ahhhh the joys of bike warranties!

Sounds like Trek is getting too big for their britches and doesn't care if they lose a customer.
And fwiw i totally disagree with mr sr500.
Trek needs to step up to the plate and take care of their customer. The bike may cost the consumer 1600 more at retail, but certainly not at cost.
Adn sometimes as a company you have to take a bath on things to keep the customer happy.
I'm sure it doesn't help that Trek and Lemond are embroiled in a heated court battle right now.

Hopefully your friend can get someone at trek with their head on straight (not up their arse) who will do the right thing.
I'm actually a bit shocked that they wouldn't give him a bit better bike so they would get some good word of mouth pr out of it.

example- Running hubbys mtn bike friends all ride high end mtn bikes.

Friend A breaks his Turner. He calls them and they say "no problem, we will send you a new frame stat" and in the process of talking to him realize that he could use an XXL frame instead of the XL. Apparently that's all they made when he had originally bought it. So they send him an XXL and do a custom paint job for him. VERY HAPPY CUSTOMER

friend B rides Ellsworth- as do friends c,d,e, and f (etc). Friend B's Ellsworth breaks despite the fact that he's NOT a hard core rider, and doesn't even ride that hard. The frame didn't even have any real scratches on it. He calls Ellsworth and they totally blow him off. They were basically offering him nothing. So now not only does friend B have bad feelings towards the company, but so does friends C, D, E, and F.
Most of them have since sold their Ellsworths.
so not only ONE Very UN-happy customer but FIVE!

It's that old adage all over again!