Yep. He put the University in a terrible position. Putting aside whatever character issues this exposes, he hired his mistress, to whom he had already paid a large sum of money, in a shady interview process. He put himself and the school in a position to be blackmailed, to say nothing of employment law problems.
They had to fire him. You don't hire your mistress. If someone who worked for me did not already know that, I'd fire them even if they didn't have a mistress.