Its very likely that some one did not do due diligence and ended up with a wrong candidate and wanted to cover their budgeting ass.
I'd take it as a lesson learned to shore up screening before flying anyone in.
Yep. Whoever made the decision to fly them out in the first place is now going to live with that on their track record, and rightfully be questioned whenever they want to spend money on a candidate: "Remember the $xxxx we wasted on that other candidate? What did you do differently this time to be sure we don't repeat that situation?"
Assuming this is a company of any size, the fact it was an actual tangible expense (and not just employee time) will probably make this scrutiny come from more and/or higher places in the management chain, because now more departments are involved.
1 - The hiring manager had to put in a lot of effort budget-wise to make the flying in happen and when he found out it was more of a complete failure than a rubber stamp, he had to save face.
2 - The candidate dramatically misrepresented themselves and lied to get in the door. Especially in the case of a cash limited start up, that could hurt - even more so if the story about high air fares due to location is true.
Either way, I think it's a lie, or at minimum the candidate isn't being entirely up front.
I have my doubts about the veracity of the story, but if it is true then that company needs to be shamed.
Better would be to use the legal system to recoup your costs. This way you don't accidentally recoup your costs from an innocent individual with zero oversight.
Or strand someone that fibbed about their experience, that then writes a suicide note (after throwing screenshots of the emails and cancellation up on their social media) claiming you stranding them in a city far from home with no money and no way home was the last straw and then commits suicide in front of your building
Or someone that comes back and sets the building on fire "with nothing left to lose".
Or waits for the person that interviewed them to walk out of the building and assaults them. Or follows them down the sidewalk and shoves them in front of a bus/trolley/train.
There's a bazillion reasons why this was a horrible idea for the company to do, if it is a true story.
"Why are you asking me about X? I don't know anything about it"
"You sure seemed to understand it on the phone screen"
"Phone screen? What phone screen? My recruiter gave me this plane ticket and told me to come interview on-site"