employee was not authorized. am i liable?

[jofroggy]

ok i recently found out that an emplyee of mine was using my companys name and license to do his own "freelancing" Well he had a contract to remodel a home. contract stated payment terms of 2nd installement due upon framing inspection. well the customer made the second installement in july and let the construction of remodeling continue. in oct. when the home was almost finished according to the contract, there was the framing inspection. inspection failed on many levels for various things, that werent included on the building permit.
I found out about the job on nov 2 when the home owner contacted me, now this contract was written feb 26 with my employee and it is very poorly written. now my employee hands over the project to me and quits. i have very limited knowledge of whats going on, but am trying to make things "right" the contract states whats to be done "according to plans" i trusted the home owner in telling me what all needed to be done, now im in dispute over money of course. and im finding out that i did alot more than the "plans" stated. I have no copy of plans that the contract is refering to. the only plans i have is the building permits and they dont state half of whats in the contract.
now if there was no framing inspection done and they allowed work to continue, do i have to pay for the re-do's? no money ever came to me, but to my employee. am i liable for this contract at all? it was made under false pretenses and my employee actually "independant contractor" that worled for me signed it. im in dept now and got a loan on my house in order to do this job, but it seems that the home owner is turning this job into a 100000 dollar remodel instead of 30. any suggestions? ? questions? i really could use some help with this before i lose my license and my home. how can i get paid back for the work ive done allready, when theres only half the contract being shown?

[judg4]

Do you want file charges against the employee for fraud and forgery if he was not authorized. That could help absolve you?

[jofroggy]

i did allready its still being invistigated by the fbi and hes still hasnt been arrested