When is a background check legal

It seems that you have a few issues here as well as a very angry employer.  First, as the employer felt the need to ask you to sign a new consent for a background check, which you refused to do, the employer is clearly on notice that the old consent was effectively revoked.  Second, there was no legitimate need for the employer to perform this background check when you were no longer working for them.  The performance of the background check could therefore easily be argued as a violation of your rights.  Third, as there seems to be inaccurate information due to the identify theft problem you had in the past, the employer would violate the law by publishing erroneous information assuming you have or immediately notify him about the false information and why it is false.  It also appears that as the old employer is threatening to convey this information to your new employer, they are acting maliciously.  You should immediately consult with an attorney who can send a letter to the old employer threatening legal action for doing the background check without authorization and making it clear that information on the background check is false and based on an identity theft issue you had in the past.  If the employer then sends the information to your new employer, you can take legal action against the old employer should you lose your new job.