We definitely have a policy against misuse of IT privileges that includes downloading or pirating non-work related data.
That policy is included in their work contract, so there is no denying that he did something wrong. He might even get a written warning with regard to the incident, though that is up to his department head, not me.
@BrandonS I already had a talking to the person together with his department head. As you say the more people in the company are aware that they are being monitored the better their online behavior will be.
So far I have blocked all ports from 1024-65535, and that seems to have stopped the software in its tracks. Though now we have some other services that has been influenced and I'll have to spend some time figuring out which specific ports it requires to work. I'm sure we will get everything working properly again soon.