Thank you for your question. I am happy to assist you.
It was not legal for her to cash the checks. It is embezzlement. This is true regardless of the fact that she returned the money. It is a crime and the state attorney should prosecute.
In addition, the bank should not have allowed her to cash the checks. Your husband gave her authority to obtain bank statements and make deposits. That is completely different from signing his name and cashing the checks. It appears that the bank is rightfully concerned about its liability resulting from its wrongful check cashing.
If you have business owners insurance, check your policy. If you have coverage for employee dishonesty, you can file a claim and be reimbursed by your insurance. If not, you will need to pursue the matter in court.
I hope that the information which I provided was helpful to you.
Best wishes for a successful outcome. If you have additional questions, please do not hesitate to submit them to me directly.
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THIS IS FOR INFORMATION ONLY. NO ATTORNEY-CLIENT RELATIONSHIP EXISTS. PLEASE CONSULT A LAWYER IN YOUR STATE FOR LEGAL ADVICE