So unfortunate. Hard lesson for your child to learn. Honestly Peter is not the kind of friend your son should have. If I was this group of boys I think I would not be inviting Peter over anymore!
Maybe I am the only one here but I don't think I would call the police. Lesson learned and move on. Unfortunately not all parents think the same as we do. I would have been going through my child's bags and room but she obviously doesn't really care. Unless there is real proof he took it then the police can't really do anything.