I think that they need to tell the truth

say yes to the question of unlawfully present. Then explain that the company lawyer did not remind you to extend their status and that you forget (or do not know )to do that either. Even in the worst case, the VO denies their visa this time. They still have chance to try the next time. And they can do follow-to-join to get their GC in China after you get your GC.