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I'd come forward without them asking and give em the money. Don't be a dick and do the right thing. You wouldn't want to be on their end and have to eat that much money. If you don't want to pay for the exhaust, at least let them pay for you to ship it back to em.
Being honest is the way to go. If you aren't, it WILL come back on you down the line. Also, it may come back on your friends mom, could get ugly in the courts and just be a plain mess if things aren't cleared up right away.
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