As a vendor, I was doing business with a client for the past 4 years. She has been the one to place orders with my company and she has been my only contact at their company.

Last January, she provided a credit card to bill all purchases as the check process was taking too long and was impacting future orders from shipping timely. In September, 2011 I was notified that the card holder was disputing all charges to the card, back to January, (close to $16k in charges).

Seems that my direct client was not the card holder, but instead her son, and business partner, has his name on the card.

I am curious how the law handles this type of situation. Do I contact the police about it, as this was definitely an action with intent to fraud. I am waiting on the results from the Credit Card company to see how they handle the dispute for financial restitution.

Is she liable for criminal activity?

What are my next steps?

I would immediately contact local authorities and press charges for fraud... if it's over the amount of small claims then file a civil action for damages.
If it is a business account and her son is her partner, I would suspect there is still liability there and what kind of assurance does the credit card company make on charges like that? You may want to consult with an attorney... most consults are free.

I can't imagine a credit card company allowing for charges to be reversed older than 90 days (some say 60), but I could be wrong. I do think it would help to have a lawyer.

I did get an attorney to collect on the outstanding invoices (@8k for goods shipped and the cc declined). The next day I found out that they disputed all the charges back to January @16k) this is definitely over small claims.
My attorney did not answer me when I questioned if I should press criminal charges. I am wondering how others have addressed this situation in the past. I almost feel as if it is a Ponzi Scheme. She collected monies from her clients, but is failing to pay her vendors... I understand I am not the only one she is doing this to.

...
My attorney did not answer me when I questioned if I should press criminal charges. ...

Applicable ethical rules commonly prohibit attorneys from threatening criminal prosecution as a tool for collecting a civil debt. Therefore your attorney perhaps was avoiding this ethical dillema by not answering.

Credit card charges can not normally be disputed after they are 90 days, Since the cards would have been seen, approved and paid. So this is a big issue, unless they are trying to say there was fraud done to them by this employee.

But you need to go with the civil route, the credit card owner is going to have to look at theft or fraud against this person if they want to challenge the validty of the debt.

Also merely challenge the debt does not mean it will be reversed, if this was valid in their business I would expect the charges to stand after review

The card holder, the son, is the one liable for her charges. It's possible he didn't know what she was doing, if bills were going to the business address and she was one step ahead of them for a while (you mention a total of 16K but somehow she managed to accrue half of that without paying until just recently, with the card, a second time?).

He's liable to the card company and she's liable to you.
I would tend to believe that the police will not see this as in their realm and the DA won't see it as a Ponzi scheme, merely a bad business arrangement between mother and son and debts that aren't big enough to prosecute themselves. You are going to have to sue. You need to start by finding out what the card company is willing to dispute and why.