After Charleston's flashback (the 7th), Reardon pays a second visit to his superior Kenyon, with a newspaper clipping (dated July 21, 1940) describing the gang's heist:

BANDITS ROB HAT FACTORY OF QUARTER MILLION PAY ROLL
Prentiss Hat Company in Hackensack, N.J. Victim of Daring Holdup

While Kenyon reads the account from the newspaper, a flashback presents the daring holdup.

Eighth Flashback:

The carefully-planned caper is presented in one long, masterful, uninterrupted take. The four masked payroll robbers enter the factory entrance at 8 am with other employees, loiter outside the paymaster's office, and then enter the second-floor location of the factory's safe. They rob the company of its entire semi-monthly payroll ($254,912), dash into the street, and make their way to three getaway cars planted earlier for the escape. The only injury was the factory gatekeeper, who is shot in the groin during the bungled escape.

After the flashback of the heist and getaway, Kenyon notes that according to the newspaper article, one of the robbers wore an "unusual green handkerchief decorated with golden harps over his face" - identifying the Swede at the scene of the crime. Piecing together various elements of the flashbacks, Reardon is certain that the Swede was involved, and that same night, checked into a small hotel in Atlantic City with an "unidentified woman" (Kitty). Within two days, Reardon also speculates that Kitty ditched the Swede, and the chambermaid saved his life by preventing him from jumping from a window. Six years later, the Swede was discovered at a filling station - and "waiting for some killers to come and get him."

Kenyon still believes the case is not worth Reardon's time, but the agent insists that he should continue his investigation for another week, because the company also insures Prentiss Hat - with their $250,000 now at stake: "There's a quarter of a million dollars of Atlantic Casualty money that's never been recovered."

A phone call from Lt. Lubinsky leads Reardon and the lieutenant to a hospital where "Blinky" Franklin lies on his deathbed after a shooting [by rival partner "Dum Dum's" '45] that left him seriously wounded in a depot washroom. [This is the first of two such death-bed confessional scenes in the film.] Lubinsky tells Reardon that Blinky is raving "about the Swede, Dum Dum Clarke, and our old friend Kitty Collins."

Blinky is heard mumbling about what happened the night before the Prentiss Hat caper:

If that guy don't call by 10:30, we better get started anyway. Yeah, each one steal his own heap [car]...I never was in a hat factory before... Gimme two cards. I'll take three. If this rain keeps us, they'll be mud up to the axles on them hick roads. How many miles of dirt road is it to the half-way house? I don't like anything about capers in the rain. Rain always gives me the creeps. I hate rain.

Ninth Flashback:

The slowly-dying, hospitalized Blinky deliriously flashes back to the rainy night (or early morning) before the heist, when he played cards with Big Jim and Dum Dum, while the Swede slept in the back room. He recalls that it would be eleven miles to the half-way house rendezvous-point - his and Dum Dum's route after the heist. During the card game, he remembers that Kitty and Colfax seem to provoke a fight with each other. The jealous Swede, predictably, gallantly comes to her defense and accuses Colfax of treating Kitty harshly, but Dum Dum cautions him to lay off: (Dum Dum to the Swede: "She's his girl"); Kitty informs the Swede that she can take care of herself: ("Mind your own business Swede. I can take care of myself"), and then threatens Colfax ("You touch me and you won't live 'till morning"):

Kitty: (To Big Jim) What'sa matter with you?...You're nervous. You're all in a sweat.
Big Jim: You keep your mouth shut if you don't want it slapped shut. You've been askin' for it lately. (He physically threatens to slap her face.)
Swede: Hey!
Big Jim: Any objections?
Swede: Yeah.
Dum Dum: Keep out of this, Swede. She's his girl.
Kitty: Mind your own business, Swede. I can take care of myself. (To Big Jim) You touch me and you won't live 'till morning.

In a high-bets game of poker, the Swede antagonistically accused Colfax of cheating to win a hand, and punched him to the floor: "Nobody can cheat me and get away with it." But when Colfax's hand is ultimately displayed, he haslegitimately won with a full house. Colfax promises vengeful retaliation against the Swede after the heist: "The job comes first. But afterwards, we'll have business together." The gang splits up to their various hideouts to prepare for the robbery. Blinky gives his evaluation of the Swede:

Blinky to Colfax: He shouldn't have hit you. You had 'em just like you said. He shouldn't have hit you.

The scene returns back to the present as the flashback ends - as Blinky gasps one more recollection. The doctor delivers a contradictory and unusual diagnosis of his medical condition:

Blinky: He shouldn't have hit you.
Doctor: Beats me. I don't know what keeps him going.
Reardon: Will he be able to talk anymore?
Doctor: He's dead now, except he's breathing.
Lubinsky: Well, guess I'll have to hunt up my old friend, Kitty Collins.

In Blinky's pants pocket is a bus-ticket to Brentwood and a newspaper account of the Swede's murder. [Before his death, Blinky was planning on traveling to the rural town where the Swede was located by the article - six years after the heist - to search his boarding house room for the Swede's stolen heist money. But he was shot and mortally-wounded by rival partner Dum Dum before doing so.] Suddenly, Blinky revives for a few more words about the rendezvous after the robbery and getaway:

Step on it, can't you get any more out of it than this? Looks like a good clean getaway. That's too bad you had to shoot that guy at the gate...Did it look like 200 G's to you? Most money I ever saw at once. Wonder if the others are plannin' the same luck we are. They should be - they got away before we did. I guess the Swede made it all right. I seen him running for his heap and nobody was between him and it. Sure, he got away. Keep your eyes peeled for Polk Road. It's a left turn there, yeah. A left on Polk Road. We oughta be there in another five minutes. Hello, farmer.

