Why do people think its possibly not fraud, you sign confidentiality and agree to security stuff in a contract for a job and he would almost certainly have broken every part of his contract.
AS for just outsourcing directly, they may well do, he may have cost people their jobs with bosses who were worried about the potential cost/quality of work done abroad now deciding to save 5/6th's of their costs and firing hundreds of people.
In reality, paying some low level company to do one mans job is likely a smaller company and people who are paid less. When you want to outsource an entire operation you need a company that is secure, likely much bigger, with much higher costs, and a lot of companies end up paying a few people to go and keep an eye on/manage offices. Depends entirely on what they are doing, it could still be vastly cheaper, it could get to the point there is no saving.
There are also millions of jobs that can't be outsourced, many companies do work with people like military/other things were security is a huge concern and they'd never go with a company who outsourced the work to anywhere let alone China.
its funny, and I kinda hope the guy got away with it, but its risky as hell, and I wouldn't be surprised if the company ends up taking him to court over breaking his contract.
Theres a huge difference between this and asking a builder to do work who hires a subcontractor when you expect this, its common practice and there won't be many jobs where a contract gets signed with security stipulations.