[h=3]Arson Desk and Jack Kelso[/h] Phelps is kicked out of the house by his wife and moves in with Elsa Lichtmann, which causes him to be belittled by policemen and citizens alike due to the fact that Elsa is of strong German descent, and World War II is still a recent memory. Due to his actions, Phelps is demoted to the Arson Desk and becomes partners with cynical WWI veteran Herschel Biggs, an expert on fires. Trying to rise back to his former glory, Phelps investigates a series of house fires which he believes to be caused by an arsonist working for a company called Elysian Field Development. Elysian Fields is running a program known as "The Suburban Redevelopment Fund"; which hopes to build houses for homecoming G.I.'s while obtaining more land. However, many of the houses made by the Suburban Redevelopment Fund keep burning down, and Phelps believes that Elysian Fields is burning down the houses as part of an insurance scam.
Initially, Phelps makes progress with Herschel on the case, but he is warned off by Roy Earle, who is on the Elysian payroll. Realising there is no way to investigate further by himself, Phelps manages to get Jack Kelso to work with him and Herschel (Kelso works as a private investigator.) Through their work, they manage to not only topple Elysian Fields, but also the morphine case shown in Vice (the morphine was being invested in the Suburban Redevelopment Fund.) They also discover that the Suburban Redevelopment Fund is much more than an insurance scam; it is a scam in which houses are overpriced by California Fire & Life, then cleared to make way for a new highway, resulting in complete recompense for the owners and a turnover of millions of dollars for the members of the fund. Eventually, Kelso finds out the identity of the mysterious arsonist; Ira Hogeboom, the flamethrower in Cole's squad. After the war, Hogeboom returned home and tried fitting into normal life, but suffered from extreme guilt and mental damage due to his actions. Elysian used him to burn down the houses, but he eventually became out of control, burning down houses that he was not told to burn and sometimes with the families still in the house. Hogeboom believed that by burning houses, he was helping people be together, and uniting them with God faster.
While hunting down the arsonist, Phelps finds out that Hogeboom has taken Elsa to the Los Angeles River Tunnels where he is trying to hide. Phelps and Kelso race to the River Tunnels and fight their way through corrupt policemen and thugs trying to silence all of them from uncovering the Suburban Redevelopment Fund scam. All of the while, the waters in the sewer raise to a dangerously high level, due to a heavy rain. Eventually, they find Hogeboom and Elsa hiding from the thugs in the tunnels. Phelps, Kelso, and Elsa flee from the tunnels after Kelso puts Hogeboom out of his misery. Eventually, the trio finds an open manhole that Hershel uses to lift Elsa up from the surface. As the water begins to rise, Phelps voluntarily lifts Kelso to the surface as well, sacrificing himself (there is nobody to pull Phelps up now.) Phelps is killed by a raging torrent of floodwater that smashes into him, but before it hits him, he mutters "Goodbye" to all of them.
The game cuts to Cole's funeral, where all of Phelp's partners attend along with his ex-wife and children, Kelso and Elsa. Roy Earle delivers the eulogy, and it is shown that many of the corrupt police officers and politicians are in attendance. Mid-way through Roy's eulogy, Elsa stands up and yells at him, saying that he is belittling Cole's memory, and then she walks out. Herschel, before going after her, tells Kelso that he (Kelso) was never Cole's friend. Kelso replies that they were never enemies as well. Hershel tells him that Cole knew that, and then walks out as well. An end credits sequence shows the members of the Sixth Platoon on the way home from China on the USS Coolridge, planning the morphine heist. Kelso tells the other soldiers that no matter how anyone else views them, he will always remember them as heroes, but that if they steal the morphine and go down a path of crime, they will become nothing.