From Nicholas Lemann in the New Yorker, I learn that the famous story of how 38 people witnessed the brutal rape and murder of Kitty Genovese in New York in 1964 but failed to do anything for half an hour, was basically fabricated by the New York Times under editor A. M. Rosenthal.
The story was recounted uncritically as an example of how the presence of many bystanders can lead to a diffusion of responsibility in such a way that everyone fails to act in my introductory psychology textbook from a few years back. In reality, there were only one or two people who unambiguously witnessed the attack without doing anything about it, and two who did intervene. This was also known at the time.
The true story is less spectacular and would probably not have had the good consequences of the fabricated one, but this could not be known at the time, as mentioned in the article. More importantly, however, the real cost of fabricating good stories like this is that when the truth comes out, it diminishes confidence in all else that is written as well.
H/t: Andrew Gelman