Earlier quoted context omitted.
Don't you find that whole pretending part to be unethical? With those kind of revenues it shouldn't be hard to either hire 2 and make factual claims, or just drop the whole we're-a-team claim. I can't imagine that building a foundation on these kind of lies towards your clients is going to be sustainable in the long run?
Pretending to be a bigger company than you are is not fraud, it's perception management. Whether justified or not, many potential customers will choose a seemingly bigger company over a smaller one (especially a one-person company). Now if they were billing based on number of people working for a client, and they were charging for phantom people, that would be fraud. This guy just has an optimized workflow that he pr…
Your last point isn't valid by the way, customer don't know whether it's reasonable or not, because they don't know. They are buying something else then what they are told they are buying, which is unethical by my standards.