Employees get fired all the time for being too senior, too wise to their rights and too expensive (even if that is not the stated reason), and in large companies entire divisions are often laid off and replaced by managed service providers and consultants that'll do the job for less.
This is just the horrible reality of employment in the US - the H-1B system has many faults, but that's not the cause here, the cause is the company itself.
You can see this in every field - employer loyalty is at a low, full time workers get hired on a part time basis, workers get rotated regularly, people get fired so they don't qualify for seniority, hours get shifted to comply with the bare minimum of labor law, etc.
Disclaimer: I'm on an H-1B.
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edit: Clarification: My first sentence should have been "if the replacements were American". Prevailing opinion seems to be that Americans losing jobs to foreigners is unfair, but no one bats an eyelid at Americans losing jobs to Americans - it's just capitalism.
I wasn't really going for the blatant racism angle, even though there is quite a bit of that too at the lower levels of the discourse pile.