How to regain wages paid after worker falsified timecards

Q. We recently discovered that one of our employees has been falsifying her timecards. When we confronted her, she admitted it but said that she only began doing this recently. An internal investigation showed that this has been going on for several years. Over the past two years our company overpaid her at least $5,000 as a result of her fraud. She resigned. Her final paycheck, including wages and accrued paid time off, is $1,500. Can we refuse to pay her final paycheck and use that money to offset the $5,000 she owes us? How do we recover the remaining $3,500? ...