At around 9 minutes and 30 seconds into the SML Movie (the title is above), Officer Goodman says that he hears Jorge coming in (that's the drug dealer). When Jorge comes in, he asks the whole class if they want some drugs. Cody is the only one to reply, and he says "No I don't.". He then greets Cecilia by saying "Hola!" to her, that he is selling drugs (which he never ends up doing in class, alhough he might have sold drugs there if he was not arrested). She replies by saying "Hola!" to him. After introducing himself to the class at Officer Goodman's request (he introduced himself as a drug dealer called Jorge), Toad makes fun of him by saying that he has a small peepee (not Chef Pee Pee). Jorge replies quite aggressively with "No I don't, man!".
Jorge, when asked what he has with him, says that he has drugs (which he later says is illegal) with him, which he is proud of. Officer Goodman, who presumably pretends to not be a police officer, caught him with possession of illegal drugs and handcuffed him. Bowser Junior volunteers to keep the drug dealer (who was going to prison again) calm while being handcuffed before he has to sit in a seat until the officer gets him so that he can go to prison.
Jorge the Drug Dealer is pronounced Hor-hay the Drug Dee-ler.
Jorge is Cecilia's brother, so he is presumably Mexican, just like his sister.
Viewers never saw Jorge sent to prison by Officer Goodman, but the drug dealer presumably went to prison after class was over.