The tip doesn't go to the restaurant - it goes to the server. The restaurant isn't being affected, unless they take some sort of cut of the tips or something.
Actually, in most decent restaurants these days, the server has to "tip out" the rest of the staff, on a percentage of their sales - to the chefs, the bartender, the host/ess, and sometimes even the dishwasher. It's a fairly common practice, by the logic that all the people I listed have a part in the customers overall dining experience. (Hence why at most places I tip 5% when I get bad service, so at least I'm not *taking* money from the server.)
A gratuity is something that just makes sense. Usually I see it run in at the 15% mark, some places go lower, as low as 12%, some fancier places go up around the 20% mark.
When I worked at an upscale restaurant, I asked once, why they put a gratuity on groups over 8. (The actual figure varies, between 6 and 12 when the gratuity gets added.)
What I was told was this: Say everyone orders a full meal, and one alcoholic beverage. Maybe some get dessert. At a restaurant like the one I worked at, this meant each person was probably responsible for between 30-40 dollars a piece. Say it's a party of 10. This means your bill is going to come in around 300-400 dollars. For a bill that large, people generally won't tip as high as the might individually. They'll think, if they stick to a 10% rule "30 to 40 dollars? For a tip? We could have had an 11th person along for that!" And will correspondingly leave a lower amount.
So, they charge a gratuity at what they generally expect to see normal tips at, which is usually in the 15% range, for most restaurants.
Note this means you aren't expected to tip *on top* of the gratuity - it's just the way restaurants try to get employees a decent tip for the kind of work a large table requires them to put in. (And believe me, if you haven't served, don't think it's not *really* hard work to keep a table that large happy, in addition to the rest of the tables you have to serve.)
As for this particular case, I think it's silly to report to the police. I might consider striking the party's name onto a blacklist regarding reservations, but not call the police for it.