I was involved in a company in which one of the co-founders used the company debit card as his personal card to purchase food, snacks from vending machines, gas and groceries. He ended up spending almost half of the money we had made from contracts and equity we had put in and refused to pay it back.

We had a choice here, we could have taken it to the police, we could have used the law to our advantage because technically he was embezzling. Instead myself and the other co-founders called for a board meeting, we sat him down and talked to him. We considered his misappropriation of the funds ground enough to fire him from the board/company and considered the money taken to be more than enough compensation for his share of the company (to which he agreed), in return we wouldn't pursue him. This worked out for the better for all of us, since it meant we didn't have to spend time and money on a lawyer/court case and he could walk away without any penalties.

We had him sign a document stating that he no longer held any interest in the company (we had already long deactivated any and all accounts he had on the company network/services and his access to the bank account) and let it go.

Every so often I will still get calls from people looking for references (his name can still be found on Google to be associated with this company), and I will simply state that I have worked with him the past, and he was let go.

Unfortunately due to various reasons it never really did work out and the company fell apart. We made some money, I learned a boat-load and had my first failure. We were trying to bootstrap the company ourselves, so the only thing lost was the equity we all put in to start the company.