Ugh, I'm sorry you're in this situation! I'm afraid there's no recourse for you, legally speaking (e.g., you can't demand that the company pay for the lost vacation if they revoke their approval -- well, you could, but all they have to do is say "no," and unless you can prove some negligence or malicious intent on their part or unless your wife has a contractual right to the vacation once approved, you can't force them to pay).
Does your wife's company have an employee handbook that describes her rights (or lack thereof) in this situation? If not, is there somebody higher-up to whom she can speak and get her request "re-approved," politely explaining that this vacation was already approved and has now been bought and paid-for based on her good faith reliance on the company's grant of her time-off request? At the end of the day, the best bet is often to find some executive with a touch of human kindness and reason (if, indeed, one can be found), who is powerful enough to override her direct supervisors. If none can be located, and if her company insists on her relinquishing thousands of dollars based on its own whims, she might consider whether a future at such a place is worth the sacrifice. (Having once worked for such a place, and having finally worked up the courage to find greener pastures, my only regret is that I didn't leave years before, the first time I was flippantly ordered to sacrifice a pre-approved, once-in-a-lifetime, family event, in order to meet a boss's entirely arbitrary, yet inflexible, deadline. Such sacrifices may prove an employee's loyalty to their employer, but they never seem to engender any loyalty on the part of the employer toward the employee.)
Also, a word to the wise: next time, buy vacation insurance immediately upon making your first down payment on the trip, with a "cancel for any reason" rider that will give you a full refund if, as Chinua Achebe said, Things Fall Apart. (We typically get it through Travelguard, but to get "cancel for any reason" coverage you have to buy the insurance within a couple of weeks of your initial deposit.) Paying a couple hundred dollars to protect a several-thousand dollar investment is worth the peace of mind.
I hope it all works out ok for you!
