I think you should take this story to your paper or a photography magazine at the very least. I almost can't believe that they destroyed the picture and you complied to avoid trouble. This, as Ian mentions, comes down to nothing more than a fundamental lack of common sense and fear - which clearly is beginning to have a massive impact on every aspect of our lives. They destroyed your property, for no rational reason whatsoever. This needs to be fought aggressively, on principle. If we continue to remain complacent about this it will lead to more fear based laws and also, more paranoia about photography and photographers.