I was given a company credit card by an employer I

I was given a company credit card by an employer I worked for in the late 90's through 2002. The balance was always paid by the employer and I never saw the monthly statements. I left under good terms at a time when the company was having financial problems.
Skip forward to today (2011) and I receive a call from collection agency saying there was an unpaid balance on this card and I am responsible for it. Since the statute of limitations has passed they are threatening to issue a 1099c to the IRS.
I'm told the original balance was $6,000, which would have taken me many months to run up given the amount I would have used the card.
I'm told the amount I'd need to pay is $2,200 if the 1099c is issued.
They offerred to settle for about 1,500 but said I could make a counter offer.
I live an work in Wisconsin.
Does anyone have advice on how I should proceed? My main concern is keeping this off my credit record. I have an excellent credit rating now and down't want it damaged. To the best of my knowledge this has never been on my report. I check regularly.
I'm angry right now so my inclination is to hire a lawyer and fight this but maybe it would be cheaper in the log run to settle. Is it normal to be offerred the chance to counter-offer? If so, any idea what they would take?
Please let me know if you need any additional information.

Send them a debt validation letter ASAP!!! Do not admit to having or using the card!

Also threaten them with filing an IRS fraud case if they try to serve an 1099 on you without validating the debt. Plus they lied..if they do file a 1099 you don't have to pay them a dime....you get taxed on it. Also it look like this debt is too old to go back onto your credit report. As was suggested above, send them a debt validation letter immediately. You want proof you owe them anything at all.

you more than likely were an authorized user...not the responsible party. Personally I would send then a cease and desist...and an FOAD telling them to hit the road. It is out of SOL.