justmakingit had already left the offending company, as noted, when he wrote his question to us all. The first thing to note is that he went to management (at least to SOME level of management) with the problem and was told to ignore it.
That should have served as clear notice that the company is unethical in its' behavior. You have to wonder in what other areas they act the same way, and how long until they begin to treat the employee unethically. Personally, I would take that as a sign to leave at once, before the company starts to screw me.
On the way out, I would take the actions mentioned in all of the CYA responses, up to and including the certified letters. I would also make sure that my complaints were heard at the highest levels of management, addressing copies to the President, the CEO or the Chairman of the Board, if there is a board. You don't know how high up the ladder the rot extends, and going to the top will ensure you either tell the head guy or bypass the rotten ones.
When you write your letters, name names, give dates and places, include info from the BSA about the legal consequences, and document the business case for getting legal in precise $ terms.
When you first try to rectify the situation and run into a low level manager telling you to ignore things, get your stuff together, then go progressively up the ladder to his boss. If no joy, go to the next rung, and keep going until you hit the top. If even the ultimate boss shoots you down, then you've done your best and it is time to CYA and get out of Dodge.
Whether you choose to report your former employer and possibly collect a reward for turnign them in is up to you, but do it from the safety of a new job!