Now, let me slip on my Arbiter robe and go through DeFillippo’s complaint:
The articles have been inaccurate and irresponsible because they fail to point out that beneficiaries have always been able to get all of their money when they want it by using our Alliance Account. Prudential does not withhold a penny of the money that belongs to beneficiaries. In fact, we pay interest. This information is clearly explained in the first letter sent to beneficiaries. Bloomberg has knowingly withheld these facts (emphasis added) and, as a result, has done the beneficiaries of our fallen servicemembers a great disservice.
The first story appeared on the Bloomberg wire July 28, 2010, under the headline: “Fallen Soldiers’ Families Denied Cash as Insurers Profit.” (Indeed, I think the headline was too strong, as I’ll explain below.)
The story focuses on a bereaved mother, Cindy Lohman. After her 24-year-old son Ryan was killed by a bomb in Afghanistan, she received a letter from Prudential saying, according to the story, “that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.”
But then, she says, two retailers rejected the insurance company’s drafts when she tried to use them, and later she learned the account wasn’t FDIC-insured.
The story effectively lays out her perspective and the problems with the accounts. But it also quotes DeFillippo giving the company’s view:
“For some families, the account is the difference between earning interest on a large amount of money and letting it sit idle,” he says.By quoting DeFillippo, Bloomberg makes it clear that beneficiaries could get their money using the drafts and that they were paid interest. So the text of the story provides that information, rather than withholding it. Indeed, the fact that it was so clear that beneficiaries could get their funds via the drafts is why I think the phrase in the headline—“denied cash”—crossed the line (and was not fair). In contrast, and tellingly, the story never uses that phrase.
”We fully and regularly disclose the nature and terms of the account to account holders,” DeFillippo says. “We make it clear that the money can be withdrawn at any time by simply writing a draft.”
Reading the story, it is clear that beneficiaries could get their hands on the lump sum, but not without going to extra trouble—writing a draft for the total amount and taking it to a bank. According to a subsequent Wall Street Journal story on the accounts, a banking consultant said that drafts can sometimes take two to three days longer to clear than checks. And, crucially, as the story makes clear, beneficiaries and even VA officials, often didn’t understand the terms of the deal.
“Delayed cash” isn’t as sexy as “denied cash.” A better headline might have been, “Fallen Soldiers’ Families Snared in Red Tape as Insurers Profit,” or some such.
Subsequent decisions by the VA to require Prudential to improve disclosure underscore that the process wasn’t as clear as it should have been. In dealing with the recently bereaved, you probably want to err on the side of too much disclosure rather than too little. It is worth noting that confusion here would tend to benefit Prudential.
The other problem with the program, which Bloomberg properly flags, is that it required the bereaved to opt out of the “checkbook” alternative. And, as every marketer knows, a program that requires action to get out of means that a higher percentage of participants will stay in the program. On September 14, the VA said that it “will provide better clarity of payment options by using new document that asks the beneficiary to choose one payment option, including a lump sum check, or a lump sum Alliance Account (retained asset account) that allows beneficiaries the option to immediately write a check for the entire payment or any lesser amount.”
So, Bloomberg did some good here.
The legal status
I cannot give you my name, but I do want to point out something that should be obvious to any business writer without needing to be stated: moneys that are completely liquid cannot be invested for higher returns. It's the reason a 3 month CD gets a lower return than a 5 year one. Mr. Evans' continued emphasis on the return in Prudential's General Account was egregious and inexcusable. He should not have needed someone at Prudential to explain basic cash management to him.
One other thing: Ms. Hamilton notes that the headline on the first article was misleading. I was taught in J-school that a misleading headline was a cardinal sin, because many people form an opinion without reading the whole article.
#1 Posted by not my real name, CJR on Wed 29 Dec 2010 at 04:17 PM
This is a whitewash of really awful reporting. Ms. Hamilton thinks some good came out of all the wrong information and the resulting confusion and investigations, so this was a valuable service. That's way too low a bar. They should have just got everything right from the start. There's no excuse.
It's quite disappointing to walk through all the rationalizations here. A headline and the substance of the reporting are completely wrong about the insurer denying cash, but this is excused because they quote DeFillippo trying to set things straight. The reporters also concocted the non sequitor FDIC issue to sex up the story even though insurers are under a different regulatory and guaranty system (in effect before the policy is triggered as well).
Given clear demonstration that the account changes were in fact not secret, contrary to the reporting, we get this dissembling analysis: "Granted, the fact that there was a DOD news service story about the change suggests there was no great effort to keep it secret."
The articles were plain wrong that these demand account owners should get long-term interest rates, but here too we "can't fault Bloomberg".
The point about the tone and the outraged quotes is completely missed. How did the reporters get these quotes for their story? At this point it's fair to assume the interviewees were misled and fed the same wrong information that ended up in the stories.
Journalism is hard in beats of this complexity, but that's not a good reason to be complacent about such terrible performance. What a shame such failure at the basic duty to get the story right and not betray the reader will be excused in the industry.
#2 Posted by Reader, CJR on Wed 29 Dec 2010 at 08:29 PM
I'm glad that Columbia Journalism got someone external to review this situation. But count me among those quite dismayed by her conclusions, which amount to finger-wagging about tone and about downplaying some state insurance information.
In my humble opinion, Bloomberg is guilty of far more, approaching a Shirley Sherrod situation of grossly mis-characterizing the situation. I'll cite just a few examples.
