Do I pay the money demanded?
There are laws in most state which allow for civil action collection when there is a retail theft. Most people choose to ignore the demand. This demand is for money over and above any fine you pay in compliance with a court order. People may get a few more letters, each time asking for more, and then they stop. While the retailer can sue you, it is extremely rare for anyone to actually be sued. You do not owe any money unless you are sued and the retailer wins. This is a common ploy. Do not pay. If you do, you will be in the national retailers database which could affect your ability to get a job and could impact your life in other ways. If you are uncomfortable, hire a lawyer and have the lawyer write a letter. That should be the end of it. Here is a good article: http://online.wsj.com/article/SB120347031996578719.html
What is the National Retail Theft Database and why should I avoid being named there?
The National Retail Theft Database is actually a voluntary list put together by different individual retailers. Further, any member that published the information on the list, can thereafter, remove it. Therefore, if you wish to have the entry removed, as you apparently do, your best bet would be to write a letter to the manager of the particular store and inquire as to what it would take for them to remove the entry.