A Suspicious Past Tragedy

Act 2: Karlsen's daughter Erin Deroche recalls her mother's last moments in a California house fire.
6:41 | 10/26/13

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Transcript for A Suspicious Past Tragedy
I know what you did continues. Once again, david muir. Reporter: When lieutenant john cleere re-opened 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 about to take all the way across the country, in a small mining town in the sierra foothills of california. And 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, died in a 1991 house fire. And who just happened to be the beneficiary of a $200,000 life insurance? Her husband, karl. She'd been a vibrant, doting mother. You can see her holding one of her three young children -- erin, levi and katie. We took walks. We went on picnics. We did crafts. You know, she taught me to cook, and was teaching me to sew. She literally did everything for me. She was just an amazing woman. Reporter: But erin claims her mother was trapped in that marriage. My father had 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, you know, 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 years day 1991. The kids 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, you know, could feel the heat. I saw the flames, so 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 the 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. And when he left, christina's sister says he took with him any chance of a thorough investigation into her sister's death. We all raised our concerns, that we thought the fire looked very suspicious. The sheriff's department didn't want to waste reeir sources. They let this guy walk out of the state of california and never went after him. Reporter: That was 17 years ago. Now two deaths, mother and son, each with a big payout for karl karlsen. Was he a man cursed with a family tragedies? Or 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 here. Reporter: Glenn coin, a reporter for the "syracuse post standard," has reported extensively on the case. 20 days before christina dies, karl takes out a $200,000 life insurance policy. 18-17 days before levi dies, karl takes out his $700,000 life insurance policy. According to the court records, he left both of them to die and walked away. Reporter: Tonight, authorities in california are now investigating too, after reopening the case of karl karlsen's first wife. And who was about to help investigate the take down? Karl karlsen's second wife, cindy. It would turn out his second and current wife, cindy, would play a critical role inhe arrest of her own husband. Reporter: You called his wife cindy. What did she say. Thank god you called. Reporter: She feared she could be next and moved out of their home she was afraid. Yes. Reporter: She was seeing a pattern. Was she convinced there was a killer in her home? I think she suspected it. She could there was an insurance policy on her. Reporter: On her, too. When you asked her to help her out. She agreed. Reporter: It was called operation abigail and went down at this local restaurant known for more 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 plans to get back together? No. Reporter: She's here for you? Yes. Reporter: Cindy satown with her husband, that wire tap hidden, with one intention. To catch karl karlsen on tape confessing to levi's murder. A confession, she had told investigators, he had already made to her once before. They're sitting at a table, just the two of them. Yes. Reporter: And she's got a wire on the whole time? Yes. Reporter: As the couple is sitting here at the table, how many undercover investigators are sitting here in the restaurant? Four. And this is what they got. I mean you're sorry about it, right? Every minute of every day. I asked you if you pushed the truck, and you said yes. I didn't push the truck, i said. No. 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. 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. Yeah, I don't think a normal person would think of a death of their son 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. 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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