My sympathy goes to your co-worker...

Poor guy, car got hit, has to spend time to fix it... And now, everybody in the company (including HR) thought he was doing something unethical. Do you have any proof that he deliberately inflated the quote?  After all, not everybody has access to trust-worthy cheap body shop. (I was told the you cannot just paint a small portion of the car too.) For your own sake, I hope he did not find out that you bad mouthed him to HR.