Hickey pretends to surrender and tries to kill Smith, who outdraws and shoots him dead. Smith lures Doyle to his location, and lets Monday take revenge by shooting the gangster with his revolver. Doyle and Hickey are absent, having gone down to Mexico in a desperate search for Felina. Smith returns to town, kills McCool and the rest of Doyle's men, and rescues Monday. He then hands Smith his pistols, saying that's all the help he's willing to offer. Two days later, Sheriff Galt arrives and informs Smith that Monday was caught smuggling food and water to the church and that Doyle will probably torture him to death. Smith takes refuge at a remote church where Felina went to pray. Strozzi and Carmonte try to surrender, but are gunned down without mercy. As they are driving out of town, they see Hickey and his men slaughtering Strozzi's gang at a roadhouse. Later that night, he overpowers his guards and escapes with Monday and Sheriff Galt. Despite the heavy torture inflicted on him, Smith refuses to talk. Doyle imprisons Smith and has him tortured, demanding to know where Felina is.
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Smith's plan goes awry when Hickey ambushes him, having received word that Felina was spotted heading towards Mexico. Doyle goes berserk and declares all-out war on Strozzi and his gang. Call) believes Smith's story, but Hickey does not. The next day, Smith is waiting at the safehouse when Doyle arrives, and claims that he arrived too late to keep Strozzi from kidnapping Felina. Smith kills the men guarding Felina and gives her one of Doyle's cars and some money. Playing on Doyle's obsession with Felina, he convinces Doyle that Strozzi will try to kidnap her again to learn where Felina is being kept. The next day, Smith relays a false rumor that Strozzi is bringing in more soldiers. Smith gives her some money and puts her on a bus out of Jericho. Lucy comes to Smith and reveals that Strozzi had her ear cut off for sleeping with him. Pickett agrees to his plan, but warns Smith that if he finds him there after ten days, he'll kill him as well. Smith says he intends to play the gangs against each other, destroying them both and making money in the process. He warns Smith that he can tolerate one gang in Jericho, but not two, and intends to bring a company of Rangers in ten days to wipe out both sides. Smith is summoned by Sheriff Galt and meets Captain Tom Pickett ( Ken Jenkins) of the Texas Rangers, who has been sent to investigate the Patrol officer's death. The two gangs make the exchange and return to their respective empires. Strozzi in turn kidnaps Felina and offers to trade her instead. Doyle contacts Strozzi and demands a large ransom for Carmonte, as well as the return of his trucks. Hickey travels to Mexico, kills Ramirez and a corrupt Border Patrol officer involved in the liquor trade, and kidnaps Carmonte. Smith defects to Doyle's side and reveals Ramirez's betrayal. Carmonte travels to Mexico to cut more deals with Ramirez, while Doyle ( David Patrick Kelly) and his chief enforcer, Hickey ( Christopher Walken) return to Jericho and are informed of Finn's death and the loss of the shipment. The gang ambushes and kills Doyle's men and seizes a caravan of illicit liquor. Smith accompanies Strozzi and his men to a backcountry road, where they meet Ramirez, a corrupt Mexican police official on Doyle's payroll. Carmonte expresses his immediate distrust and dislike of Smith, who leaves, and meets and seduces Strozzi's mistress, Lucy ( Alexandra Powers).
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Smith agrees to his offer and meets Giorgio Carmonte ( Michael Imperioli), son of a prominent Chicago mobster who is monitoring Strozzi's activities in Jericho.
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Strozzi is eager to wipe out his rivals, and is hiring anyone who can fight to build up his gang. Learning of Finn's death, Fredo Strozzi ( Ned Eisenberg), the head of Jericho's Italian gang, offers Smith a job in his outfit. Smith departs and returns to the hotel bar, much to the surprise of Jericho's residents. He then goes to Doyle's headquarters and challenges Finn to a duel, which Smith wins with alarming speed. Instead, Smith walks to the town hotel, run by Joe Monday ( William Sanderson), gets a drink and a room, and arms himself. Stranded and with no money to get his car fixed, Smith goes to see Sheriff Ed Galt ( Bruce Dern) the cowardly Galt refuses to help him. They warn him against staring at "Doyle's property" and smash up his car. Moments later, a group of Irish mobsters, led by Finn ( Patrick Kilpatrick), surround Smith's car. As he arrives, a young woman named Felina ( Karina Lombard) crosses the street, catching Smith's eye. In Prohibition-era Texas, a wanderer named John Smith ( Bruce Willis) drives his Ford Model A Coupe into the small bordertown of Jericho.