[Phalanx]

Have the balls to at least mention it to them.
You should be able to have a basic idea if they're lying or not.
I mean hell, the "temp" folder? Sounds more like a contingency plan to have an excuse at the ready to me...
From that point onwards, what you do is up to you - I mean it IS an illegal act, and may in fact be the first steps towards even worse things/actions towards young people/animals, knowing that, it's not really someone I'd personally want to associate with any longer - further action is at your discression.
I'd assume that if reported, the authorities could keep an eye on him without him knowing it.

Personally, I think it's more than coincidental that BOTH of these types of things were on the one guys pc...seems like a weirdo...not everyone can be helped - some are just fucked in the head, as cool as you are with them, some people are just disgusting individuals - although you should know that my perception (most likely among others) is that, so are the friends that let their loyalty lead them down the garden path.