First, I would attempt to communicate with the tenant about the problems they created. Next, I would also provide them (as reiteration) a copy of their lease, which hopefully is clear about early termination, and security deposit issues, with a list of the flagrant problems they created, explaining why return of their security deposit simply will not occur. I know you are also an attorney, but I would avoid litigation at all costs, because ultimately there will be no winners. Depending upon the tenant, in today's market, so many people are walking away from leases, you need to decide if pursuing them for the default is worth the time, effort and energy.
Re: the reference...I would confirm their tenancy and then state: "I can't provide any further details about their occupancy, other than it ended unproductively for all parties." 'Nuff said!
Do not return the security deposit. Small Claims court is probably the way to go to get dmamges paid, if you think there is any chance of collecting, I have been successful in making small claims, just need plenty of documentation. But, if the tenant doesn't have any money, collecting it may be a trick. You may just end up with an uncollectable judgment.
Aaaahhh, the joys of being a landlord.