This university has substantially lowered the reputation conferred by their degree by allowing this person to keep his.
A PhD is awarded for the contributions made to scientific discovery, whether the data is negative or positive (to the hypothesis). Doctoral training in the US has requirements for ethics training. This student demonstrated either a lack of understanding or a blatant disregard for scientific ethics. He also falsified his data, so he made no real contribution to scientific discovery. He has failed to meet two of the most basic requirements for a doctoral degree.
As someone who recently finished her own PhD, this is utterly disgusting. There is enough incorrect information in scientific literature as is from well conducted, controlled research because of the human error of data analysis and the fact that we simply don't know everything yet. We don't need it to be intentionally polluted by individuals who cannot or will not bear the rigors of research.
(Not to mention, the majority of the world does work with penal systems to try to prevent crime, so agree or disagree with this method, it is currently the norm.)