Folks, let's not rewrite the entire thread. I stated the allegation. I have not sided with either party, nor do I know intent. We know the plaintiff did not fly, and that the airline is upset about that fact, citing the intent to defraud. The "free use of the lounge" may or may not seem like a big deal to us, but it certainly does for the airline, to the extent they have acted as they have to date.
My point - and let's please narrow the discussion to it - is that I disagreed with some comments that the airline is "dumb" because they are jeopardizing* a high-revenue customer over comparatively trivial losses. My question is whether a business should ignore small losses from a big spender.
There is no need to highlight the conditions and entitlements of refundable fares. Those are not under debate, in case someone is at pains to point out that the benefits of such fares are the ability to cancel at any time. Ordinarily this is the case, and I'm sure there are lots of legitimate last-minute trip cancellations. Something triggered AC to believe otherwise with this traveler.

* although they may not be, as the plaintiff continues to purchase high AC fares, unless I'm mistaken.