Here's the scenario: There's a kid out here who completed his training for an RPP recently (not with us). He came in this morning to get us to act as Authorized Person and sign off his Student Pilot Permit, which we normally are able to do. We were unable to do it this time though, because he didn't have his paperwork in order (Flight/Written test results, PTR incomplete, etc.). So this afternoon, I see him pile into his plane with a passenger, and go for a flight. On his return, I was on the ramp, and casually ask him if his passenger was a flight instructor, to which he answers "No". So I ask if he managed to get his RPP signed off, and he says "No, but T.C. was supposed to fax me a 'Special Flight Permit'". So I ask if he has it on him, to which he once again responds in the negative. Whether this 'Special Flight Permit' actually exists or not, I don't know yet (but I'll be asking TC in the morning if such a thing exists). Funny how if you want to do things right, it takes 6-8 weeks, but this appeared in under 2 hours

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Now, I'm not a huge stickler for paperwork, although given the current litigious society we live in, and the business I am involved in, I have gained a new appreciation for it. Flying without all your docs is NOT a huge safety concern in my mind. My biggest concern here is that someone is breaking a law that I am forced to abide by, and more importantly, that this kid is doing it on HIS VERY FIRST FLIGHT

which doesn't exactly speak volumes to his respect for the rules that allow us to do what we do with some degree of safety. I follow the rules, run a tight ship, and pay the financial cost for doing so. My opinion is that everyone else should do the same. Aviation would not work if we didn't all have a healthy respect for the regs. So now I find myself wondering how to proceed.
A) Do nothing, let it slide, pull the stick outta my a$$
B) Talk with his folks (who seem complicit- Dad saw him off)
C) Call TC Enforcement
D) ?
What say you?