That is a good post from jane. Power often follows the money and the FIL seems to be exploiting his position as far as that goes.
I also agree with roses (I think it was her who said) to not escalate matters with police and who knows what else. Anyway you can't really do anything, as you say, it's for your DD and SIL to deal with. The little boy can be kept away from him. However, your paths will cross.
I was in the situation where my FIL threw my 5 year old son into the deep end of a swimming pool. My son swam (he could swim) to the edge and shocked, got out in tears, and ran to mommy, a perfect outcome for wanting to "man him up" (not). I was seething and I don't remember the detail but obviously I got the message across because it never happened again. My son, as an adult, loved that granddad very much and they found a way to have a relationship. Of course my son also had many other stable, loving, proper men as role models, that balanced things out.
But, three is tiny. I'd be mad as a snake too.