Its unfortunate that your husband had a difficult phase early in life, but highly admirable that he has so brilliantly turned his life around and made it so good - that is something to be commended, not hidden.
I'd wonder why your brother in law ( ? your husband's brother ? ) chose to mention the reform school aspect to your son, without checking with either of you as to whether the lad already knew - that was irresponsible and possible hostile, and needs to be understood. But the boy is probably old enough to learn of how marvellously and bravely his father, having got into trouble, turned his life around and made it so good, and how terrific a thing this was for him to do.
Telling the boy prevents any further accidental exposees, and removes any possibility for anyone else to maliciously Tell him.
The message isn't that his father once upon a time behaved badly, and no he can do so, too ; but that his father once long ago behaved badly,regretted it, and made it good. And that's what he should do if ever he does something wrong.
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