Who Pays For Bogus UAL Bankruptcy Post?

Show me the money.

Chances are that's what some angry UAL Corp. shareholders will soon be saying. It's a demand expected to surface in legal actions that may arise from the controversial Internet posting of a news story and headline earlier this week that stated the airline concern had filed for bankruptcy protection.

UAL didn't enter bankruptcy. But the story--which was six-years-old and in an archive--was mysteriously plucked from a Tribune Co.-owned Florida newspaper web site by search engine Google and blasted over the web. Ultimately, the entry made its way into the system of financial news and information provider Bloomberg, which ran a UAL bankruptcy headline on its terminals, prompting a brief but massive sell-off Monday before the mistake was discovered and corrected.

UAL lost about $1 billion in market capitalization during the free fall as its stock price tumbled from about $12 to $3 per share until trading was halted. Today, UAL shares remain below the $12 mark.

All of which sparks some questions that haven't been thoroughly addressed yet in the crush of news coverage about this debacle. They include: Can shareholders recoup losses or are they stuck? Do they have a case for being injured? If so, who gets sued for damages? Who is ultimately liable for this situation? Does UAL, in its capacity as a representative of shareholders and stakeholders, have grounds to sue for damages?

I rang up Andrew Stoltmann, one of Chicago's better-known shareholder rights attorneys, for some perspective. (I've interviewed Stoltmann many times, for print and radio, and he gets right to the point.)

Yes, he said, expect shareholders who believe they unjustly suffered losses to take their cases to court. The reason this hasn't happened already, he surmises, is that shareholders don't know who to sue--yet.

In fact, since the bogus UAL story emerged, there have been claims flying between Tribune Co., which owns theFlorida Sun-Sentinel web site where the old bankruptcy story appeared, and Google.

Both Tribune and Google have issued conflicting statements about what happened.

Stoltmann, says one thing is for certain: "Someone is to blame".

He contends lawsuits will raise hot-button issues of "liability" or "negligence". Among those most eager to make up for any losses will be investors who had "Stop-loss" orders attached to their UAL stock positions. They may never recoup their losses, he notes. (The NASDAQ, where UAL is traded, is not busting or rescinding any of the UAL trades sparked by the faulty bankruptcy post).

Who's going to feel the wrath of UAL shareholder lawsuits?

Now, that's an interesting question. There's Tribune Co., which has nearly $13 billion in debt, and then there's Google, one of the richest and most profitable companies on the globe.

Hmmmm, which would you pick?

Actually, it could be one or all of the companies involved in this matter, most of which probably have some type of business insurance to help protect against damages, Stoltmann says.

Still, chances are this situation is not going to just blow over.

UAL is outraged. When I spoke to the company yesterday it did not back off of its previous statement that the Tribune's Florida newspaper started this mess. Perhaps Tribune and Google's more recent statements will temper that view. We'll see.

That said, I'll give Attorney Stoltmann, the last word on this matter today.

"It will be," he says, "A Pandora's box of litigation."

Comments

[GretaR]

I fail to see how Google, or Tribune, are liable for reader comprehension - or lack thereof. If making an important decision about buying a selling stocks, wouldn't it be prudent to do some research -- particularly something as basic as date sourcing material.

It is very common practice to include a release date in a press release or new story. So, unless that was tampered with in an effort to be deceptive, cannot see blame here except on the part of stockholders.

[EinChicago]

Rule 10b-5 prohibits teh making of a false or misleading statement to manipulate the price of a stock. I have a hard time seeing how the excuse that you have an automated program which made the misleading statetement will be a defense. At the very least, Google will be taking a hit for negligence.

[KillTheMessenger]

Let me quote that for you:

"It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

1. To employ any device, scheme, or artifice to defraud,

2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

3. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

IN CONNECTION with the PURCHASE or SALE of any security."

Was Google actively buying or selling a security related to the UAL stock?

Me thinks you will have a hard time proving that.

Maybe you actually want to read the laws you quote, Ein. A stock ticker is not a stock trader...

[FogBelter]

The way things are going with the US airline industry, United Airlines will probably be nationalized, along with the other US carriers, before the case is litigated anyway.

At some point the airlines are going to be begging the US Government for a bailout again and they will have to stand in line behind a dozen other industries with their hand out. So Google is probably safe.

[shyamg22]

this is going to be quite an interesting case.

[KillTheMessenger]

Since when are cases that are being turned down in five sentences interesting?

[mommadona]

GOOGLE
POSTER
POSTER'S EMPLOYEE

There ya go.

[proreality]

I noticed this a few weeks ago. I get all my news through google and a few weeks ago while doing my daily run threw I ran across an old article that I didn't realize was old until I started reading it then asked "What's going on?" looked at the date and sure enough it was from 2004. This happened a few times over the course of a couple of days. Never noticed it before, and haven't noticed it since. I wish now I could remember what the articles were about, but the point is I'm no reporter and it didn't take me more than a minute to spot the problem and notice the other old articles as I ran across them. So who is the incompetent hack that plucked the story and ran with it.
The really funny thing is I remember thinking to myself "I wonder how google runs it's articles in "news" and why would these older articles be showing up?"

[julianne]

Maybe if UAL had more employee ownership and in-depth employee participation rather than the linear, top-down owner-investor model, these emphemeral problems wouldn't have such an impact. This over reaction wouldn't have happened to Southwest Airlines. For most U.S. companies, it is the top-down, Big Man, winner-take-all system which contributes to a lack of continuity and strength in the present economy. They'd rather do the wrong thing such as forestall inevitable innovation and/or take larger risks to make EVEN MORE money while treating the technicians and workers as "other" and disposable labor. Recently, it was our fellow American greed-freak business leaders that tried to halt wage hikes and organized labor in China. Everywhere you look in the U.S. you see the high end of the American business community selling out the American people and working and paying them like chattel. It's not just globalism but American business leadership that has taken a wrecking ball to our economy, destroyed the vocational and craft foundation for the nation's security, while corrupting and ripping off the U.S. financial system. Perhaps massive representation and investment in the U.S. economy by Europe and other nations is what the American people need because our own insanely wealthy fellow citizens appear too greedy, immature, and short-sighted to handle our nation's finances and major businesses let alone look out for the long term security of our posterity.

[Paul]

Mabe a lawyer posted it....