The Expanded Broad Match issues can negatively affect advertisers running local / geo-targeted advertising. Here is an excerpt of the explanation provided by Google to another PPC consultant who saw a "3396% increase in impressions for a single broad match keyword phrase that included region-specific keywords but was being displayed nationally for searches that did not include any region-specific qualifiers".

"When you use broad matching keywords, expanding matching is enabled and your ad can appear on variations of your keyword. As your quality score improves, the number of expanded variations that your ads are eligible to run on increase. The large increase in clicks that you experienced in [snip] was due to the fact that the AdWords system allowed your ads to appear on additional expanded matching keywords due to good performance in the past.

Think about that. An improvement in quality score meant further expanded matching. When you take a keyword phrase like /san francisco used car/ and "expand" it to /used car/, that's NOT expanded matching."

I encourage advertisers using location modifiers to read the entire article Adwords Flaw Could Cost Small Businesses Millions.

I will follow-up with the author and find out if he knows whether this flaw still exists or has been addressed by Google.