This sound like a frustrating situation for all involved. If any one confronted me about every little thing my sister dobbed me in for I would probably react just like Jack and would regard my sister as the worst person ever. Time to sit down and focus on what is good about Jack and the three year old.  Can he list good things about himself? Most children don't want to be miserable but they get that way when they feel cornered. Sit with him and help him list his good qualities and then the bad things he does - making sure that this isn't who he is - it is just some of the things he does that you would prefer he didn't. Then take the bad things and make a list of the opposites like truth and the advantages truth brings. Sad and miserable compared to happy and loving. Help him learn what he can do right. There is an old saying 'what we focus on we get more of'. Your little girl will benifit by finding out what is the opposite of dobbing - supporting nice behaviours and gaining friendship. Good luck with focusing on the positives.