Since you can talk to the police the first time, it's not a corrupt INI file. I checked the code and you need to get the Medallion and Passport from Amorales, maybe that's the reason you wont get the second dialog with the police. But that would mean that you wouldn't be able to set up the meeting/ambush.
Other than that, the only reason I can think of is that you might have started using a different set of source code files in the middle of your game, that can cause these kinds of weird errors. In that case you need to start a new game.
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