I am in a small town, a man, and had alot of ........(Different) experiences growing up.
First off, You did the right thing!
Second, the nephew is being courted by the single mom. (even if not sexually) Every guy would have died for the chance at an older woman. (Even if his only real chance is in his imagination) The attention is real.
Third, A depressed single woman, living in denial (sounds like it to me) loves any attention, even if from a young guy.
Fourth, (Todays times) it could be sexual. Who knows?
Fifth, The other guys are using him. They treat him like a brother and best friend. all the while teaching him (subconciously ) what needs to be done and how to do it. When the time is right, they will have some reason why they need him or want him to do them a favor. At this point he knows the process. He has seen how easy it is and the money to be made. AND it is very easy! and there is ALOT of money to make!! its just the getting caught part that sneaks up on you. They never tell or show you that part! As for informing the police; That could be another thing. If you do decide to (and personaly I would) do it in the form of a typed or emailed letter. don't be seen entering the station. in small towns people talk. If they are into something illeagle, it could be very dangerouse to be a known snitch. Be sure to include any known paths or roads and the times of the trips. include names and addresses. Maybe if they get caught with your nephew with them, it will scare him enough to stay away. if they have a record and are caught dirty they will go back to jail. if your nephew is caught dirty he should get off with probation. NO GUARENTEES!!!!!!! This is just my opinion based on my past and experiences.
I hate that this is what you have to deal with! I wish you the best of luck! It's always hardest to tell a loved one that their child is doing something wrong. Most of the time they already know it. they just turn the loving mothers blind eye. "If I don't belive it, it's not really happening!" kind of thing. Sorry again.
Good Luck and God Bless You!!!