Bob Harvey kidnapped/molested Luke.
Regali walked in on Bob Harvey with Luke.
Luke saw Regali's face, and Regali knew he could be identified in a lineup.
So Regali shot and killed Luke.
Follmer had nothing to do with Luke's kidnapping/molestation/murder, he was only taking money from Regali/the mob, to coverup previous/current crimes. When Follmer found out that Regali had something to do with Luke's murder, Follmer approached Regali and told him he was done with their deal.
Follmer showed up and shot/killed Regali at the end of the episode because Regali wouldn't let him out of their deal. Follmer snapped, and did the only thing he knew he could do to get out of his deal with the mob: shoot and kill Regali, and suffer the consequences.
Though this is not said in the episode, I like to think that because Follmer was messed up with the mob, that he was put into Witness Protection post-Release because his life would be in danger if he were locked up in prison where friends to Regali's mob family might murder him too.