A bad cop is a bad cop, whether he has a K9 or not.
If a dog false indicates, it is a training issue. If a dog false indicates due to a handler cue that is intentional, I would think that is entrapment. Proving it would take some expert witnesses and review of the training records of the team as well as the video.
Bomb dogs in the military fall out of mission capable status if they fall below 98% accuracy. Misses and falses are counted negative. The worst bomb dog on a mission is at 98%. The problem with a dog false responding is it wastes time, places people in danger because they are stationary, and erodes trust in the team.
In the situation you describe, I feel you are justified in questioning the motives of the officer. Any handler can talk their dog into responding by just asking for the final response. If you tell the dog to sit, it's going to sit. Proper training, handling and records keeping of well run and ethical K9 teams avoids this type of thing altogether. It is the misuse of the tool that is at fault. It's of important note that most, not all, narc dogs can search the exterior of a vehicle in about 20 seconds. Semi trucks take about a minute.
I feel your pain though. I've been hassled a couple of times by the police in my younger years. No fun at all. Sorry you got the runaround man.