You're right, that was very foolish of him. But I urge you not to think about this in terms of "I don't want to get involved." You need not report him to anyone on your own initiative, but you also mustn't attempt to dodge the police if they try to question you, or refuse to appear for court if summoned. You could end up in legal trouble yourself if you do that.
On the other hand, remember that you don't have any personal knowledge of what has happened. All you know is what he said. He could have been making it all up, perhaps.
Regardless, I'd recommend you stay away from this person in the future. Anyone who is dumb enough to discuss illegal behavior with uninvolved people, and malicious enough to think it's a good idea to get other people prosecuted for things he's done, is not someone you want to associate with.
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You make an excellent point. People who discuss their legal matters openly subject themselves to great risk. We always admonish our clients to exercise great caution. Nowadays the police are very savvy about the Internet. Frequently, we find that people post information about their legal troubles online, exposing themselves to jeopardy. Similarly, people sometimes confide in their friends, coworkers and family members when they would be well advised to remain silent. The defense attorney is the only person who is legally required to keep the client's secrets. People would be well advised to keep this in mind.
You aren't under any obligation to participate in a police investigation or answer anyone's questions, unless you are called to testify at a grand jury. If someone is questioning you and you don't want to be involved, all you have to say is, "I don't want to talk to you." If police persist in questioning you, you can also add "I want a lawyer appointed to represent me."
That said, the moral thing to do is to come forward with this information. Your so-called "friend" is committing two crimes here - one, the underlying crime, and two, the act of framing an innocent person. You are uniquely situated to do something about the second crime, and in my opinion you should. If you don't, the next time your "friend" might turn on you and leave you holding the bag.
"All that is necessary for the triumph of evil is that good men do nothing" - Edmund Burke.
This post is offered as general information and is not intended as legal advice. This information does not in of itself create any attorney-client relationship.
If you're friend is being investigated for something, he should not be discussing it when anyone other than an attorney. One of the most frustrating things I see as a criminal defense attorney is people who talk too much and make things worse. If you are contacted by the police, you have the right to say nothing. You have the right to walk away. If stopped against your will, the police better have a really good reason or they may be violating your rights under the 4th Amendment to be free from unreasonable searches and seizures.
Sometimes the best thing a person can do to protect themselves is to say nothing. My experience is that some police officers don't always listen to what you have to say, hear what they want to hear, or mischaracterize a person's statments. All of which equates to making matters worse.
I am licensed to practice law in Oregon only. If you are seeking legal advice, please contact my office to schedule a consultation to discuss the facts of your case. Any comments made through Avvo are based on the very limited information provided and should not be construed as legal advice or the establishment of an attorney/client relationship.