Wow! A lot of really good points made and I'm really happy to see some of them made by new posters.
Pamm made a good point about mentioning to the manager the co-worker's role in salvaging the situation. Perhaps that tech should be considered for a bonus of some kind, particularly if the client remains with your company.
Ilana raised a critical point (welcome!): is there a CBA in effect here? If so, what are the pertinent parts of it and, also, past practice may play a role (particularly if the issue is not covered by some article or process stipulated in the CBA). However, I disagree with the point about involving the client in the investigation. That is something I really, really try to avoid because you end up interfering with the business end of things and it's often just not necessary. In my opinion, the account executive or other person responsible for maintaining the business relationship shold definitely be consulted before calling clients in on a company investigation unless you can see with clarity that the Company has an obligation or a real need from a risk management perspective to do this. Also keep in mind that the client has no obligation to talk to you and must be handled much diffrently from how you might interview a current employee.
IT HR and curlytop94 (welcome!) are spot on in my opinion regarding suspension. Suspension as a disciplinary tool is at odds with management practices that are increasingly focusing on internal environment factors. In theory, you're send someone off to feel the sting of lose pay and to take time to think about their wrong doing hoping they'll come back better and wiser. In my experience, it doesn't usually pan out that way in practice.
HRforME's point about "when's enough, enough?" is another great one. If this isn't sufficient for termination, what is? What would you do if another similarly situated employee did the same thing? This goes back to Ilana's question: why are you hesitating to terminate in the face of such egregious behavior on the part of the employee?
Something that we haven't made the focus of a post yet is this: what is your policy? Ilana mentioned code of conduct, but apart from that, what policies do you have that may play a role? We have "discourtesy to coworkers, clients, or the general public" in our laundry list of things that can get you immediately dismissed. We also have included things like "making false or malicious statements about the Company," "making false or malicious statements about the Company's clients" not to mention prohibitions against intimidation, which may play a role here as well depending on why the client threatened to beat up your employee (insulted? feeling threatened himself?). Do you have a code of conduct? What do your own policies say on this matter?
Another consideration, going back to HRforME's point: have you had anybody else in a situation even remotely like this? If so, then what did you do and why should you do anything differently this time?