If Microsoft was stupid enough to send him a modded X360, then there is no way to prove it wasn't him who modded it if they didnt catch it initially. While if he buys a new one flat out there is no risk of being blamed for modding, BUT they may not accept a new account with the same credit card...
If you are 100% innocent, I say send them the stupid Xbox. You will be out a console for a month if they were as busy as they were when I sent mine in, but better paying for postage than a much large amount for a new console. If the lawyer gets involved, tell him he can keep most of the money, as long as you get everything else you deserve. It is Microsoft, so he can have fun raking up some lawyer fees for them to pay for all this.
Microsoft deserves a kick in the balls for their failure of a console just because some idiot didn't realize they were using the wrong metal mixture for welding in the chips...
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