Shari has a good idea. If you can catch him offering something to someone online, it just might get some real attention from the authorities. If you want FBI involved, it needs to go over state lines I think. I don't know if the FCC will get involved with the internet. I know they do with telephones. I think that is the right letters for the group I am thinking of - the one you complain to about telemarketers who won't put you on the do not call list. Heck, if he IS doing something online with regard to pics of kids, etc... it may be that he could be encouraged to start using paypal and if he ever agrees to take a credit card through paypal it establishes it as a business and there are groups who would get involved then. That perverted justice group might also have some ideas.
I really hope the kids learn to trust you and the family and will confide in you. Would it be possible when easy child is feeling a little better in a few weeks to take Katie's kids on a playdate to easy child's house now and then? For a couple of hours, not all day, but arrange it so that she can "rest" because you know the headaches are "bad", or even, gag, so that she and M can have some "date" time? I know that makes you want to vomit just reading about it, and to go and scrub your brain with scouring powder, but the ONLY way you will get those kids alone with-o their parents is to make it appeal to the parents. My parents have been doing this with exsil for a LONG time. They know she will just get stoned/drunk and let niece wander where she wants for hours (at age 8, living on a 4 lane highway) with no supervision. It is their was to keep tabs on exsil and to help keep niece safe.
I am so sorry this is an issue.