Dalmas enlists the help of another studio detective, Denny, and traces the gun that killed Walden to its former owner, a blonde named Helen Dalton, who is involved with John Sutro, a city councilman; she denies knowing anything.
When Dalmas goes there to confront Denny, who he realizes is playing the other side, a hit squad arrives and shoots up the home with tommy guns, narrowly missing them.
Donner blames the hotheaded henchman who attacked Dalmas's driver against orders, but Dalmas demurs and explains the full story: Walden was involved in the dope business with Sutro, but wanted out, since the repeal of prohibition would free up police resources to focus on the dope trade.
Donner's henchman was blackmailing Walden, milking a steady payday, but Sutro had too much to lose and simply killed him.
The police are content to contain the story to just the Walden and Sutro’s deaths in order to protect both the film studio and the city council.