Tenth Flashback:

The flashback continues, picking up as Dum Dum and Blinky arrive at Farmer Brown's (Charles B. Middleton) farm house (a new rendezvous location) to split up the unmarked cash with Colfax. However, the Swede, thinking that he has been betrayed and double-crossed [through misleading information about the rendezvous he received from Kitty - to be revealed later], creeps up on the group, holds them at gunpoint, and runs off with the quarter of a million dollars:

Swede: Swell idea you guys had. Leave me holdin' the bag at the half-way house while you split up the dough, huh?...
Colfax: The Half-way House burnt down last night. That's why we came here.
Swede: Somebody ought to have let me know.
Colfax: You were told, you're here.
Swede: Next time, play it straight.

As the Swede leaves, he flattens the gang's car tires so they can't pursue him.

[Note: Colfax's alibi that the half-way house burnt down is conveniently interjected, but the plan to betray the Swede - and change locations - had been made much earlier by Kitty, who informed everyone of the change.]

After the flashback, Blinky expires. Reardon's next step is to follow a hunch and discover who mortally-wounded Blinky. He visits Brentwood and stakes out the Swede's room by taking the room next door. As predicted, Dum Dum arrives in town to rent the vacant room for $9/week. From the adjacent room, Reardon listens as Dum Dum searches the room and splits open the mattress looking for the Swede's stolen payroll money. Reardon bursts in with his gun drawn, asking for information to clarify what happened:

You don't know what the Swede did with the money or you wouldn't be here tearing his room to pieces. But maybe you do know things that put together with the things I know will tell me where the money is.

Reardon asks why the gang met at the farmhouse instead of the half-way house as originally planned ("Who picked the farm house?").

[Note: A fire report later states that the half-way house burned down at 2:53 am, almost three hours after Kitty (at midnight) began telling gang members of the change in rendezvous location.]

According to Dum Dum, boss Colfax picked the new location, and Kitty at midnight delivered the news of the change in plans to gang members in various hideouts. Reardon deduces from Dum Dum's account that Dum Dum and Blinky couldn't be suspects in the Swede's murder (because they believed only the Swede knew where the payroll money was): ("It wasn't Blinky and me. We were after the money. Would we knock off the one guy could tell us where it was?"). However, Dum Dum undoubtedly killed competitor Blinky to get to the Swede's money first: (Reardon: "You killed Blinky so he couldn't get here ahead of you").

After a brief struggle, the tables are reversed and Dum Dum holds the gun on Reardon and asks a question of his own: "Why'd you want to know about Kitty?" Reardon speculates that in Atlantic City two days later, Kitty stole the money back from the Swede and returned to Colfax. The Swede never had his hands on the dough for very long:

I think she knows where the money is...The Swede and some girl checked into an Atlantic City hotel the night of the holdup. Two days later, the girl took a powder. I've got an idea the dough went with her.

When Reardon tells him the cops are outside waiting for him, Dum Dum viciously kicks Reardon twice in the head, rendering him unconscious, and flees out the boarding room window onto the roof, where he is confronted by police that Reardon had earlier summoned to surround the building. But he eventually escapes, although wounded, after a brief gun battle.

[This is a crucial turning point. Until now, Dum Dum thought the Swede acted alone in stealing the payroll. However, after learning that Kitty was involved in the robbery, and knowing that Colfax and Kitty were married, he would now realize that Kitty and Colfax were accomplices. Dum Dum's next target will be Colfax!]

Reardon travels by train to Pittsburgh with Lieut. Lubinsky to speak to Big Jim Colfax [reportedly "Kitty's ex-boyfriend" but actually her husband], the gang leader who planned the hat factory heist. Apparently, Colfax has "gone legit" as a big-time contractor and builder. In Colfax's office, Reardon questions the ex-gangster about the death of Ole Andersen ("alias Pete Lunn but best known as the Swede"), but Colfax claims no knowledge of the man. Reardon provides a brief summary of the robbery aftermath: ("The Swede and Blinky Franklin were both killed. Dum-dum went back to Brentwood and got shot in a fight with the police"); Colfax asserts his honesty as a reformed citizen: ("I'm an honest citizen...I got nothing to hide").

Without "one shred of evidence" against Colfax, Reardon reasons that he must speak to Kitty Collins to glean the last piece of the puzzle:

...it was Kitty Collins and not the Swede that reaped the golden harvest...When the gang met to divvy up after the robbery, the Swede pulled a fast one and walked off with the whole take...That same night, he and Kitty were together in Atlantic City. She walked out on him a couple of days later. The money disappeared when she did...

Although unlikely after six years, Reardon claims that the chambermaid in the Atlantic City hotel could identify Kitty. Colfax lies about not knowing Kitty's whereabouts and condemns her:

If there's one thing in this world I hate, it's a double-crossing dame...the Swede never had a chance, did he? Any one of the gang that ran onto him would have been sure to knock him off. You might say Kitty Collins signed his death warrant.

[Note: In the setup planned by Colfax against the Swede, Kitty's duplicity wasn't known by the other gang members. They would assume that Ole had all of the money, allowing Kitty to rejoin Colfax with the re-stolen money so the couple could re-establish their married life without fear of reprisal or detection.]

Reardon has already sent out word that Kitty has until 10:00 PM that night, or he threatens to take his information to the police, unless he can speak to Kitty (through a message delivered to her). Fearing that he and Kitty will be exposed, Colfax further deceives Reardon about his relationship with the femme fatale:

If you do run onto her, let me know, will ya? After you're through with her, I'd like to have a word or two with Kitty myself. We got some unfinished business.