Yeah I agree - it's an empty threat made from desperation. Hey, if they keep this up he may even have grounds for unjustifiable dismissal
Let them go to the police if they want. Doubt they could make it stick plus if anything the police would probably just refer it to DOL and then they'd have to repay the $$ they took from him unauthorised.
But yeah shouldn't have any trouble at all transitioning into retail. I went from hotels into airline call centre - so basically anything that is customer facing is easy to transition to.
Best option would be for him to get another job and then take a grievince case against them - but you would need to check with DOL about what evidence you need to gather for that and whether moving first would hurt his case (though I doubt it since as I said before it's pretty close to being constructive dismissal)
Good luck with whatever he decides - sounds really stressful.