Here is the original story, as told to io9.com by the perpetrator of this very conscientious fraud, John Bohannon. Bohannon ran this con as to expose just how open to corruption and manipulation the whole research publication process can be (BioMed Central scandal, for another example), especially when it just the kind of research that is bound to get a lot of media attention (LaCour scandal, for another example).
Bohannon set out to "demonstrate" that dark chocolate can contribute to weight loss. He ran an actual study (n = 26). He went on a fishing expedition and measured 18 different markers of health, and did find a significant relationship between chocolate and lower cholesterol (a good example of likely Type I error).
So a manuscript was created. Bohannon describes how quickly their manuscript was accepted at several pay to play journals (no peer review, either, opening up a class discussion about both peer review as well as the gradient of pay to play journals, some of which are peer reviewed, many of which are not).
Dr. Bonahon then describes how he created a website called "The Institute of Diet and Health" to legitimize his research (to be clear, this Institute does not exist) as well as a press release for his study. Then, the media did his work for him. Once one outlet picked up his story, so did hundreds of others. One glimmer of hope: While the media just ran with this story, Bohannon states that internet discussion boards associated with the different media outlets actually yielded intelligent discussions that picked apart the flaws of the study.
So, I think that the whole io9.com piece would be a good reading assignment for a statistics or research methods class. Additionally, if you are looking to use this story in class, here is an NPR interview with Bohannon.