I like your optimism.
But there were umpteen layers of pre-existing forces in game and in real life that would have been brought in before this and thus my problem and no amount of tapdancing, or tweaking or even ret-conning will change that. KW just like every other zone is not a separate city with a separate law enforcement, they are parts of Paragon City thus all served by the PPD. so factoring out the other glaring dumbness here, regardless of whatever big terrible fuck up happened, the only things that would happen would be a cleaning of house by PPD, worse case scenario, all of PPD, in every district.
Blah blah this isn't reality. Duh. Yep sure isn't but the games reality works in that it still frames itself in a veneer of normal among the abnormal. State Police, National Guard (State Activation), Federal Law Enforcement, National Guard (Federal Authorization), U.S. Military, Longbow (FBSA Sanctioned), Vanguard (United States and United Nations Sanctioned). All of those entities would have been brought in before some corporation, especially one where the city all but cedes control and oversight of to.
Its too much horseshit to suspend disbelief on. Sorry.
There are dozens of ways this great enemy (from a power and challenge standpoint) could have been brought in, corporate war between Crey and them comes immediately to mind.
Le Sigh.