Was House Fire Death of Man's First Wife a Murder?

Part 2: Karl Karlsen's second wife Cindy Karlsen, who feared she would be his next target, helps police.
5:45 | 08/29/14

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Transcript for Was House Fire Death of Man's First Wife a Murder?
Reporter: When lieutenant John Cleere reopened the investigation into Levi Karlsen's death underneath that pickup truck, finding what he says is evidence his father was out for the insurance money, he never expected the dramatic turn the case was about to take all the way across the country, in a small mining town in the Sierra foothills of California. While you are investigating everything that happened here, you discover the story of his ex-wife. Yes. Reporter: Could you believe it? It certainly raised a lot of concerns. Reporter: The stunning discovery. Levi's mother, Christina, Karl Karlsen's first wife, had died in a 1991 house fire. And who just happened to be the beneficiary of a $200,000 life insurance policy? Her husband, Karl. She'd been a vibrant, doting mother. You can see her here in home videos holding one of her three young children, Erin, Levi and Katie. She literally did everything forme. She was just an amazing woman. Reporter: But Erin claims her mother was trapped in that marriage. My father had a -- a very horrible temper, and it didn't take an awful lot to set him off. And my mother would take the brunt of it. She would not allow him to take it out on us. Reporter: The sister of that first wife remembers asking her the same question over and over. I kept asking her, you know, "Why aren't you leaving him? Why aren't you leaving him?" And I almost had her convinced to leave. We were this close when the fire came through. Reporter: It was new year's day, 1991. Children were napping, Christina was in the bathroom when their home suddenly lit up into a kerosene-fueled inferno. I remember waking up and going to my bedroom door. I saw the flames, so I woke my sister up. My father, you know, bust through the window and, you know, got us out. Never once did he look panicked or frantic or frazzled, not even confused. He was just very calm and -- "Let's go." Reporter: In the fire report, Karl Karlsen told investigators that just three days before that fire, he'd repaired a broken window in the bathroom by boarding it up with a piece of wood and 17 nails. That window would have been his wife, Christina's, only way out. And then just a week after the fire, Karl hit the road, leaving California with his three young children, returning to upstate New York to be near his family. We all raised our concerns that we thought the fire looked very suspicious. Reporter: That was 18 years ago. Now, two deaths, mother and son, each with a big payout for Karl Karlsen. Was he a man cursed with family tragedies? Was he murdering his own family members for money? A lot of people have said when this guy needed money, a family member would die. There's definitely a pattern there. Reporter: Authorities in California begin to reinvestigate, reopening the case of Karl Karlsen's first wife. And who was about to help take him down? Karl Karlsen's second wife, Cindy. And you're about to see her play a critical role in the arrest of her own husband. You find all these red flags and you decide we're gonna call the wife, Cindy. And what did she say? The first thing she said was, "Thank god you called." Reporter: She said, "Thank god?" Yes. Reporter: Investigators say Cindy Karlsen feared she could be next and had moved out of their home. She was afraid. Yeah. Reporter: She was seeing a pattern. Was she convinced there was a killer in her own home? I think that she suspected it. She believed that there was an insurance policy on her. Reporter: On her too. Yeah. Reporter: When you asked her to help you out, she said yes? She agreed. Reporter: It was called operation Abigail's, and it all went down at this local restaurant, known more for its chicken wings than undercover stings. And "20/20" was taken right through it. So they walk in as a couple, and she's got the wire on where? Underneath her clothing. Reporter: And what does he think he's walking into? He thinks he's coming to talk to his wife about getting back together. Reporter: About reconciliation? Yes. Reporter: But she has no plan to get back together? No. Reporter: She's here for you? Yes. Reporter: Cindy sat down with her husband, that wiretap hidden, with one intention, to catch Karl Karlsen on tape confessing to Levi's murder, a confession she had told investigators he'd already made to her once before. Reporter: So as they're sitting there at that table, how many other undercover investigators are here in the restaurant? A total of four. Reporter: And this is what they got. I mean, you're sorry about it, right? Every minute of every day. Okay. Karl, I -- I asked you if you pushed the truck, and you said yes. I didn't push the truck, I said. I said I had nothing to do, but I said I took advantage of the situation once it happened. And that is exactly what I said to you. Karl, you told me that you didn't set it up that way, but when you were in there, you saw the opportunity. No, after it had happened. Then I panicked and saw the opportunity to where, like what you wrote, that's exactly what I said. One of the most significant remarks was that he took advantage of the opportunity. Reporter: Opportunity, a very strange word for a father to use about a son's death. I would find it very unusual that a parent would refer to the death of their child as an opportunity. Reporter: A week later, Karl Karlsen agrees to meet his wife again. But Cindy and that team of investigators have other plans. I'm all set. Okay. Reporter: So he thinks he's coming to meet her again? Yes. Reporter: But you're waiting for him this time. Yes. Reporter: And you haul him in for questioning.

This transcript has been automatically generated and may not be 100% accurate.

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