FREAKING OUT! what do we do?!

this past week, my mother was taking care of my son as well as my two neices (8),(2), and my nephew (4). the oldest girl and my nephew were in my mothers bedroom watching cartoons. My mother had just been in to check in, then about 15min later she walked in to find them under a blanket very quiet and whispering. she then became LIVID and took the blanket off, my neice pulled up her shorts(underwear on), and became very scared. my nephew was speechless. My mother was unsure how to handle the situation, so she asked what she was going on, my nephew stayed silent, while she said they were playing house. My mother asked why her pants were off and she said "they dont fit" shich ofcourse was a lie, which made my mother more upset. she seperated them, and left her parents know as soon as they got there. but told my brother the father of my nephew nothing. And now tonight my brother and his wife call Heated! that my nephew had just told them that (8 yr old female cousin) had been touching his penis. he was very frightened when telling his mother and begged for her noe to tell his dad(my brother). my neices parents did minor scoldding. and my nephews father is so upset he doesnt know what to do, and is developing a hate for his own neice. Our family is in a crisis...what do we do before this boils up even more? PLEASE HELP!!!!

[Meeva]

It happened to my family once. I went down to round up the kids for dinner, and saw the closed door. I opened it quietly, and there was my 10 year old girl with two boys, one a neighbor and one a cousin, sittin' around practicing nudism.
Little Kids are naturally curious about each other. Most, having siblings, know the difference in gander. But for those who don't, they don't know why you aren't supposed to wear clothes....
This is actually rather common, believe it or not. Your neice was just curious, and somewhat fascinated. My advice is to sit her down, and give her a small talk about private parts, the difference between girls and boys, and modesty.
My advice for your brother is to sit down and call a family meeting. remind them about (if this is true, adjust if nessicary, you get the idea) that you are all little once, and have (even if you don't remember it) seen or walked in on someone in the bathroom nude.
Also, your neice was also nude, and both are to blame, if you are going to blame anyone at all.
I hoped this helped, even a little bit. Remember, curiosity killed the cat, but satisfaction brought it back. That cat doesn't want to be killed again.