Would have been dealt with even earlier, but our experiments with it (http://meta.stackoverflow.com/a/69032/130213) lead us to believe Google was starting to treat us as a link farm.
What we were seeing in our earlier attempt wasn't pages appearing lower in results (which could reasonably be expected in some cases as a result of the change; and we wouldn't care, 2nd on a search under an equally good resource is fine by us), but pages being removed entirely; almost universally pages that had newly un-nofollow-ed links to stores, or ad-laden sites (mostly legitimate posts, but some spam that stuck around for a bit before the community deleted it). So, "classified as link farm" seemed like the most likely problem. Google naturally won't tell you why your ranking drops, so it was (and remains) just an educated guess as to what happened.
So we stopped, putting it on the "wish we could, but reality doesn't let us"-list until Google reached out to us (among thousands of others, I'm sure) to change our nofollow practices. Google didn't describe any changes in their algorithm, but it seems reasonable to me that there would have been some tweaks around nofollow to accompany a new policy; again just an educated guess.
Basically, this is an old post complaining about a long since addressed concern that we had tried to address even earlier but ran into practical problems with.
While the exact details of our algorithm are secret by necessity, I will say that we've had to consider posts individually to prevent spammers from kiting a single account up to post nofollow-less spam content. People still try, it's kind of astounding how much spammers try (I suspect SEO's opaqueness cuts both ways here), but it doesn't work (well, you can get one link in your profile; but there's less SEO juice to pass and you are hard-capped at one, no matter how long it takes someone to delete your account).
Disclaimer: Stack Exchange employee, I was on all the relevant calls but has been a couple years so grain of salt and all that.