Business Fraud. My family has been stealing from my company.?

I just found out that one of my employees, has been taking out large amounts of money by writing a check to another company, and that "compnay" writing a check to my employee for the same amount.
In other words, my employee writes a check for X amount to another company. That company deposits the checks and turns around and writes him another check, made out to one of his "private" companies. They have been doing this for the past 3 years and they have stolen more then 100k. I am going to seek legal advise, but before I do I want to be clear on a few things.

What is this sort of thing called legally that they are doing?
Is the other party that accepts/deposits the check acting illegally? If so, is there a term for what he is doing?
How can I sue, or what can I do exactly to my employee that has been stealing from me?

What rights do I have?

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