He delivered shit ton of code; managers have seen the progress pretty much daily, or at least weekly. The failure of the project can be blamed on many things - so ultimately, maybe Walter was just digging the right (albeit crude) ditch but at the wrong place. Someone else's ass may or may not get busted for the project flop (depends on the size of the company, usually).

In the meantime, Steve gets sacked because he's obviously not working - so why he should get paid?

The point is, companies would want you to focus on business goals, but in fact they pay you for the amount of code produced (and punish you if it's low).