I would be careful in telling your friend - especially if you think she is going to be defensive. Since you husband was the only adult to observe this, I would be worried that if you friend incorrectly questioned her daughter then somehow, perhaps, it could get turned around into something that your husband caused or did. I agree with your husband because of the risk to him, I would not have the child in my home again - If you cannot do that then I would not allow the child, for your husband's sake, to come over without at least 2 adults, together at all times, supervising. I do not mean to cause you alarm but I work in a field that often deals with these issues and it is scary to me how the stories can get turned around by someone who incorrectly questions a child. If you observe the behavior again you might even consider calling CPS instead of first telling your friend. IDK - it is a hard choice.