The LEO didn't do anything about it because he didn't know there was an issue with it being marked M2. With my many years as a LEO I can tell you that cops can be the most ignorant people in the world when it comes to guns. That cop probably didn't know an M2 from R2D2. This was one of my biggest gripes when working the streets. There is very little formal training for LEOs about firearms identification. I tried to hold a couple of classes but the participation was dismal at best. I would consistently have other cops call me to respond to ID one gun or another. Most of my beat partners started catching on.
For a number of years ATF, Bakersfield PD and Kern County SO would go into a shop that sold military surplus. They would do random checks but never found anything out of the ordinary. Above the counters there were four "dewat" machineguns hanging from chains. An M1Tommy gun, type 26, MP40 and a Sten gun. All were fully functional and two, the Sten and MP40 had loaded magazines in them. Nobody ever caught it until some CSI techno-geek went in to but a set of BDUs for work.