Here is what happened. H1-Bs must be legally employed all (well most of) the time they are in the USA. To get past that rule, these H1-B shops act as employers and then farm out the employees to other companies. Employers need to pay H1-Bs at least the prevailing wage that is mentioned in their H1-B application. This employer did not. Instead, they reduced wages when the employees were on the bench. That is the violation that they have been convicted for. So this conviction is not that much about H1-B's replacing American workers as much as it is about an unethical employer paying his employees less than the promised wage.
Usually, people who join this kind of shop are people who have not been able to land a direct employer on their own and desperately want to stay in the USA. This judgment will go a long way in correcting the system because now all shops (and there are many!) that run this scam will close down. That, in turn, will decrease the number of people who end up applying for H1-Bs without a real employer. Hopefully, that will improve the perception around genuine H1-B VISA holders.