It's an interesting story, I won'der if you could turn the automation trick around on them.

Would you be able to make them do the same negative SEOing but to their own site?

Fill their site with unrelated garbage and internal links with undesirable anchor text.

* unbock their IP * create content that links back to their site with the undesirable keywords * only show this content to them and not regular visitors * don't let them grab much / any legitimate content