All I was looking for were posts about the dive shop, maybe a little dirty laundry, and this is what came up. It sucks this happened, but from the article it looks like there was little that could have been done to prevent the accident. Unfortunately, once you get "tagged" like this you just get to deal with it... again. In the world we live in people love to point fingers rather than actually try and address the root causes of incidents, this is unfortunate.
Divers generally seem to be an easy-going lot, so I understand how an instructor referral system could be in place. However, this does expose an instructor to additional liability having a student in open water who they personally never evaluated in the pool first. I am not talking about the stupid legal BS liability, but rather having somebody in open water who is not ready for it yet or may not really be cut out to be a scuba diver in the first place. It seems an instructor, you would not know to say "no thanks" to referrals until something like this happened to them. To be fair to the deceased, nobody really knows how you will handle panic until you are in the situation.