Best option for defense?
A good criminal defense lawyer.
What you are describing is par for the course of our criminal justice system. It is heart-wrenching to see it work on someone you know and care about.
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Everyone involved needs a good criminal defense attorney. In the end, it may not make much difference who did what, as they could each be charged for aiding and abetting each other.
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If you are concerned enough that you really want to help this person, you should assist him in hiring an experienced criminal attorney. However, the fact that he is now on house arrest rather than the lockup does appear to be a positive development for him; the judge must have at least see some hope for him in switching his temporary detention to house arrest. Although he will face a lot of pressure to plead out, there is a lot to be said for pleading out in the juvenile system rather than facing waiver to adult court if the DA is making him such an offer. Juvenile convictions remain secret (except for law enforcement in the event of future arrests) and therefore do not have as great an impact upon future employability as adult charges do. I am not yet your attorney and will not be taking any action on your case, but you are still welcome to contact me during business hours at my in Racine if you still have more questions. Also, please see me on the web at www.jayknixonlaw.com to read 15 years of my prior answers to consumer legal questions arranged by topic, please go to http://www.lawguru.com/answers/search/attorney/jknixon. Answers may contain attorney advertising materials.
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My colleagues are correct. The clear step is to put the matter in the hands of a competent attorney (if that has not already been done).
The 18 year old has a number of possiblities, depending upon his role in the offense and his criminal or delinquency history. At 18, he is not eligible for treatment as a juvenile, but it is possible that the offense, if it was committed, is expungeable.
All of this is one step up from speculation, since we don't really know the facts. It may be that the 18 year old is happy with the representation he has already. If so, you should not interfere. If he is not confident in his representation, then he should contact a lawyer and explain the facts to the attorney to get some sense of what can be done.