NetJets Inc. has angered some central Ohio business leaders by slashing millions of dollars in funding promised to nonprofit groups, including nearly $9 million to the Pelotonia bike tour.
Ride organizers now are scrambling to replace the millions the Columbus-based division of Berkshire Hathaway had pledged to support the fundraising event through 2013.The situation prompted Limited Brands founder Leslie H. Wexner to write a letter to Warren Buffett, Berkshire's chairman and chief executive, chastising the nation's second-wealthiest man for allowing one of his companies to not live up to charitable commitments.
In the letter, Wexner told Buffett that he was "shocked and appalled" that NetJets "(turned) its back on the community."
"Your company reneged on numerous charitable commitments totaling millions of dollars here in central Ohio," he wrote. "The explanation? Berkshire Hathaway/NetJets had a tough year.
"Well, we all have had a tough year."
Wexner pointed out that he himself was one of those who worked to keep the private-jet company in Columbus by securing state and local incentives -- though those incentives have not and probably never will be paid out, since the company put on ice a $200 million expansion announced last year.
Berkshire, whose businesses range from Geico Insurance to Dairy Queen, has earned $5 billion so far this year and $35 billion since 2006.
NetJets has been the exception, though, creating a drag on Berkshire in the past year. Struggling with more than half a billion dollars in losses in the first nine months of 2009 alone, the company has laid off 1,700 employees this year, said David Sokol, a right-hand man of Buffett. Sokol was appointed to take over as chairman and CEO of NetJets in August. About 800 of those layoffs have occurred since Sokol arrived.
Buffett is well-known for letting his companies work autonomously.
The company "reneged on helping the homeless and a commitment to food banks," Wexner wrote in his letter to Buffett. "Reneged on disadvantaged youth and victims of domestic violence. Reneged on public education and a significant gift to the Ohio State University for cancer research ... (this) is about integrity and commitment and keeping your word."
Sokol answered Wexner's letter, responding that former executives had acted without the approval of Berkshire and saying that "any insinuation that Mr. Buffett is not a man of his word is ridiculous."
"I would think the fact that he has publicly donated in excess of 90 percent of his net worth to benefiting mankind would provide some indication of his commitment to 'community and promises,' " Sokol wrote of Buffett. "He made such donations (the largest in history) to benefit mankind, not to create political power, enhance his legacy or for self aggrandizement."
Sokol said NetJets has given $5 million to area charities in the past 18 months, but he acknowledged that the amount will be less than $1 million next year.
The highest-profile of NetJets' philanthropic commitments was the Pelotonia charity bike race, founded after NetJets announced that it would remain in Columbus and expand.
The Pelotonia bike tour was created in 2008 with NetJets as its sole corporate underwriter, enabling all money raised by riders to support OSU's Comprehensive Cancer Center, including the Arthur G. James Cancer Hospital. Sokol said NetJets gave more than $3 million to underwrite Pelotonia's first year, but sought a lesser role after his new management team began to make cuts to offset losses.
When the cuts were under way, Sokol met with OSU President E. Gordon Gee and told him that the company would not fulfill its $12.5 million, five-year sponsorship of the event. "I can understand it, but of course, I'm disappointed," said Pelotonia Executive Director Tom Lennox, who is working with several companies to secure new funding commitments.
Sokol said the company is not abandoning Pelotonia.
"We've signed a firm, four-year commitment to support it, and we'll be making a meaningful six-figure contribution each of the remaining years and possibly beyond," Sokol told The Dispatch in a wide-ranging interview (details on Page D1 today).
Lennox said NetJets will donate $1 million to Pelotonia -- $250,000 a year for the next four years. That would bring NetJets' total support of Pelotonia to $3.5 million over five years, about $9 million short of its original pledge, he said.
NetJets also is scaling back or eliminating support to other central Ohio charities, ranging from COSI Columbus to the Columbus Coalition Against Family Violence, founded by Abigail Wexner, wife of the Limited Brands founder.
Sara Loken, administrative director of the Community Shelter Board, said NetJets is reducing its support to $12,500 next year from an expected $25,000, and rescinding its 2011 pledge of $70,000.
"We know it's about the economic situation and not us," she said. "They were very upfront about it and seemed to care about the relationship."
Sokol said he expects to restore charitable giving as NetJets' finances improve.
"If we return the company to profitability, we will of course re-engage in the community," he said. "But I can't commit in advance to doing that." The first Pelotonia tour in August drew 2,265 participants, including seven-time Tour de France winner Lance Armstrong. The event raised $4.5 million for the James.
Registration opens Dec. 1 for the 2010 event, which will take place Aug. 13-15 and include a new route of 70 to 75 miles. Riders must commit to raise between $1,000 and $2,000 or pay it themselves.
Lennox, who previously said the 2010 tour will be open to 1,000 more riders, said Pelotonia won't change: There are no plans to divert rider funds from the James to pay expenses or to scale back the food, drink, lodging and entertainment for riders.
"The experience will not be sacrificed," he said.
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