Illegal use of my server??

[Tony Saign]

Any legal gurus out there??

Long story, but I'll summarize;

On Friday 05/16 my T1 went down.
In troubleshooting attempts it was discovered that a machine, on my
network was being used maliciously.
Not hacked, but Squid was being used to relay mail (i.e. SPAM).
The machine was immediately brought down, and Squid was disabled.

I received a call from my ISP, and they are NOT happy.
Looking @ the logs, it appears that several thousand SPAM emails may
have been sent.

What should I do? Can I pursue each ISP in attempts to track down the
guilty parties?
Can I take any legal action against them?
This is the last straw! I'm so frickin' sick of SPAM, and now people
potentially got some w/ my IP address!
Grrr!!!

Any suggestions, advice would be greatly appreciated.