Look for the dude with a sword, in the least likely of places for villagers to be loitering.
As for the discussion of letting him draw his sword... Nah. He refuses to come with you alive and as the option states, you only need his head. You give the authorities trouble, it's your own life you are destroying. Guilty or innocent isn't the cops duty, it's the courts. If the man refuses to co-operate, the cop is within his rights to be forceful. In a situation with a sword ready to be drawn... I doubt further discussion is needed when justifying lobbing off his head.
And the villagers will miss him and cry a little, minus 2 relations. After all, guilty or not, you are killing one of their family members.
What annoys me is knocking him out and it still says I killed him. I also succeed in saying that he is dead when i only knocked him out and get all the reward, be it money or honour for refusing money.