University advocates for students facing academic misconduct charges
It seems to be that the overall process is working well. The problem is that Student B was denied the opportunity to have an advocate truly being a proper advocate. 

In absence of any university regulations which require you to bump it up higher, I would recommend handling it locally if you can. There seems not benefit to engage higher ups if not needed.

I would, however, have someone examine the entire advocacy system used. The fact that two students were given the same advocate on a case where they are basically claimant and defendant comes off as wildly unfair. Of course, the advocate is not a lawyer but still, the system simply should never allow that to happen. When you saw it happened, it would have been better (if it is allowed) to stop the proceeding immediately and sort out the advocacy issue.

In short, the problem is with the advocacy system, perhaps not with the advocate. Someone should dig into and fix that so that such problems never happen in the future.

As for the current two students, if Student B (not the advocate) did admit, then it seems clear that blame should be shared (it was not theft but rather collusion).