Katrice disappeared in November 1981 during a trip to buy food for her birthday party from a NAAFI store on an army base in Paderborn, Germany, where Richard had been deployed with his family. But the RMP would only treat Katrice's disappearance as a missing person inquiry.
They failed to close borders and it was weeks before they even interviewed staff at the supermarket where Katrice vanished in the few seconds it took her mother Sharon to fetch some crisps. Nor did they notify hospitals of an eye condition Katrice had that would have helped to identify the little girl.
Finally, in 2012, the Ministry of Defence apologised for its "flawed investigations" and a review team was appointed to reassess the case, but Lee believes the RMP has done little to redeem itself since.
He claims that in May last year, after police excavated a German riverbank close to where Katrice was last seen, the realisation that bones they uncovered belonged not to his daughter but to a horse was broken on social media before police told him.
"They informed Instagram, Facebook and Twitter that it wasn't Katrice but they hadn't informed the family," he says. "This is why I feel angry."
Yet he was still initially grateful for the call last week to tell him about the arrest of a man in Swindon, Wiltshire. "I thought, 'my God, they're actually treating me as the father of a missing child, a human being'," he recalls.
"Then the alarm bell rang. The man said the review team had pointed this individual out. This suggested to me that the information was there all the time and hadn't been acted upon, just as the information that led them to the riverbank last year had been on file for 37 years."
When Lee said as much to the army major in charge of the case, the response was obfuscating: "He said, 'I can't give you an answer on that because it might jeopardise the case should it ever come to court.'"
The next day, he received another phone call from the RMP to say the man arrested had been released without charge.
Lee believes the events of last week were more an attempt by the RMP to save face than anything else.
"It was an exercise in covering up the mess from 1981, I'm sure of it," he says. "He said, 'We would ask you not to speak to the press.' They wanted to do it below the radar and not have it reported on."
Yet Katrice's mother Sharon, a 66-year-old administration worker - divorced from Lee in 1991 but united with her ex-husband in their desire for answers - said last week that she was "very happy with the investigation team from the RMP this time around".
Speaking from her home in Gosport, Hampshire, she added: "I want the police to carry on their investigation and then, when the time is right, to tell me why this arrest was made. I don't want this arrest and search to be the end of it."
The couple's daughter Natasha, 46, also from Gosport, who was 7 when Katrice disappeared, told the Mail that while she was "gutted" to hear of the arrest last week, she would not say any more for fear of jeopardising the investigation.
So have officers made a breakthrough, or is this another red herring from a blunder-prone police force whose previous behaviour pushed an already fragile family to the brink?
The Mail can reveal that the man arrested - whom we are not naming - is a 74-year-old former soldier who served at the same base as Lee.
With a police cordon outside his semi-detached home in Swindon and two tents erected in the back garden last week, there was, naturally, talk among local people.
They describe the arrested man as smartly dressed, friendly and bespectacled. A family friend told the Mail that the man's partner was distraught after police came to their house last week: "You'd be horrified to be told he was suspected of that, wouldn't you?"
It seems the ex-soldier had no inkling he was under suspicion either. An acquaintance recalled seeing him happy last weekend: "He seemed his usual self. He's a comedian. He likes to crack jokes."
The ex-serviceman is only the second person to be arrested since Katrice disappeared.
Lee, who has been with his current partner Irene, 68, for 26 years, still remembers the events of that day 38 years ago vividly.
Despite the drizzle on November 28, 1981, residents of the Paderborn base were in buoyant spirits. It was the last payday before Christmas and relatives were arriving for the festive season.
Lee was sitting in the family car outside the base's NAAFI supermarket while Sharon and her sister Wendy took Katrice inside to buy food for her second birthday party.
When Sharon realised, at the till, that she'd forgotten to buy crisps, Wendy was left with Katrice while she dashed to fetch them. Wendy assumed Katrice had run off to find her mother - then Sharon returned and the women realised she had gone.
"Our whole world changed," says Lee, who immediately thought the RMP's theory that Katrice - who was wearing a tartan dress, turquoise duffel coat and red gumboots - had simply wandered off and fallen into the nearby River Lippe, a tributary of the Alme, was flawed.
