Well, do you?

I think the son is trying to tell something.

This is what nightmares are made of!!! My then 2y/o son started screaming and crying that "daddy hurt me! daddy hit me on the sidewalk!" on a busy afternoon downtown. His vocabulary was limited, so that was the best he could vocalize what was wrong. What Really happened, though, is that my husband pushed the stroller over a large bump in the uneven sidewalk ramp. My husband tripped as the stroller tipped into the curb. Son was fine, just startled. We're probably lucky all we got were horrified stares from people.

I think you should use this to scare the hell out of him, teach him to not lie and that they have consequences. Tell him people will be taking him away because of it.

Well then...no bruises or scars your are clear

Time to teach younger child to tell his brothers friends he wets the bed or wears a nappy

That's just absolutely horrifying! Hopefully you can get this fixed up with BOTH children before it ends up getting CPS involved for a problem that doesn't even exist. And if your Son is that much of a troll already, I can only imagine the things he'd tell the CPS agents, not knowing how much trouble is actually happening. That is, assuming the son is still a young child himself.

Is the child's father satan?

Makes you wonder what made him do that.

What was taught can be un-learnt. You need to explain to your daughter that her brother did a bad thing and she is not to say those words out to anyone. Also, maybe give her teacher & his a heads-up; before this ever becomes an issue. They can testify to it being a HUGE misunderstanding.