British police have made an official complaint to the television regulator over a documentary it says contained misleading footage implying Saudi-inspired extremism in British mosques.
And it later emerged that a second Dispatchesprogramme, also about British Muslims, is under investigation.
The Channel 4 Dispatchesprogramme Undercover Mosque, broadcast in January, purported to feature "chilling sermons" from Saudi-trained preachers which were secretly recorded by an undercover reporter.
"Dispatches reveals how a message of hatred and segregation is being spread throughout the UK and examines how it is influenced by the religious establishment of Saudi Arabia," the programme's web site said.
The claims were investigated by West Midlands police officers who found there was insufficient evidence to bring charges against speakers featured in the documentary despite accepting some of the speeches might be considered "offensive".
Instead, prosecutors said the footage, which provoked anger among Britain's 1.7 million Muslims, had been "heavily edited" and the speeches appeared to be "taken out of context".
"The splicing together of extracts from longer speeches appears to have completely distorted what the speakers were saying," said Crown Prosecution Service lawyer Bethan David.
After their initial investigation, police turned their attention to whether the programme-makers were guilty of inciting racial hatred. However, detectives concluded there was not enough evidence and instead have made a formal complaint to Ofcom, the television watchdog.
Channel 4 denied wrongdoing, saying the police had no evidence for their allegations and that it would defending itself against any complaint of unfairness.
"We believe the comments made in the film speak for themselves - several speakers were clearly shown making abhorrent and extreme comments," said Kevin Sutcliffe, commissioning editor for Dispatches.
An MP whose constituency covers Green Lane Mosque in Birmingham which was featured in the programme, called the decision not to prosecute the speakers as "gutless, spineless and a cop out".
"I am incredulous that the Crown Prosecution Service alleged that there is insufficient evidence to pursue a prosecution," Roger Godsiff said.
"It's a green light to any xenophobic, neo-fascist, racist who wants to go out and make their disgusting statements."
However Abu Usamah, one of the preachers featured in the programme, said the mosque had a tradition of teaching a moderate view of Islam.
"To try and demonise the efforts of these people by taking their comments out of context was shocking," he told the BBC.
Meanwhile, the Metropolitan Police in London are looking into the edition broadcast last Monday. Dispatches: Britain Under Attackexplored the roots of Islamic extremism in the UK.
It featured a man known as "Abu Muhammed", his face obscured by a scarf, who told British Muslims they were "in a state of war" and said the July 7 bombings were "justified".
"It was very justified. Because Allah says if someone committed an aggression against you, you commit aggression against them. If somebody transgresses against you, transgress against them the same way," he said.
According to the programme, Muhammed is banned from entering Britain but broadcasts to British Muslims via the internet.
A police spokesman said: "We are assessing the content of a Dispatchesprogramme broadcast on August 6th to determine if any offences may have been disclosed.
"We will also be liaising with the Crown Prosecution Service in due course."
The revelations are the latest controversies to embroil the broadcaster. In May, it was severely criticised by Ofcom for "serious editorial misjudgement" over its handling of a racism row on last year's Celebrity Big Brother.
In July, premium phone regulator ICSTIS imposed a record stg£150,000 fine on the station over a show which asked viewers to telephone to take part in a quiz even though winners had already been chosen.