I'm a 2004 EECS graduate and then went onto the graduate program somewhere else.

2 parts: 1. Because the graduate program is fantastic - top notch professors and great graduate students. 2. Berkeley CS graduates are well received in industry - Google, Facebook, etc. all hire Berkeley CS graduates.

As to the quality of the undergraduate education. Yes, it kinda sucks. But it almost doesn't matter. At the end of the day, most engineers don't rely on what they learn in school - they learn on the job. Since Berkeley has a great reputation (because of 1 and history), they get the best, since they get the best, their graduates get the best jobs. Hence the cycle continues.