Only a white guy is going to flip off a cop and think he should should get away with it. The rest of America knows you'll get shot in the back for pulling that shit.

Shouldn't you have figured this out before even writing the first line of code? The fact that they want source code is a pretty good indication that they think they "own" the software you are developing for them. And that makes a lot of sense since I don't think that any company is going to finance the development of software that will end up potentially benefitting the competition. You better get yourself a lawyer and send her every scrap of documentation and agreements you have with your client to make sure you understand the situation you are in.