Don't let your direct report bully you. You are his manager. Document every incident in writing. Get his tirades on video. When talking with him you need to keep all altercations about work, not about is mental illness. For example, your demeanor is insubordinate. Your work on project X is failing because of -----. He sounds like a toxic employee. If so have performance reviews about his work. If he isn't performing up to par give him written warnings with corrective action. Make sure you also include the insubordinate behavior as well. If he doesn't improve, his employment needs to be terminated. Get HR evolved. Don't be scared. The worst that could happen with a corrupt company is that they could fire you for doing the correct thing. That shouldn't bother you because you're at the point now of quiting. Being a good boss means not only hiring and retaining good employees but also possessing the fortitude to fire bad ones. If you don't have the fortitude to give him written corrective action and eventually terminate his employment if necessary then maybe management is not the correct position for you. If you do the right thing and the company doesn't agree with you or believe you, then you only have two options --stay and deal with the toxic employee, or get another job.

Good luck