The facts are very clear. I have personally audited very similar situations. The company contracted with the individual, not the corporation. The individual provided his social security number to the company, probably on a form W-9. The individual personally provided services to the company. The company then paid the individual personally, and issued form 1099-MISC with non-employee compensation reported in box 7.
The individual therefore MUST file Schedule C with his personal tax return. There is no way around that. If he pays the money over to the S corp and takes that as a deduction on his personal tax return, that is fraudulent. Why? Because the S corp has no legitimate role in the transaction. The only reason I can see for doing this is to try to obtain tax treatment available to the corporation that is not available to the individual. If it was this simple to avoid the rules, why does anyone file as a sole proprietor and pay the SE tax on the full amount of profit from their business activity.
Bottom line is that it is easy for anonymous people to post any kind of scheme they like on a message board. They are not the one who will have to answer for any allegation of fraud.
jk is likely right, the company refused to do business with the S corp and agreed to the deal only if the individual personally provided the service for personal liability purposes. They refused the proposal to do business with the corporation. If the individual did something the caused harm, they wanted to be able to hold him accountable for his injurious action. That was a term of the agreement. That was the meeting of the minds, and the basis on which the work was performed. There is no way to shuffle paper to change the facts.