If you feel you must do something, then tell him that company policy is
to fire, but instead you're just going to knock his pay down to what a
person with no degree would get and put him on probation.

If he's a good worker, gets along with the staff, and you like him
enough to get tipsy with, you wouldn't be doing yourself or your
company any favors by firing him.

You might end up with a very loyal and grateful employee, and if he
continues to give you good service, restore his pay this time next
year.

Finding an employee who meshes well with your staff and does good work
isn't always easy, but this shows him and your staff that you take
misleading paperwork seriously.

-Nathan