You really should have told the government it had been stolen/lost. They own it, and they give it to citizens for travel and identification. Most countries have serious penalties for passport fraud and that is what could be alleged for not reporting it as soon as you discovered it was lost as you are required to do by law...
1- does he NEED a passport to file in the first place?
He needs the identification as proscribed by the green card laws.
2- since he doesnt have his passport anymore, there is no evidence he entered the US legally,
If he still meets the requirements to be there legally, there is no problem. If he doesnt, then a passport is not going to help.