Gambling on a ride for life

A California AIDS organizer is assured of profits, while charities await uncertain results Those infected with HIV/AIDS face gambles enough in their day-to-day existence. Now, some of the agencies on which they depend for support are themselves gambling -- and the payoff from the Florida AIDS Ride is anything but certain. Indeed, in its second year here, the Florida AIDS Ride organization has a lot to answer for, not least of which is convincing skeptics that they are not to be faulted for keeping nearly three-fourths of the proceeds from last year's ride. Still, AIDS organizations, including Orlando's AIDS Resource Alliance, are lining up as investors in the hope that this year's ride will generate a far greater return. The Alliance is the sole Orlando group among six state AIDS organizations who anticipate big payoffs at the end of the three-day, 275-mile fund-raiser, which kicks off May 16 with 1,100 bicyclists bound from Orlando to Miami. If all goes well, the Alliance, which paid the California-based organizers $100,000 to cover upfront costs as well as to reserve its place as a beneficiary, would quadruple its investment. But it's a calculated risk -- one that failed to pay off as expected last year. In the past four years, Los-Angeles-based Pallotta TeamWorks has raised $41 million in 14 AIDS rides operated under the same guidelines. The company has met with criticism because AIDS organizations have seen only 57 percent -- or $24 million -- while more than $16 million has gone to Pallotta or paid expenses from the rides, including salaries for company employees who manage the events. Florida AIDS Ride 1 was a relative failure, returning less than 26 percent to five Florida AIDS service organizations. Still, supporters laud the results: those groups split $348,170, with the local Alliance collecting $68,000 on top of its $50,000 upfront investment. Other boosters point to the public education resulting from the rides, particularly in Florida, the state with the third-highest incidence of AIDS cases in the country. But skeptics wonder: Are people aware where their money is going? And is Pallotta principally interested in raising money for AIDS or itself? Such concerns are secondary for Caroline Gertz, executive director of the Alliance, which provides referral services and emotional and financial assistance to more than 1,000 people in the Orlando area who are HIV-positive or have AIDS. "They put a lot of money into this," Gertz says. "They're going to make money. It's a business for them." The ride represents the Alliance's main fund-raiser, allowing Gertz's staff to focus on the needs of its clients. "No one has offered us a better deal," says Gertz, who rode last year and has prepared for this year's ride by training and meeting the $1,500 minimum in donations that ride organizers require of each cyclist. "Apart from the money, you feel you're doing something very challenging," she says. Other AIDS activists question why Pallotta reaps such rewards while soliciting for the emotionally charged cause. "I think that bothers all of us," says Debra Sanders, executive director of Hope & Help Center in Winter Park, which doesn't benefit from the effort. "They have to be taken to task. They have to be held accountable." Last year, Pallotta and three co-sponsoring AIDS organizations agreed to pay $134,000 for failing to properly register the ride and for overstating the percentage of riders' receipts that would wind up benefiting AIDS. This ended an investigation of the Washington D.C.-to-Philadelphia ride by the Pennsylvania Attorney General. To meet similar reporting requirements in Florida, Pallotta functions as a "commercial co-venturer" and contracts with CenterOne, a nonprofit AIDS services organization in Broward County, which distributes profits to the other recipients. CenterOne lists the Florida AIDS Ride as one of its fund-raising activities and is therefore responsible for maintaining the financial records required by the state and federal government. "It's not what you want to see all the time, but it's probably legitimate," says Rudy Hamrick, a consumer complaint supervisor for the state Department of Agriculture and Consumer Services. Reg Metzger, a CenterOne staff member and the director of Florida AIDS Ride 2, defends Pallotta's profit margins by pointing to doctors and pharmaceutical companies involved in the treatment of AIDS. "They're making tons of money and not giving anything back. We are 100-percent committed to getting (AIDS) over with," he says. Corporate sponsors, such as Tanqueray, help defray costs. But profit projections for the Florida ride rely on the participation of at least 1,200 riders. As late as May 2, the actual count was still 100 shy of the goal, and organizers were doubtful it would rise much higher. Still, while each rider must raise at least $1,500, many raise more. But organizers can only guess how well participants will do in fund-raising and collecting pledges. And here is where conflict can arise: Pallotta and his employees get their money no matter the final tally. So do other businesses involved in moving a small city from Orlando to Miami. Left to divvy up what's left are the Alliance; CenterOne; Action for AIDS, a statewide grant-making organization; the Community Research Initiative, in Coral Gables; Comprehensive AIDS Program, in Palm Beach County; and the Tampa AIDS Network. "It would be wonderful if every dollar would go into services. Unfortunately, that's not the way fund-raising works," says John Weatherhead, executive director of CenterOne. In 1983, while at Harvard, Dan Pallotta conceived of a cross-country ride to raise funds for Oxfam, an international relief organization. His 40-rider group spent the summer riding from Seattle to Boston, practically every expense covered through donations. "We did that whole thing for $5,000," he recalled, and raised $80,000. After graduation, he moved to California and participated in national charity events while working in fund-raising. In 1992, he formed Pallotta & Associates, a company specializing in major-gift fund-raising and grant writing. Two years later, the company, now known as Pallotta TeamWorks, developed the concept for the California AIDS Ride, a long-distance fund-raiser "marketed to people who didn't think they could do it," Pallotta says. Pairing the emotions of AIDS with the exhilaration of such an athletic achievement, the first California ride raised more than $1.6 million, $1 million of which went for AIDS services. Pallotta then developed a model using the business principals of capital, leveraging up-front money from AIDS organizations willing to take the risk. To attract more participants, Pallotta arranges for everything from fund-raising training to rider support, meals, medical care and more. Slick marketing materials are laced with promises of individual self-realization. A registration pamphlet says: "It is a heroic statement of your commitment to those with AIDS. It will inspire people. It will set the stage for a future of expansion, accomplishment, and growth." There is no way of tracking the success of these claims. But the promotional pitch has been extremely effective. Pallotta estimated the company grossed $1.4 million in 1996 alone. The rides continue to draw nationwide publicity and participation. In most cases, more than 60 percent of proceeds have gone to AIDS. In California alone, where this summer's fourth ride had to close off registration early, the rides have grossed $13 million. But last year in Florida, the ride fell far short of projections. Only 750 riders participated, raising $1.3 million. Still, by doubling its upfront cash pledge this year from $50,000 to $100,000 -- about 8 percent of its annual budget -- the Alliance is betting heavily on the upcoming ride. While sensitive to the criticism, Pallotta is unapologetic about his approach. "We have a business to run here," he says. "Florida has been an anomaly for us."Asked about the company's policy of holding seed money for rides in advance, he says, "You need money to operate." In 1996, Pallotta says, the company donated $12,000 to the Florida ride to pay for advertising to pump up rider participation. And this year, Metzger and the Florida staff are working overtime to pump up proceeds, he says. "The AIDS rides have become more successful more quickly than any AIDS event in history," Pallotta says. "What we need is patience, not criticism."
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