He did not pay him, he just asked him if he would witness the test. You are correct that the person wasn't qualified to administer the test. In the end , if he would not have had falling out, there's no doubt he would have have passed the dan exam. Politics and business sometimes ruin the merit of martial arts. I have had discussions with my instructor about the situation, it's not because it boosts his ego to test in front of someone who knows nothing. He was just a Master in a style of martial arts, and he felt that he would be understanding and proctor the test.
He could of done what many head instructors do and just given himself 9 degrees, but he just wanted the degree that he would have been, if he wasn't screwed over. My instructor is 60 years old, 60 years is the minimum age for a 9th dan in the system he was in. It would be believable that a 60 year old is a ninth degree. He didn't want to do that he just wanted to test for the degree he was screwed out of.
Not everyone is after the Title Master or Nine Degrees. Things happen out of people's control. he doesn't even make us call him master. Just Mr. and his last name.There are associations that for a nice $500.00 check will give you a pretty certificate and a Dan from and international organization. That's great, and all, but in the end he would be the same martial artist and the only difference would be that he is now $500.00 more broke, than he was before. It came down to the fact that he worked hard ran a man's school and, in the end that man who he had worked so hard for, screwed him over out of testing and money. He has dedicated the majority of the last 15 years of his life to bettering the lives of his students and progressing himself as a martial artists. He just asked for someone who had done the same thing to witness the test.
In the old days, anyone could claim to be a Master of fighting. Of course, they might have to face a challenge match or duel.
George Silver has some very unkind words to write about "supposed masters" from continental Europe teaching in England with their un-English sissy little rapiers. One of the more famous, Rocco Bonetti (made famous in the modern context by a reference from the cult-classic "The Princess Bride") was a Master of Italian Rapier, teaching in London. Apparently unpopular with the English Fencing Masters, who taught the English weapons of Broadsword &tc., because he was taking the rich students away from them, Bonetti had at least one duel, which he lost. It appears that Bonetti pissed off a river boatman. Bonetti drew his rapier and was clocked with an oar for his trouble. Silver himself challenged the Italian Rapier Master named Saviolo to a duel, quite publicly, issuing "handbills" (a common convention at the time) and having one hand delivered to Saviolo, who decided to ignore it and was quickly branded a coward.
So, historically, if you think you can fight, call yourself a Master then open a school, teach private lessons, or both. But just be prepared for someone to check and see if you actually know what you're talking about. Historically speaking, this could sometimes be friendly and sometimes not.
You know what? Same thing still applies today. Grapplers are particularly eager to check out anyone who claims to teach grappling. Sometimes they'll just drop in and watch a class or two. If the instructor knows what he's doing, they'll nod and leave, maybe strike up a conversation and make a contact. If the instructor is teaching BS, they'll spread the word. Sometimes, the instructor so questioned will start talking smack. Usually some sort of more-or-less civilized challenge match will ensue. Physical injuries are rare but reputations and students can be gained or lost.
So just tell your guy to call himself a "Master" and let it ride from there. Eventually someone who is a Master will drop in and watch some of his stuff. If your guy doesn't know his stuff, word will spread. The worst that can happen, realistically, is your guy's reputation as a martial artist will be trashed.
Peace favor your sword,
Kirk
While he is the head of his own organization, he no longer seeks out rank. It is what it is, and you can stay, or go. You heard of, "No Capes!"?, he wears, "No Bricks!", and it goes just fine. We call him, Skip, which, so far, has not offended any Asian sensibilities. To others, he is a professor, which means one who professes. 
