As he finishes his conversation with Colin, Costello runs into Captain Queenan and Sergeant Dignam. They exchange insults for a while before getting down to business. Queenan wants to know what Frank did with the real microprocessors, since the Chinese ended up getting caught with fake ones. Queenan tells Frank he's going to get him, but Frank just laughs at him.
Billy works a job to kill a guy who crossed Costello. But during the job, the guy lets slip that Costello is actually a protected FBI informant. The whole reason he's never been caught is because he keeps selling out other gangsters.
Billy meets with Queenan at night and tells him that Costello is a protected FBI informant.
Billy walks into a warehouse one day and finds Mr. French waiting for him. French wants him to write down every scrap of personal information about himself.
Billy writes down his stuff and helps another thug named Fitzy write the word "Citizens" on the envelope that they're putting all their info in. Then he leaves and tells the guys he doesn't care if Frank ordered everyone to stick around.
Next time we see Billy, he shows up at Madolyn's apartment. She lets him in, and after some chitchat about Billy's vulnerability, they end up sleeping together.