You posted that when he works, he'll have to use the money to pay you back what he took, I agree to a point. Let him keep a few dollars-if he earns $20, let him keep $5. That way he can learn to budget with the money he earns.
In this way, he'll learn 3 lessons:
1.You have to take responsibility for your actions.
2.Money and things do not come easily and if you want something, you have to learn to put some money aside.
3.He may get an idea of how hard and long you and your husband have to work to provide your kids with what they have.
This is exactly how I feel about it. If I take the $40 per week that he earns and keep all of it, he'll only come back to me and DH to ask for money when he's allowed to do things again. That doesn't seem like it would be a very good learning experience.
As for the police and scaring him straight, I think talking to your BIL is a very good idea. However, given his personal history I would ask you to PLEASE not have him even pretend arrested. This boy needs to know that he is secure and that you are there through thick thin and any other crap that may come up. Not saying there need to be consequences and severe ones, but having the police come pick him up can totally screw up his trust for you as well and that is going to rock any foundation he has.
That is the rocky road that I see. While my BIL can talk to him about the ramifications of his actions, I wouldn't want to arrest him. He needs to understand what can happen if he chooses the wrong path and he needs to have us there for him to show him the right path that he can walk with us.
at least you can head this behavior off while he is only 13...before he goes to college and gets a credit card and starts treating the entire dorm to pizza and beer.
This has definitely crossed our minds.
Tell him he failed twice.
The code is honesty. The second part of that code is he would have to turn himself in.
We've discussed this at length. Because my BFF is the physician for the cadets and her DH is a math prof at West Point, I could give him a number of examples of people having to confess what they'd done because of the honor code. One friend of ours came very close to being thrown out because he lied about being with his GF when he was supposed to be back in the barracks.
One of my first thoughts was drugs too. When he works for his uncle, is he around other employees that have the drug/alcohol problems? If so, I would consider not having him work there anymore. You would be amazed at how much influence co-workers could have on people, especially a 13yo -- and I don't necessarily mean drugs per se, just their attitudes/thoughts on life/etc.
I really think that the adoption aspect could be a big part of the cause. I would definitely get counseling.
Luckily, those who have drug/alcohol problems do not work remotely near my DS. He tends to work in the office, with the ladies, shredding the week's castoffs or he works near the customer counter mopping and sweeping, etc. The guys at the counter are all class acts, and many are his cousins or uncles.
I have a feeling that the adoption aspect is a big part, too. The more I think of it, the more I've been remembering about him having to leave our house when the summer program was finished to return to Russia. When he got back to the orphanage, he bragged to the other children that he and his Dsis had rich parents. Rich in his mind meant that he and she had their own bedrooms, they had bicycles and we had 2 cars (if you can believe that we are so rich.

) All of the kids were mad at him and didn't want to play with him. He had to learn to keep his mouth shut around the other children who didn't have prospective parents yet.
Another thing is that he had to go out with his other siblings to beg in the streets to keep their house going. He's always been very money focused as he could find a kopeck on the ground from far away. (There are 100 kopecks in a ruble and about 30 rubles in a dollar.)
So, from that, I would think that he would understand the importance of having and keeping money, but evidently he sees money as a quick fix to fun. I just don't want that fix to turn into drugs or alcohol from candy.
He asked me if I had ever stolen anything tonight. I could look him in the face and honestly say that I never did, nor did his Dad. He was amazed. I told him he could confirm that with either of his grandmothers.
I really think the day has helped him to put the gravity of his actions into perspective. I can't wait to hear the lecture his uncle gives him tomorrow at "work." He said he's going to confess everything to him so he can seek out his advice on what he should do to make it up to us. I know he'll be scared, but I also know that he'll listen to everything that his uncle has to say and he'll take it to heart.
I've gotta go to bed. What a long day!
Thank you again for all your support and advice!