You seem to using the words Distribution and Dividend as if they are synonyms. They are Completely different in their tax treatment, and C Corp has different provisions than S Corp. You seem to have a person taking C Corp funds for Personal; think "Enron" in regards to this type of action.

I think you might want to treat this as Employee Loans to be repaid, or Owed From Shareholder, for example. And who signed off on that overdraft link? Again, it seems shady.