Easily justified as good marketing. This #1 post on HN will Google (in various ways) much more than the cash they could have used to look like good guys, even if it wasn't done out of goodness.
Entities with massive wealth, such as Google, should always use money to soften the blow of their mistakes.
Giving this person a small chunk of cash would make me respect Google so much more than just screwing this person's life up and saying "Whoops, you're fired, lol!"
But it's been a long time since Google was a cool company.