But what would compel him to lie 5 times in a row if he knew he was to get in trouble for it? Could he be ashamed or embarrassed by what he had done? Maybe he didn't see it somewhere but thought "I wonder what would happen if I did this?" Would a five year old have that kind of thinking process?
No, a five-year-old cannot be a compulsive liar. Many children will lie about wrongdoing because they want to escape trouble/discipline. It's not by any means an indication that the child will develop antisocial inclinations. The same holds true for sexualized behaviors, depending on the circumstances. It sounds like mother has a pretty negative perception of her son.
But what if the mother thought there was something wrong with him, she thinks he's going to grow up a pervert. And she's sure he's a compulsive lier. Can a 5 year old be that?
He might well lie because he knew the behavior was a problem and he did no want to 'get in trouble'. No, the sort of thinking you describe is not typical of five-year-olds. They are pleasure seeking and impulsive by nature.
A 5 year old doesn't have the experience or the ability to plan/see the consequences into the future. Rather than 'lying', think of this situation more as 'denying' to understand his motives. The denying/lying will probably happen again until he gets a little bit older. Lying to escape punishment is pretty typical of a 5 year old. He may be scared to be in trouble (especially if he doesn't understand what he did wrong), or just plain doesn't want to have the consequences that go with it.
As for the grabbing, try to reassure his mother that grabbing the other boys' crotch doesn't lead to the conclusion he's some sort of developing pervert. There are lots of reasons in a 5 year old's mind that can spur them to try new actions/play - everything from movies, games to mis-understanding adult conversation. Just because it was the boy's crotch, doesn't make it sexually motivated - it's only us adults who assign this as taboo, because of the adult understanding of sexuality. The same goes for the lying. He's 5.
ps. These situations are opportunities to understand your child's development and express your views and guidance to your child. To help him understand and participate in his world; he's learning too. Assigning hugely negative labels and over reacting can easily be accepted by such a young child - based on the one incident, is this how he should think of himself?
If it's an isolated incident it is nothing to be alarmed about. You might ask him what gave him the idea to do grab the other boy. It wouldn't be surprising if he's mimicking something he witnessed. Be sure to set a firm limit on this sort of behavior.