I wouldn't call the mother or business up either. I would go through with the legal avenues available to you. It sounds to me like this guy is blowing the money on /other/ illicit things, but that's just speculation on my part. Usually, changes in behavior like that are indicative of a deeper problem that needs to be resolved.
If he's using fraud (that's what it is, so you might as well use the right name) to pad his income, it has to be going somewhere. Maybe his girlfriend is pregnant, maybe he's having mental issues, maybe he's entered a phase of his life where he just doesn't care and thinks he can get away with whatever he wants. WHATEVER the story is, a visit from the FBI is more than justified in this case. There's two people on this thread alone that he's scammed... How many more are out there?
If he's doing Bad Things besides ripping you guys off, I'm sure the feds will be able to figure that out on their own and take whatever measures are necessary.
Sometimes a stay in the pen is the wakeup call a person needs.
Although I have an uncle who's about a 5 time loser, not counting stays in local and county, and he's still using drugs and living his life poorly.
Either way, getting him to stop defrauding reefers (by using his mother's business, obviously) is a worthwhile endeavor.