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United blames bankruptcy rumor on old story

An old story about United Airlines' 2002 bankruptcy filing resurfaced on a newspaper Web site on Monday, decimating the airline's shares before trading was halted.
/ Source: The Associated Press

The 2002 bankruptcy of United Airlines parent company was big news at the time, and big news again on Monday when an investment newsletter mistakenly passed along an old news story about the Chapter 11 filing, thinking it was new.

United shares tanked before trading was halted and then recovered only a portion of that before ending the day down by a larger percentage than other airline stocks.

The trouble started with a Google search.

A staffer at investment newsletter Income Securities Advisors Inc. in Miami Lakes, Fla., entered the words “bankruptcy” and “2008” in the Internet search engine, according to President Richard Lehmann. ISA does this all the time, searching for overlooked information about companies in trouble, he said.

Lehmann said the top item returned in the Google search was a story about United’s bankruptcy filing that appeared on the South Florida Sun Sentinel Web site. The story referred to United’s filing on Monday morning. United had filed for Chapter 11 protection on Monday, Dec. 9, 2002. Lehmann said that date was not on the story.

At 10:43 a.m. the staffer posted a summary of the story from the Sun Sentinel site on the financial information service Bloomberg, Lehmann said. Bloomberg has its own journalists but also distributes information from third-party providers such as ISA, for which some subscribers pay extra. Lehmann said all Bloomberg users would have been able to see the headline, though.

After trading around $12 a share Monday morning, the stock of United parent company, UAL Corp., dropped at least as low as $4.62 about five minutes after the ISA article was posted on the Bloomberg terminal. The shares fell as low as $3 before Nasdaq halted trading just before 11:07 a.m. EDT.

“The phones immediately started ringing around here,” Lehmann said of the period after his firm posted the story, which was based on a Chicago Tribune article written on the day of United’s 2002 bankruptcy filing.

He said his firm did nothing wrong in posting its summary of the Chicago Tribune story.

“The story that we put up was a very accurate translation of the story that appeared in the Chicago Tribune,” he said. “The only thing was, it was five years ago.”

“We’ve been doing this for going on 10 years, and this kind of thing has never happened before, so I don’t think this calls for any change in procedure,” he said.

Bloomberg spokeswoman Judith Czelusniak said the company makes third-party material available to subscribers.

“We do not edit third-party websites or other news organization content. Rather, in addition to our proprietary content and news, we provide information from various sources that Bloomberg users can view,” she wrote in an e-mail message.

Editors at the Sun Sentinel did not respond to messages. A statement from the Tribune Co., which owns the Sun Sentinel and the Chicago Tribune, said a preliminary investigation showed that the Chicago Tribune story from 2002 “was located in the archive section of the website of the Sun Sentinel in South Florida. The story contains information that would clearly lead a reader to the conclusion that it was related to events in 2002. In addition, the comments posted along with the story are dated 2002.

“To be clear, no story appeared today or over the weekend on the Sun Sentinel website or any Tribune website regarding United Airlines’ filing for bankruptcy.”

United quickly denied the bankruptcy rumor categorically on Monday morning, and issued a statement saying, “The story was related to United’s 2002 bankruptcy filing, and United has demanded a retraction from the Sun Sentinel and is launching an investigation.”

Asked whether United had made a mistake in blaming the Sun Sentinel, United spokeswoman Robin Urbanski said the company stands behind its statement.

Trading in shares of Chicago-based UAL Corp. resumed at 12:30 p.m. EDT. They closed at $10.92, down $1.38, or 11.2 percent, from their close on Friday.

A single trade for one penny on the CBOE Stock Exchange was later reversed. Nasdaq said the trades made during the 13 minutes when the shares were falling in earnest would stand, and that the decision could not be appealed.

United emerged from bankruptcy protection in early 2006. Like other airlines, it has struggled with rising fuel prices, and its finances have been shaky, although there has been no suggestion that another bankruptcy filing is imminent.