Bah, don't worry about it. It's just a shakedown, especially given the hijacked email address.
We've got some lawyers on this list (see "fire in the office" thread) have them give you an honest opinion. You might need to retain them, if so, I bet they'll do it for $1. That's the deal I have with a lawyer friend of mine. I gave him a buck ten years ago and now he gives me legal advice.
