Yes, the police can still prosecute, though the situation you describe offers grounds for more lenient treatment:1) Theft is a crime, even if the stolen goods are later returned (the return though will be a mitigating factor).2) The victims of the crime do not make the decision to prosecute or not; they are witnesses to the crime, not parties to the legal action (but sometimes the authorities will voluntarily choose to respect the victims' desire to not prosecute, and generally if the victims ask for leniency, that will be another mitigating factor).