pallotta TeamWorks' staggering 26 events for 2002. Riders registered for more than one event became furious when they received several copies. Soon people were asking out loud, "Why wasn't the money for all this marketing going to the charities?"

By most accounts, the 2001 California AIDSRide was a disaster. On the ride, the beneficiaries fought with Pallotta's staff to mention AIDS in evening information briefings for riders; instead, the company wanted to promote its many new events. Riders were shocked to see advertisements all along the route for Pallotta's book, titled When Your Moment Comes: A Guide To Fulfilling Your Dreams by a Man Who Has Led Thousands to Greatness. One rider, in a letter of complaint to the company, described the grandiose closing ceremony at the L.A. Coliseum with tons of bunting, balloons, and Pallotta running up and down among the riders, as an "Albert Speer production." To top it all off, the production fee and marketing expenses increased, while the return on the dollar dropped to 51 percent. Within months of the 2001 ride, the L.A. and San Francisco groups announced they were cutting ties with the California AIDSRide and would produce their own competing event in 2002. Pallotta's company sued the charities for copyright infringement and breach of contract, infuriating hundreds of loyal riders who swore they would never support Pallotta again. The courts rejected the company's claims, and summer 2002 saw not one, but two seven-day, San Francisco­to­Los Angeles bicycle rides for AIDS. The take for both events didn't come close to matching the 2001 total.

Soon the beneficiaries for the Washington, D.C., ride announced they too were breaking with the company. Most of the new 2002 cycling events either folded before launch, or returned so little on the dollar they created a PR nightmare -- just weeks before the European AIDS Vaccine ride, riders were warned the return on the dollar for donations would be about 10 percent, with the rest eaten up by production costs. Then Avon announced in the spring that 2002 would be its last year of working with the company. Add to that the economic slowdown, 9/11, and what the company called donor fatigue, and suddenly mass layoffs were inevitable.

Pallotta TeamWorks still has three Breast Cancer walks scheduled in October, including one in L.A. Although the company has not said for sure (all of its spokespeople were laid off), it hopes to rehire some of its employees to produce those events.


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