Patrick's advice is very sound. (Except, perhaps, for that last bit about what to say in an email to employees -- before sending any such email, please refer to Patrick's earlier, superseding advice to "Lawyer Lawyer Lawyer." Let your lawyer basically dictate what your email will say.)
There are ways of handling this that have been worked out through decades of practice and litigation. This is most certainly not an area to be winging it. And, with all due respect to the thoughtful posts on HN you'll encounter, you should always keep in mind that HN is not a free source of legal advice.
Since this has now happened, you'll want to a) lawyer up; b) terminate the offending employee for cause; c) work with the lawyer to set up some sort of HR training for managers in how to appropriately handle these situations.
It might also be time to reemphasize the employee handbook and make known your zero-tolerance policy towards harassment. (But again, consult a lawyer before doing so.)