Your son needs an attorney. Yes, it is possible for him to serve jail time. As for the army, it will be up to the army to decide if they still want him if he is convicted. The army cannot really punish him if he was not in at the time of the incident. Have you browsed through the information in LawInfo's Free Legal Resource Center to learn more about your issue yet? See:
http://www.lawinfo.com/consumer.html. You can certainly try to speak to a lawyer to determine what legal options may be available. In the meantime, you may be able to learn more on your own. Search the "Free Legal Resources" tab, or browse the Consumer Resources. Good luck.