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This happens to be extortion, or also known as blackmail. When one party attempts to use force, or threat of force to compel another to do something they do not wish to do, that is a crime. In this situation telling you that they will discuss a secret unless you do as they say would violate state law. It is therefore in your best interest to explain to this person that as she is on record with her threats, should she follow through on them, you will consider contacting the police and pursuing charges. That does not in any way remove your obligations to pay her the funds, but she has to use proper means to seek collections--in other words she is free to sue you for the money if she wants, but she cannot threaten to expose you to do it.
Hope that helps.
What would be needed for proof if this was verballl said to me over the phone?
You need some record of the comments, such as a recording or an email. An oral comment, if unheard by other witnesses, simply turns it into a situation where it is your word against hers, and that is not usually enough to bring charges. Perhaps sending her an email with these assertions and getting her to reply would create proof, but just a comment that was not substantiated by anything is likely not enough to pursue charges.
Hope that clarifies.
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