Plantman,
I used to work as a juvenile court case worker with 10-17 yr old boys on probation. Some of them had landed there by stealing or assault, but most were on probation for drug stuff. A really horrid concequence of a drug conviction is that it excludes the offender from consideration for federal student loans for college. I think that it is a terrible policy, but depending on your financial circumstances, you might want to look into this sooner rather than later to see if there is a way to preserve his chances through a plea or something? I'd have never made it through school without those loans.
Anyway, most of the kids I had in my caseload were fatherless, and most had family lives that did not have very concrete standards that were upheld. I had some kids who were from the wealthier families around town, and they had just assumed they were entitled to do whatever they wanted to do. While many people tend to assume that parenting must lead to behavioral choices one way or another, I found this frequently to not be the case. Parents get their say, but kids- teens especially- gather their decision making info from many sources. Often, the voices of the kids around them are far more persuasive. A good open relationship between kids/parents did not always lead to a kid who only made good choices. So, our program focused on decision making and self-esteem building activities that could help the kids learn how to be confident in saying yes/no when they wanted to, without feeling so much peer pressure. We avoided hokey artificial construct programs that are out there- just say no- dare, etc. Sadly, many of the kids so enjoyed the consistency of our program and the presence of a positive consistent role model in their lives that they would commit a small offense after being released from probation. Once I saw this pattern start, I began meeting with the kids even after they were done, so that they wouldn't keep offending to stay in the program. I still have a couple of them who keep in touch, and it's been 4 years since I had that job.
Avoid beating yourself up about missing the signs, etc. My parents were awesome and supportive and had no idea (and still dont) of anything I was doing. It was partially due to their great example that I was extra dilligent in keeping it from them for fear of them being dissapionted in me. The kids in my caseload responded to me in similar fashion, but I was smarter than they were, and always knew where to find them when they tried to hide.
If your kid was taking stuff from you, it's possible he was trying to give himself a way to get caught/get in trouble/stop the behavior and still keep his street credibility (w/his friends). Now that he's been court involved, the opportunity is obvious. He now has a chance to blame his quitting on you or the 'man'. Ideally you want him to feel confident enough in his desire to quit whatever that he can make the decision without an excuse. How you handle the specific subject matter of the content of what he did is up to you, but the legality of it, the future ramifications of a drug conviction (very hard to become a teacher, for example) are likely things he's not considered.
As to your NYPD Blue methodology, it's nice on TV, and would probably make you feel better... but most kids don't respond well to that. Only the bullies I worked with needed to be out-alpha'd and shown who was boss. Then they usually sang like birds. ha ha.. It helped being 6'5'', 235lbs. Giving your kid a chance to express his feelings about what has happened without criticism or critique will allow him the space to let you know if he has a good understanding of the circumstances or not. Just listen. He will know that you have a lot to say, but hopefully appreciate your willingness to hear him out. He ought to feel a responsibility to you, and know that he's let you down. With time, he'll appreciate the respect you gave him in this bad time, and it will be a powerful motivator against the peer pressure he'll certainly feel again. But he does deserve to hear you out as well... and he's earned whatever punishment you decide is neccessary, in addition to his legal consequences.
Now, all that said, you're going to do what you think is right for your kid, and that's exactly what you should do. I agree with JenTay that your job is not best friend, but parent. These do not have to be mutually exclusive, but it's closer to having a well trained dog as best friend than another human as a best friend... until he's legally independent, you share responsibility for his choices.
I hope it goes well. keep us updated as you are able...
Kevin