Urgent - Please Advice

[chittugaadu]

One of my friends is a student and on F1 visa ... Since the school he studied is very expensive, he is into debts before the end of 3rd semester.
As things turn out to be, he got a job offer through a Indian body workshop (working at client site). The school denied him Internship (guess he need to pay money to school to register for internship).
So my friend worked for 6 months at client site and the employer paid him cash / personal cheque. The employer never ran any payroll. My friend clearly knows that its highly illeagal, but being in the desperate situation he had to take up the oppurtunity. The employer promised that what ever cheques he received from client he will show it as expenses. My friend is not working any more and swore that he would never repeat this.
My question is:
1) What ever the employer said about not submitting to IRS and showing it as expenses. Is it possible to do it or he just said so that he can make money out of my friend.
2) Since there is no payroll generated ... and what ever my friend received is either personal cheque, cash ... Is there any risk that IRS would track down my friend
3) Is there any way to rectify this situation if there is a problem.

Please help me with these questions ...I would greatly appreciate the time and help in advance...

[chittugaadu]

Thanks a lot Joe ........... I guess the company and my friend share a good relation (atleast till day) ... More over i guess, the company can't complain about the issue to IRS because even they are at fault ...
I guess that, keeping quite and not repeating the thing is the best option.

Thanks a lot for the quick and prompt response ....... you are very very helpful.