Jeffrey will not confirm or deny anything, because he doesn't acknowledge Gregson's authority. Gregson tells him that Oliver's given up enough to put Jeffrey away for the rest of his natural life. But Jeffrey figures he'll be out in a week, since high-level spies tend to be traded back to their home countries He speculates on a catalog of political prisoners. Gregson shrugs that the feds will do their thing. Watson says, "You ruined that girl's life."
Back to the brownstone. Watson has pinned a bunch of pictures and clipings up around the fireplace. She wants to find a way out for Carly, even though she's already confessed. Holmes has brought her a mug of spaghetti. Yes, a mug. She asks how Holmes deals with puzzles that don't work out the way he wants. He says the only thing that matters is the answer. How they feel about it doesn't factor in. And just then! The autopsy report arrives, and there's an X-ray of Terry's hand. She has a broken finger, which Watson identifies as a "boxer's fracture." She hit something with a clenched fist. Holmes remembers the pen. Oh yeah! That mysterious clue from the beginning of the episode that no one's mentioned since!
Jeffrey is now at the police station. Holmes observes that he's angry. Good job, Mr. Super-Detective. Jeffrey repeats that he didn't see Terry the week she died. Holmes says he saw her the day she died. Because after he got rid of Carly, he found out that Terry wasn't dead. So he had to decide if Carly or Terry was more important. Watson says Terry hit him and stabbed him with the pen. But there was no ink anywhere. Holmes brings up the concept of invisible ink. Awesome! Very old-school. Holmes admits, "You might as well have a phone in your shoe!" So it turns out that the pen has "permanent flourescing ink" in it. And Holmes went to the morgue and shone a UV light on Terry's corpse, which revealed that she was covered in invisible ink. Gregson provides Jeffrey's shirt, for which they had a warrant. There is, in fact, a handprint! Holmes says, "You didn't just see her the other night. You killed her." The US would trade a spy under the right circumstances, but not these. Jeffrey will be going to jail.
So what about the alibi? Didn't Jeffrey claim he had an ironclad alibi? He was having dinner with some random couple, remember? I guess it's possible that the couple was also a pair of Russian spies, but I feel like the show just forgot about the alibi completely.
Okay. Carly and Watson. Watson says Oliver is cooperating, so the two of them will get a new start. Carly says she still feels responsible, because she loved her mother. Watson tells her it'll hurt, and she should let it. Bell arrives to take Carly to see her father. They share the "Tough times don't last/tough people do" line. So I guess that's a happy ending for Carly, although she has to go into hiding and can't go play soccer at Michigan. In fact, if she's to go into hiding properly, she probably can't play soccer at any Division I school. And forget about pursuing it as a career, right? Surely the Russians would have an eye out for her. Yeah, her dreams are pretty much dead. Sorry, Carly! You seemed nice!