It's straight-up plagarism, using someone else's written work and passing it off as your own work (something which they said to you during an interview). He should be called out for it, and his defense on his blog was crap. The reason Hari did it is clear: to make himself look bigger & more important & more clever. The honest thing to do would be to write, ' X and I discussed Y, and here's how he explained it in his autobiography: ....'
But he shouldn't be sacked, or anything like it. He did not misrepresent his interviewees, and if it's true that none have complained, then it's hardly a major problem. And he didn't make up quotes, he plagarised them. Bad, but nearly as bad as just making it up. For that, you should get sacked.