Allow me to vent.What is fair and right?

It seems the relationship is already done for some time at least. To trust her at this point with any major project would be fool-hardy.
While forgive and forget is a outstanding policy, it is mostly for the forgiver. To let a child benefit from unjust or greedy actions only breeds more of the same, unfortunitly its the same for adults.
It sounds like you have a good legal recourse, if you could take her through the legal actions without malice, it might be best for her. But only you can say if you are able to deal with emotional roller coaster. It is said the one that loves a child is the one deciplines it, do you love her enough to try to show her the meaning of being just. Being a decent human will be up to her, but showing her that she is not being decent might be up to you.
Of course there are risks, you may never have a relationship with her again, and then again she might admit she was wrong, which would lead to a closer ties between the both of you.