The process is complicated. Only Bug knows the whole story. But I she want to or have to..., evidence is the key.
Personality does not change. Think deeply what old lady said and did before (beyond the acc), check all related emails, and do not miss any piece of evidence. your coworkers may had similar experience... If you have money, hire a detective, search her records bottom up.
This is your war and sadly your are alone. Back to the reality, does it worth for you to fight to the end or you want to settle, or even walk away for a better opportunity?