He made the right decision. Honesty is almost aways the best policy.
It's a good thing he has a conscience. If he didn't, this would be an excellent opportunity for him to not only maintain his job with these crooks, but to also extort some money from them for asking him to falsify a report. But that wouldn't be very honest.
But the more I think about it, the more I see a teachable moment that need not go to waste here. And he could give all the extortion money to charity; or most of it anyway; or whatever percentage his conscience dictates he should give. I think a 50/50 split would be fair. After all, he runs the risk of his bosses hiring a hitman to put an end to their problem.