1. Ms. Hamilton suggests, "One mark of the value of Bloomberg’s reporting: it got results."
It most certainly did not get results.
What it got was outrageous headlines from gullible media and greedy politicians. Can Hamilton point to a single piece of legislation that Senators Max Baucus or John McCain introduced to go along with their prime-time outrage at an insurance company during an election period? Can she point to a single indictment by NY Attorney General Cuomo (ditto)? Can she point to any further reporting by CBS, who breathlessly bought the story on day one, then dropped it like a hot potato?
Other than essentially raising the font level on a footnote, I am unaware of any result whatsoever of the 'consumer alerts' or attorneys general investigations Ms. Hamilton calls 'results.' And apparently, neither is she, for she might have mentioned them had they existed.
2. Ms. Hamilton should have gotten way on top of the FDIC non-issue. The simple fact is, the FDIC exists to insure banks--not insurance companies. Consistently claiming that retained asset insurance accounts weren't FDIC insured is like saying they weren't covered by the Good Housekeeping Seal of approval. True, but utterly irrelevant--and misleading.
The only item Ms. Hamilton cites in defense of this affront to reasoned argument is to quote a judge in a case where he decided to throw out the suit.
It's a well known tactic--the Big Lie--to repeat an irrelevant or even untruthful clause long enough that people believe it. I would wish someone like Bloomberg could be held to higher standards than is implied by the continued assertion of a non sequitur.
3. And speaking of rhetorical confusion: in the entire series, Bloomberg's Evans assiduously stayed away from defining the 'right' thing to do. Hidden by the vague language of "lump sum" payments, the constant implication is that insurance companies are avoiding payment.
What would Bloomberg have the insurers do? Show up with a bag of cash at the funeral? That would be lump sum. Send a single check for the full amount? Bloomberg never says.
In fact, the single-payment check was the norm before the October 1999 change. The DOD concluded that giving a young widow a single check around the time of the funeral was a decidedly poor policy. It forced the beneficiary to deal with issues like stolen checks, lack of interest payment until deposited, and disposition of funds, all at a time of great stress. The program introduced a decade ago was considered a reform, in part because it brought to military insurance benefits that the civilian population took for granted.
Somehow, Ms. Hamilton calls a Department of Defense press release a "backhanded way" of announcing the deal. If a DOD public press release is backhanded, what could possibly constitute 'forehanded?' A full-page ad in the NYTimes?
4. Ms. Hamilton effectively ratifies Bloomberg's obfuscation of the "secret" deal alluded to in its last story. She refers to "an unpublicized deal," never describing what the deal was. Precisely the same as Bloomberg's failure. We are still waiting to find out what this 'deal' was. Isn't there a journalistic version of habeas corpus? What was the crime here?
5. I'm not a journalist, but one lesson I took from Watergate reporting was to always ask the question, cui bono? Who benefits? It is clear to me that Bloomberg benefited, as did a number of bloviating politicia
#3 Posted by Charles H. Green, CJR on Wed 29 Dec 2010 at 10:45 PM
Well, this blog and this column prove that Hunter S. Thompson was right all along:
Those who can't do: teach.
Get a load of this:
"They also sent a point-by-point rebuttal to DeFillippo’s consisting of paragraphs from the stories. I read that only after I had read the stories myself and made my own initial conclusions."
THIS WOMAN MADE CONCLUSIONS BEFORE READING THE POINT BY POINT?
She admits making up her mind before having all the facts?
Writing to the headline. Love it.
#4 Posted by I. F. Stoner, CJR on Thu 30 Dec 2010 at 07:22 PM
I've come back to see the excellent comments following mine, and it's prompted me to recap:
1. The first headline and the main point of the first article were wrong, known to be wrong, and excused by the arbiter.
2. The FDIC insurance issue was a complete red herring, excused by the arbiter.
3. There was no secret deal.
4. There was nothing inappropriate about the method of payment; there was nothing wrong with the interest paid; there was no outrageous profint garnered by Prudential. All facts; all excused by the arbiter.
What else is there to say? An apology by the CJR would be nice -- but I hardly expect it.
#5 Posted by not my real name, CJR on Tue 4 Jan 2011 at 09:39 AM
it's always great to see the corporate apologists who post here, as though they gave a rat's ass about journalism, or its public!
There's no escaping the fact that the insurance contracts did not disclose the basic elements of the deal to the insured or beneficiaries and that they were sure to be misunderstood by people not versed in distinctions between insurance and bank accounts. But your trolls are outraged, I tell you , outraged at the injustice! to the insurance company!
#6 Posted by siegfried, CJR on Fri 7 Jan 2011 at 07:23 PM
Siegfried,
Just to be clear: I don't work for a corporation, I hardly consider myself an apologist, I don't work for the insurance or any financial industry, and I care a great deal about journalism. As evidence of that last, I wrote to this very column myself in reaction to the original story, way before an arbiter was invited.
It is simply, completely and flatly wrong of you to say "the insurance contracts did not disclose the basic elements of the deal." They most surely did. And the public is not nearly as stupid as you suggest; they can figure out the deal with checking account interest, which is about what it takes to understand this issue.
There. Is. No. Story. Here.
#7 Posted by Charles H. Green, CJR on Tue 11 Jan 2011 at 08:55 PM