I agree it would be too quick to give out over 100% of the funding to all the first wave admits, probably bordering on irresponsible. Roughly about as irresponsible as ignoring e-mails as a means of deterring students (if the story is true). I can't think of another scenario for why they could have to do such a thing, though.
Programs extend a certain number of admits based on an expected number of student acceptances. To get 5 students, if you know your program's yield rate has historically been 30-40%, you might admit 15 students expecting 10 of them to decline. It's possible their projections were off this year, and too many students accepted. Thus they are now over the quota and in a bind.
I'm interested in learning more about how a department might go about petitioning for the requirements to be waived. What kind of favors are we talking about here?