Gittes deduces that the water department is drying the land so it can be bought at a reduced price, and that Mulwray was murdered when he discovered the plan. He discovers that a former retirement home resident is one of the valley's new landowners, and seemingly purchased the property a week after his death. Evelyn and Gittes bluff their way into the home and confirm that the real estate deals are surreptitiously completed in the names of its residents.
After fleeing Mulvihill and his thugs, Gittes and Evelyn hide at Evelyn's house and sleep together. Early in the morning, Evelyn has to leave suddenly; she warns Gittes that her father is dangerous. Gittes follows her car to a house, where he spies her through the windows comforting Mulwray's mistress. He accuses Evelyn of holding the woman against her will, but she confesses that she is her sister.