If you gave the employee the keys to the car, it is not a crime.
If the employee is not returning the car and is threatening violence that is insubordination. The person can be fired. If the fired employee does not turn the in the car keys and all other things related to your employment of him then you can sue for conversion as the person's employer.
And, with proof the person is now fired and that the car is the property of the company, then the police can intervene to retrieve company property from the employee.
I have no idea how the police could say this is not theft.
At any rate, I think you may have to discuss this with your insurance carrier and/or sue this individual for replevin or conversion of your car. You gave him permission to drive it and use it; not keep it.
If he has threatened you, that is an assault and you probably want to make a police report on that.
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Attorney Brinkmeier is right on the money. So too is Attorney Hoffman, although my approach would be to go to the Office of the State's Attorney to inquire about the failure of the police to take action. The prosecutor can certainly bring charges if the police don't want to do so. Violence threatened would certainly be criminal in nature and would be the basis for criminal involvement.
Without a doubt, an action to replevy the car would be appropriate, and the employee should be dismissed at once.
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