Dinged? The implication is that they brought him in for an interview even though he was unqualified so that they could say they tried, not that he didn't get the job because he wasn't Indian.
You don't have to bring anyone in if they're unqualified, that is not required by any law I'm aware of. This whole thing smells fishy, both the company and/or this incident.
To hire an H1B worker, you're required to prove that you've tried (and failed) to find a domestic worker to do the job.
I have a friends who work for Qualcomm, and it's widely acknowledged both inside and outside the company that they rely on a steady stream of underpaid H1B engineers.
Why is this flagged? because I supposedly misinterpreted a "fake job interview"?