Iwas forced to terminate an emploee for insubordination. I closed my business 6 months later and my foormer employee has been accusing me of incompitenc and has prevented me from getting at leat one job. He is also responsible for a negative reference given to my current employer. I had to tell the story to my current emloyer in order to defend myself. It's been a disaster. Can I take any legal action against this person or the company that gave me the bad reference. I work in a rather specialist area and my reputation has been damaged severely. This guy is ruining my career and I donb't know what to do.

You can sue him for defamation but you'll need proof/evidence that his statements are false. If he has been telling people in your industry that you are a fool or just do not know your business it probably will not constitute defamatiion, its his opinion. Your reputation may be damages but its up to you to prove it was done maliciously.