Although it seems unethical I'm not entirely sure why. They paid him to make sure a certain amount of work got done. It did. Does it really matter if he physically did it himself Vs supervising someone else doing it? Companies subcontract out work all the time.

That said, I wouldn't do it.

Maybe instead of firing him they should have put this Bob guy in charge of managing outsourced development and outsourced a bunch more stuff. Sounds like there is a pretty massive cost saving to be made there.

They hired him as a FTE, and not as a 1099. So, employment fraud.

1/5th the cost, and the best developer at the company. What's that say?

Maybe they should try to hire the chinese guy instead. After all, he already knows the code and has proven that he can work well.

Where do they mention/talk about him being a 'model' employee?

They didn't used the word 'model' but said, for example, in final paragraph:

“His code was clean, well-written, and submitted in a timely fashion,” ... “Quarter after quarter, his performance review noted him as the best developer in the building.”

Ah, the joys of exploitation.