When feelings are aroused, research shows that the logical parts of our brain are suppressed. The stronger we feel, the weaker we think.
In my several years as a Forensic Auditor investigating fraud and all manner of malfeasance and bad faith at work, I have had to work with both the law and the justice delivery system (dictionary definition of forensic is “of or to do with the law courts”). Whereas the law is an ass, our justice delivery system deserves another Dickens to express it.
Long story short, when there is a fraud at work the employer is caught between Labour laws and the suspect’s lawyers; the employer can be forgiven for feeling like the malefactor.
This is the time you need a steady hand to guide you through the labyrinth. You have to get it right from the beginning.