FWIW, here in the UK we have an entertainer called Derren Brown. He specializes in psychological "magic". A while ago he did a show where he set up a punter to believe he had committed murder. The mark reacted exactly as your friend client. IIRC, he actually gave himself up to the police, really believing was guilty. IMO, very disturbing and going by the TV episode, even though Im sure it didnt show everything, too simple.

If any one is interested in tracking it down, Derren Brown - The Experiments. Episode The Guilt Trip.

http://en.wikipedia.org/wiki/List_of_works_by_Derren_Brown#D...

Added: Sorry, the point is that Im shocked that you are saying your police actually do this, in this way. When watching these shows its easy to assume that there is some extra trickery going on, so it cant happen to a real person in real life. Your case shows that it can.