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A somewhat classier, less-heavy-handed approach would have been to simply not give that employee a raise.

no, this way they're saying "okay, we can't trust this guy, he's out of here". denying him a raise would just be punitive, which isn't too classy.

Would that have made the headlines? If not, it wouldn't have the same effect.

It would have made the headlines if a google rep gave boingboing or IO9 a brief interview saying "we are not evil, but no one messes with the google."

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