In 1967 he was controversially sacked. Ostensibly Ritter was accused by the City Council of failing to produce the statutory planning scheme that was required by the Metropolitan Region Planning Authority (MRPA). The MRPA had been formed in 1963 to convert the Stephenson-Hepburn Plan for the Metropolitan Region into a statutory scheme for the whole of Perth. The relationship between the MRPA’s Chief Planner, David Carr and Paul Ritter soon began to deteriorate. Perth historian Jenny Gregory believes the falling out was due to the state government’s (and Carr’s) view that the role of the PCC was to fill in the details of the overarching metropolitan scheme. Ritter himself insisted that, despite some personal animosity, “the one and only major contention” between the two was regarding the Government Freeway Plan, which Carr backed and Ritter vigorously opposed.

Following his sacking in 1967 a committee comprising Sir Walter Murdoch, Mary Durack Miller, Stella O’Keefe, Professor E. K. Braybrooke, Professor G. C. Bolton, Thomas Wardle and Dr. R. B. Lefroy was formed to inquire into the dismissal. He later successfully sued for wrongful dismissal.

In 1970 Paul Ritter was involved in the design of the Crestwood Estate in Thornlie, Western Australia. To this he introduced Radburn principles. Every house sits on the edge of a park, and movement on foot through the development is possible without encountering vehicles.

In 1971 he was appointed by the state Minister for Town Planning (H. E. Graham) to report on the MRPA proposals for the Corridor Plan for Perth; however his report had little impact.

In 1983 the Federal police commenced an investigation into whether he had attempted to mislead the export grants board. The investigation included interviews with his overseas business associates and contacts, and led to Ritter’s arrest in August 1984. He received a 3-year prison sentence, of which he served 16 months in Fremantle and Karnet. Paul Ritter maintained that he was framed, but his appeal was dismissed in 1986, and he abandoned an appeal to the High Court of Australia. After his release he published Curses From Canberra: public service conspiracy and the failure of democratic safeguards. The imprisonment led to the bankruptsy of Ritter and his family.