CROSSETT, Ark. - A local newspaper that incorrectly reported two Arkansas CUs filed for bankruptcy spurred a $639,000 run on money at one of the CUs and damaged reputations for both, report CEOs of the affected institutions.
On May 26, the Arkansas Democrat-Gazette in Little Rock placed the names of Crossett Paper Mills Employees FCU and TruService Community FCU in its bankruptcy column. The newspaper printed three corrections, but corrections or not, the damage was done, said both CUs’ CEO. The hardest hit may be Crossett Paper Mills here, whose members have since withdrawn $639,000, explained Crossett CEO Ed Gilbert.
“Many of the withdrawals were for more than $10,000 and the money has not come back,” he told Credit Union Journal, adding the CU is concerned it could lose a few more large deposits.
The newspaper mistake only escalated concerns Crossett members had about the CU’s stability, Gilbert explained, noting it has suffered from write-offs and members filing bankruptcy, and although the $82-million CU has been improving its financial condition in the past two years, Gilbert said that wasn’t enough to allay fears when members saw the news reports.
“I think our members thought, “OK, here we go. It happened,’” Gilbert said. “‘Everything we’ve been thinking about the credit union has come to pass. They believed what they read.”
Gilbert couldn’t believe the news when the member phone calls flooded in. “I think we took well over 400 calls on Monday and Tuesday,” Gilbert said. “I had one employee who said she really couldn’t take her vacation because she was getting so many calls.”
Gilbert immediately contacted the Democrat-Gazette and spoke with deputy editor Frank Fellone, who agreed to investigate. Fellone told Credit Union Journal the problem resulted from managing the bankruptcy filing data downloaded from the federal court system. In that data, creditor names are also listed with the names of individuals filing for bankruptcy. “It’s our job to weed those (creditor names) out,” Fellone said. “To my knowledge, we have been gathering bankruptcies for five years and this is the first time we have inadvertently left in one or more creditors from the downloaded lists.”
Gilbert has been speaking with members in person, he appeared on a local radio show, and landed a story in the Ashley County Ledger. The CU also worked with primary sponsor Georgia Pacific to send e-mails to its employees. A representative from the Arkansas CU league also contacted the Democrat-Gazette, Gilbert said.
TruService FCU CEO Linda Jeffery feels corrections run by the newspaper aren’t enough to alleviate member concerns. “When a newspaper puts something out like that, with one stroke of the pen they tarnish our reputation and those little retractions they ran are not acceptable,” she said.
The day before the error, a local newspaper featured a front-page article about a bank that failed in the northern part of the state, said Jeffery. “So the error came right on the heels of a bank failure and I think that spurred a lot of the questions from members about the safety of their funds.”
The CU took 50 calls the first day and is still receiving them. Staff productivity has suffered, and Jeffrey has stationed herself in the lobby to answer questions. TruService has not lost deposits. “We e-mailed U.S. postal workers, who we serve, through the postal system’s e-mail network and explained the story was an error,” Jeffery said. “We also put a story on our website’s homepage.”
TruService FCU’s reputation has been very good over the years, Jeffery said. “We were the first credit union formed in the state. But the article put fear in our members’ minds. John Q. Public or our members don’t know that a credit union can’t file for bankruptcy. All they know is what they saw in the paper.”
