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You "took over" the business from a previous owner? So did you buy him out? Do you have full ownership in this company? Or are you speaking from just a management position? I find it interesting that such a family oriented business would just sell to an outsider like that but keep the family employees.
Again, do you have supervisors above him or are you directly over him? Basically, is it your job to fire him or someone below yourself's job?
Like someone else said, you do sound like you have a personal dilemna with him. Is there a way to just warn him? Dock his pay? Suspension?
If you own the company and wrote the policies, why do you need to ask? If you own a company, why are you not talking to your company attorney? Do you have an HR department?
Again, this is a complex issue that sounds more and more fishy as you go on.
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