Do I fire my employee?

He is a very talented individual. Hard working and smart. Not a kid either. 38.
But…

He sees a conspiracy in everything. Also, it is his way or he is like a bratty child, becoming difficult.
I went as far as to adjust his work responsibilities. So he does not have to conflict with authority and direction.

We have had cutbacks and he was cut to part time. No question, it sucks.
I want to make that transition as easy as possible.

The problem I have is he went from the conference room (when told what is happening) to his computer where he proceed to password protect and encrypt everything.
Which is against company policy. So I sat down, had him remove all passwords and delete all security programs.
His reasoning for doing it was that he did not want the client list to get in the wrong hand. Great if he would have consulted me on that move.
But I know that is bull.

Funny thing. All his projects and the client list are gone. He is not overly upset about it and feels that some how when deleting the security programs.
The files must have gotten deleted too. I believe… I know that is a crock.

I am giving him time to clear his head and put things in order. I do not want to cut him loose. He has plenty of issues at home. Don’t we all.
Basically I have been hoping and have been impressing upon him to get everything nicy nice, by the end of the week.

He has even gone as far as to not only go over my head, but cooperate offices head trying to get to the top.Attempting to plea his case. Of course he was directed back to me.
What is tweaking me even more is he is now basically trying some half ass extortion. I KNOW, if (and it wont) he was reinstated to full time. All those documents would magically re-appear.

I know what the end result is going to be. Just want your insight on this matter.