We have no way of knowing what occurred. You should ask your own attorney or accountant to conduct a full investigation (if you believe that will inure to your benefit).
However, if he had an S corporation and was not taking a reasonable salary for his services (but passing all income through on his K-1), then he was "doing it wrong" and, perhaps, his CPA corrected that by advising him to take a salary and issuing a W-2.
