Making out checks to her boss for insurance? That does sound very fishy. I would inquire to any governmental office that deals with work related issues, whether that's okay. I can't see how that is.
I think your instincts to stay are spot on. I say, go for it. (Not that I have a say, but if I did, that's what I would say.)
Take care, Wendy.
Me:57 H:52 M:28 Got another lawyer last year and filed. D35,S/D twins28,D22 EA4/04 End? Who knows? "Life is like a mirror. Smile at it and it smiles back at you." — Peace Pilgrim