some thoughts:

1) assuming this business strategy is still ongoing: how about TELLing the students that emergency ration and water are available, but if you drink, you fail and no refunds

2) regarding the last sentence, the student (former) mentioned fear of desert, really, it should be fear of irresponsible and simply stupid guides

3) i don't think boss has mentioned any actions taken against the guides in this case

4) note to self: if hiking partner mentions he's a graduate/guide of BOSS, stay the hell away from that guy.

5) really don't think that liability waiver is going to stand up in court.