Is it ok for a moderator to delete a part of a members message containing judgemental remarks before posting?

I am the group owner of a site. My moderator oversees all messages and activites. Without my knowlege she edited a message of a moderated problem-making member by deleting a portion of the message which mentioned another member by name because she felt it was insulting to the mentioned member. Is this wrong? The moderated member is furious and is harring me with his expectations to have the original memo posted to the site with an apology from the moderator. He also expects the moderator to devise a plan so posts will never be edited again in this way. He demanded the moderator to announce her plan to the group otherwise he will take legal action. HELP!!! I don't know what to do.