Where's the students of history? When you create a police state like this in a company, control will be lost, morale will fall and productivity crashes. Abusing your force only makes it worse.
However this memo is dated as August '06 so we can assume that it happened sometime earlier that summer. From this google finance chart: http://bit.ly/ar1PSo it shows the massive dip the company took in July of the same year.
Aside from all that, actions like this will bite you in the ass in one form another. I doubt many visitors to hacker news hold CEO Neal L. Patterson in high regard after this.