Mr. Leroi is right on all three counts. I would add that the civil cause of action may well lead to "treble" damages (three times actual value of the car) against the friend. However, reporting to law enforcement and the insurance company are important steps as well because this friend may not be able to pay court ordered damages.
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Report it to law enforcement, his insurance company for fraud, and have your brother hire a civil attorney
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What do you want to happen? You have a number of options, although none are easy and results are not guaranteed. You can report the theft and forgery to law enforcement. You can file a civil lawsuit and potentially get a judgment for treble damages and attorney fees for civil theft. However, a judgment will only turn into money if the Defendant has resources. Many thieves do not have steady jobs or bank accounts which can make recouping money difficult.
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