"The only way out was via three checkouts," he says, adding that even if Katrice had somehow managed to escape through a back door with no handle on it, the first question someone would have asked in an area chiefly populated by forces families was "where are your parents?"
Believing the RMP was "ill-equipped to deal with the enormity of the situation", he asked the investigating officer to ensure that hospitals were made aware of Katrice's eye condition, so they could alert authorities if she were admitted. Yet it later emerged that hadn't been done.
He asked the police to inform international border crossings that his daughter had gone missing. They didn't. Statements from shop workers and other witnesses were not taken for six weeks. And when Lee tried to raise awareness of Katrice's disappearance by speaking to the British press, he was told he had no right to do so because he'd signed the Official Secrets Act.
"I wanted more action. Nothing was being done. If I raised an issue I was told, as a soldier, to keep quiet," says Lee. "The military police's attitude was that we are untouchable."
Meanwhile, his family life shattered. "I was taught that men don't cry. So I'd go to the toilet, turn the taps on and cry my eyes out in private because I didn't want my wife or daughter to see me."
Natasha, a civil servant who married last year and recently admitted that she struggled growing up in the shadow of her sister's disappearance, felt neglected. "Sadly, we looked away and left Natasha to fend for herself," says Lee. "I can't imagine what it was like for her."
He says the strain that a missing child placed on his marriage was compounded by the RMP's "lack of support".
After the couple separated in 1989, Lee left the family's red-brick flat in Paderborn, where Katrice's bedroom, with its teddy bears and toy trunk, had remained untouched for eight years, returned to his home town of Hartlepool and started a new posting in Ripon as a warrant officer. Sharon, meanwhile, moved to Portsmouth, her home town.
Both continued to lobby their local MPs for more assistance in finding Katrice.
The case was reopened in 2000 when a former soldier was arrested, but closed again after three years. In 2008, a BBC programme featuring a digitally updated picture of Katrice as she might look aged 29 also led to nothing.
In 2012 the Lee family suffered further heartache when a woman called Donna Wright contacted them claiming to be Katrice.
When a DNA test proved that she wasn't, she stalked and abused the family, using more than a dozen aliases before admitting an offence under Section 2 of the Protection from Harassment Act and being given a 12-week suspended prison sentence at Newton Aycliffe Magistrates' Court.
After a witness came forward last year claiming to have seen a man hold a child who looked like Katrice on a bridge over the river Alme the day after she disappeared, the army dredged the banks of the river but found only non-human bones.
Lee, throughout, maintained hope that his daughter is alive.
"I always believed she was taken by a family who couldn't have children or snatched and sold for profit," he says. Astonishingly, he says that provided Katrice was happy, he would "bear no grudge" against anyone who had taken his daughter if they should come forward now.
The agony of not knowing what happened is the hardest thing to bear.
"Parents whose child is knocked over by a car have a point of grievance - a headstone or a grave," he says. "We don't have that. We have high points and low points, and during the lows you just want an answer, even if the answer is dark - she's been dragged away and buried... your mind absolutely races..." His voice trails off. He has never had depression diagnosed but admits: "I have days when I feel enough is enough. Is that depression? I don't know."
Then there is the anger he feels towards the RMP, whose handling of the case has only been investigated by other police forces - which Lee believes is so wrong he has refused an invitation to look at the findings: "I want a public inquiry."
His mistrust of the RMP appears to be reciprocated. When the man in charge of the current investigation called to tell Lee the suspect had been released without charge, he expressed frustration that someone had leaked the story of the arrest.
"From his tone it was evident he was asking if I was involved," says Lee. "I asked if he was actually accusing me. I said I told my MP, which I am absolutely within my rights to do, but other than that I'd told nobody else."
Lee says the name of the arrested man was "vaguely familiar" to him, though he had no definite memories of him.
Whether last week's events will prove pivotal in any police investigation remains to be seen. If so, Sharon says, "we may get closure by knowing what happened to her, even if it's not the ending we would want. If she is found it will be a release for us, but how she is found may be hard for us to cope with afterwards."
An army spokesman declined to comment, other than to refer the Mail to its statement made last week: "We can confirm that an arrest was made on September 23 by the Royal Military Police in connection with the disappearance of Katrice Lee in 1981. We cannot comment further at this stage."
