My understanding is that this failed on all levels of the company. I'm sure none expected this fiasco.
This is not possible given that you said earlier "the buck had to or should have stopped somewhere and it apparently didn't, much to the regret of Larry"
They knew what was going on, which more and more points to negligent and, most likely, fraudulent business practices.
In addition, you say "By the time they found out, they were probably already too deep to pull out"
This implies that they spent like crazy on who knows what (other campaigns, sending money upstream to Light Harmonic, who knows). If they were in too deep that they couldn't back out with refunds, then the whole perking up thing was just multi-level marketing...a "scheme"
You are hinting at way more than a fiasco...way more!