I've seen LOTS of basses with factory installed shims, including expensive Fenders (like the highly regarded AVRI series). Sandpaper is not unusual, although thin pieces of cardboard (like business cards) are more commonly seen. Personally I prefer using tapered wooden shims that cover the entire neck pocket (you can even get them pre-made from StewMac) but I've never seen that used as a factory shim.
This should only be a matter of using a shim with the right thickness. Is the problem perhaps that the strings on one side of the neck won't get high enough while the strings on the other side can't be lowered enough? You mentioned that one end of the sandpaper was folded onto itself, which suggests that the neck might need a "sideways" shim as well as a backwards tilt. While this isn't exactly impressive craftsmanship/QC from G&L it should be possible to deal with. Especially if it worked fine with the factory shim. If the saddles can't be lowered enough, start with a thin shim, like a piece of a business card. Still not low enough on ANY of the strings? Add another layer of the same thickness. If you reach a point where only one side of the bridge/saddles can't be lowered enough, add another thin shim on ONLY that side of the neck pocket. Maybe even shim the entire length of that side of the neck pocket, so you basically end up with an L-shaped shim. I've both seen and used this on a several occasions. It's not very common, and shouldn't be necessary on a properly made guitar, but it if works...
On ALL strings or just some of them? If it's mainly one "side" of the strings, like either D-G or E-A, see above. If it's ALL the strings it could just be a setup issue (neck relief and/or saddle heights). It could also be something worse... You bass may have developed a "ski jump", although this should happen gradually over time, not suddenly if a shim falls out. There are two separate issues that I (probably incorrectly) refer to as a ski jump. One is the "kink" that can happen near the start of the neck joint on bolt-on basses (I guess this is what's normally referred to as a "ski jump"). The other is a disfiguring near the end of the fretboard that I suspect MIGHT be caused, over time, by shims that aren't full-pocket, tapered shims. I know lots of people will say that shims deforming the end of the fretboard is just a myth but I've seen this happen on far too many shimmed basses to dismiss it as a coincidence. Does it look like the fretboard has an upwards "bump" near the end of the fretboard? This could certainly cause fret buzz, or even "clank" because you slam the strings into the last fret when playing (particularly if you're playing fingerstyle close to the neck). Sometimes this can be fixed simply by leveling the upper frets, although the "correct" way to deal with it is to remove the frets and level the fretboard itself. However, both these "ski jump" scenarios happen gradually over time, not suddenly if you remove the neck and lose a shim. I suspect you bass simply has a poorly made neck pocket (which can almost certainly be fixed with a shim) rather than a "ski jump". Of course it could also be something else entirely, like a fret that has popped up a bit somewhere, causing fret buzz. But again: This seems highly unlikely if the problem occurred suddenly after losing the sandpaper shim. I strongly suspect this is just a matter of shimming the neck right, possible by using a "sideways" shim in addition to a "neck tilt" shim.
I guess this can happen to a certain degree if the action is sky high but too sharp on ALL the strings no matter how far back you move each saddle? That shouldn't happen unless the action is crazy high! If the Chromes are only two years old, and intonated perfectly before you lost the sandpaper shim, I think we can probably rule out a problem with both the strings and the position of the bridge. You probably know this already, but just to make sure: You're not checking the intonation on EVERY fret, are you? A bass can never be intonated perfectly in every fret. That's physically impossible (unless you get one of those true temperament guitars with curved frets, that sound more like a synth playing a guitar patch than a real guitar IMO...). If the 12th fret is intonated it's ok.
I'm not sure if this is helpful at all but I honestly don't see any reason why you shouldn't be able to fix this, unless something else has happened in addition to the sandpaper shim falling out. And if you can't fix it yourself I'm pretty sure a luthier (or an experienced guitar tech) should be able to sort this out within an hour or so. If the bass NEVER worked properly it would have been a different matter of course.
