Paul, we had an almost identical situation near here about 4-5 years ago. 2 inspectors and I think the Township supervisor was involved as well. As I recall, they turned around and tried to sue the Township for race discrimination
At the same time, I was involved in an insurance investigation of a 125 year old home damaged by a puff-back of the oil-burning furnace. All the place needed was a basic cleaning. At one point, we agreed to remove some wallboard to prove that the soot did not enter the wall cavaties ...... But these inept clowns at the inspection department teamed up with the homeowner and conspired to essentially have the home torn down. Their logic? The removal of the wallboard exposed an inadequately sized header over a non-bearing doorway. They required more wallboard removal .... soon, the entire home was gutted of wallboard and ceilings .... now, old wiring and plumbing was found .... duh! ..... so now they want all the walls rebuilt, all the eletrical and plumbing replaced, and since the walls were attached to an old stone foundation ...... hey, why not remove and replace the foundation too ..... about this time, these criminals were exposed for buying homes after writing up bogus violations. I was appointed the 'temporary building inspector' for the home I was working on and at least got that one squared away. I think everybody involved eventually skated with slaps on the wrist ......