It is unlawful to retaliate against someone who reports sexual harassment. In fact, the Illinois Human Rights Act provides some more protection against retaliation than it does to the victim of harassment in the first instance. Without knowing how your business is structured, there's no simple answer as to who to go to. Most employers have an HR department, and that would be the next logical step for you and for your friend to go. Your friend needs to report the retaliation and you need to back up her story. If you don't have an HR department, you may need to just skip rank and go to your manager's boss.
Not everyone wants to file a formal case about this stuff, but the law's there for a reason. If your friend feels strongly enough about this to report it, and got this crummy response, she should strongly consider doing herself, you and all your co-workers a favor by filing a formal charge with the Department of Human Rights. Cases involving sexual harassment can sometimes result in significant monetary awards, but a lot depends on the specific facts, circumstances and impact on the lives of the victims. A consultation with an employment lawyer will help clarify this for both of you. If the lawyer takes the case, it's often on a contingency basis. Good luck.
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The move may be in retaliation or it may be to put distance between the two and it was easier to move her than the manager. Make your report and ask why the move and indicate whether or not you can stay where you are under the circumstances. Then follow up on the report with a letter which recounts your version of the meeting with HR.
The above is not intended as legal advice. The response does not constitute the creation of an attorney client relationship as this forum does not provide for a confidential communication.