While the story is infuriating, it is also:
1) completely from one person's version of events
2) absolutely unverifiable
I can't help shaking the feeling that it could be ragebait? Which ended up on HN as a result? Sure, companies act like bullies sometimes, but I don't know that I think this story is more likely than "person I've never heard of makes up outrageous story for attention". Both seem equally plausible.
The thing that doesn't make sense to me is if there was pretty clear evidence that some vendor had put in a backdoor into the email servers of multiple government agencies and there were directors and managers at all of these agencies that had good reason to believe they were being spied on, then this would have warranted a criminal investigation of the contractor. At that point, voiding the contract, migrating to whatever other email service you have and getting out of the bill would have been easy. It wouldn't have mattered what sneaky language got slipped into the contract by the vendor, you do not ever get to spy on internal government emails.