Intended result with made up numbers for purpose of illustration.
Author pays 10x$10 for copies of their book to have/give away. No royalties are owed to anyone on these copies. 5 are returned as damaged they are refunded 50.
100 copies are sold at $20 and 2 per unit are paid to author.
Authors balance sheet
-100
+50
+200
Net +150
What actually happened
-100
+50
+190
Net 140
By re-using the royalty free copies which ought to have been destroyed as damaged they directly took money out of authors pocket and put it into their own whilst dishonoring the spirit of the agreement to pay n dollars per unit.
They didn't bitch about damaged product because such fuck ups come out of Amazon's bottom line whereas a form of theft literally every real publisher would recognize as theft comes out of theirs.