The woman, Dr Karen Mahlo, 52, had been wheeled into the family-run funeral parlour on Queensland's Sunshine Coast in mid-2008 after reportedly stabbing herself to death. But the old man was mystified by some strange wounds on the woman's hands, which to his eyes suggested she had tried to defend herself.

Through his medical connections, he passed on his concerns to the dead woman's psychiatrist, Dr Clive Fraser, who in turn contacted police. But it would be nearly two years before the police got back to Fraser, because as far as they were concerned, the bizarre stabbing death of Dr Karen Lee Mahlo was a very sad – and not unexpected – case of suicide.

Police had found Mahlo, a former hospital administrator, in her bed lying face up in her white and purple floral pyjamas, with a 24.5cm kitchen knife protruding from her chest, at her Sunshine Coast home early on May 28, 2008.

Waiting for police at the scene was Mahlo's distraught boyfriend, John Michael Hehir, a local financial planner. He told detectives he had received a missed call from Mahlo in the early hours of the morning and, after repeatedly trying to reach her, rushed to her home, a 20-minute drive away. (Data from mobile phone towers later confirmed Hehir's movements and his frantic attempts to call her.)

When he arrived at the house about 5am, the front door was wide open and the lights were switched off downstairs. He climbed the stairs to Mahlo's room and was confronted with the shocking sight as her two small dogs – Bobbi, a miniature schnauzer, and Benson, a cross-bred Australian terrier – roamed around the bed. Hehir immediately touched Mahlo's arm but found it was cold. He called triple-0.

"She's dead, she's dead," a distraught Hehir cried to paramedic Glen Ecclestone when he and his partner Sarah Jackson arrived at the house. When the police arrived, Mahlo's body was already showing signs of rigor mortis. On her bedside table were a blue-handled filleting knife and a box cutter. On the floor beside her bed was another silver knife similar to the one protruding from her chest.

Blood smeared the left side of the bed and the fatal wound appeared to be from the knife that had been plunged through the front of her pyjamas into her chest. A suicide note addressed to Hehir was illuminated on the screen of her computer in the office downstairs. Lying nearby on the printer, face down, was a copy of the same note and another addressed to her two children, Ben and Anna.

"I have hurt you so much and can't do that anymore. Please look after the kids when they need you and don't try to control them," read the note on the screen.

At the police station later that morning, Hehir described Mahlo's litany of personal problems. She had been dumped from her senior hospital manager's job at Queensland Health and transferred to a lesser position, he explained. She had also been battling depression, was a heavy drinker and only a month earlier had been hospitalised for a near-fatal overdose in a suicide attempt.

Hehir said that the day before Mahlo's death, about midday, he had argued with her over the phone. Later in the evening he had dropped by her home to pick up some belongings and a motorbike, which she was signing over to him. Hehir said he apologised for the row on the phone and they continued to "banter" before parting amicably enough later on. He returned to his office and then went to his flat to sleep.

About 4.30am he got up to go to the toilet and saw a missed call on his mobile from Mahlo's landline that had come in about 3am. Worried because of Mahlo's emotional fragility, Hehir rang back and left messages but there was no answer. He got dressed and started to drive to her house; on the way he rang an ambulance.

Hehir told officers that he thought his decision to collect the bike and his belongings had been the final straw and that he believed she had "finally" taken her own life. Later, after taking a statement from Hehir, police dropped him back at Mahlo's house to pick up his car.

It was what he did next – enter the house and collect a few of his belongings, including possibly a USB flash drive – that would not only deeply upset Mahlo's two children, but lead them to take him to court over her will, and demand an inquest into her bizarre death. This, despite Hehir never having being named as a suspect in Mahlo's death and no charges ever having been laid. At first, Mahlo's children, Ben, now 29, and Anna, 27, weren't unduly surprised when they discovered that their mother had made Hehir executor of her will and a beneficiary. They were initially too shocked by the death to think deeply about wills.

But Hehir soon informed the family that he already had a signed will, dated February 2008, which named him as beneficiary of her most valuable single asset – her house. She had other assets, including a $1 million life insurance policy, and investment properties which Hehir's financial planning business had provided advice about acquiring with bank loans.

The family sought to confirm the bona fides of the will by having Mahlo's computer tested, as a hard copy of her will – recently sighted in the home by a friend of Anna's and by her father – could not be found. The family were mystified as to why the will was missing from its usual place in a top drawer.

When they had the hard drive of the computer tested, they found a newly created will, which left nearly everything to Mahlo's children and her aged parents. They were also told that a flash drive – called "John's USB" – had been inserted into her computer just before 3am on the day of her death.

Ben and Anna took legal action to prove that the will found in her computer was the rightful one. The dispute went to trial in Queensland's Supreme Court in 2011 and the proceedings focused on whether the will found in the computer existed in a hard copy form and whether someone could have removed it from her home on the day of her death. At first, Hehir denied going back into Karen Mahlo's home after the police interview on the day of her death. "If I went in the house, it was only by one step," he said.

Justice Philip McMurdo handed down his decision in August 2011 and noted that the will which left Mahlo's house to Hehir had "likely" been drafted by Hehir. But he dismissed the Mahlo children's claim, saying the electronic will document in Karen Mahlo's computer was not her "intended" will.

The Mahlos took further legal action and obtained a settlement in which Hehir received some $200,000, while Anna and Ben were awarded $200,000 each and Karen's elderly parents $300,000. It was a dispute, however, that cost the estate at least $500,000 in legal fees, says Karen's brother Wade.

The evidence uncovered by the Mahlos' computer specialist achieved something else: it kicked off a renewed police investigation into Mahlo's death, which was also slated to come before the Queensland coroner.

A number of shortcomings in the original investigation began to emerge. No major searches appeared to have been conducted of vehicles or properties used by those associated with Mahlo whose whereabouts at the time of her death might have been considered important. None of the knives found in her room, nor the one in her chest, had any fingerprints on them.

More strange evidence emerged. The autopsy revealed that Karen Mahlo had been stabbed not once but three times through the same wound. One of the thrusts had been delivered with such force that the knife penetrated her sternum – something that seemed challenging for a woman with a blood alcohol level of 0.114 – while therapeutic doses of the muscle relaxant drug diazepam and the anti-depressant Citalopram were found in her system.

The day before Karen Mahlo died, the haunting strains of Hallelujah, the Leonard Cohen version, wafted out of her neat two-storey home on William Street at Moffat Beach, an upmarket suburb on the southern end of the Sunshine Coast.

"The song would have played for hours," said neighbour Rachel Campbell, whose front deck gave her a prime view of the domestic disputes at Mahlo's home.

Annoyed but not willing to confront her neighbour, whom she thought somewhat haughty, Campbell went to bed only to be woken up by "someone running up and down the street wailing very loudly. I then realised that this was the last boyfriend that I knew Karen had living with her," Campbell later told police.

She told police that Hehir appeared to be the latest in a string of men from whom Mahlo had abruptly moved on. "When she finished up with one boyfriend, it didn't take her long to move another one in," Campbell told officers.

Despite barely knowing Mahlo, Campbell had aptly summed up her chaotic personal life. By the time Mahlo moved to the Sunshine Coast in 2005, she had left a trail of failed relationships in her wake.

Born in central-western NSW, Mahlo had been raised on her parents' sprawling wheat farm at Forbes, embracing the life of a country kid, riding her horse, Argon, around the paddocks, swimming competitively and excelling at the local high school.

Academically gifted, she went on to attend Queensland University's prestigious School of Medicine, graduating in 1980 and establishing a reputation among some of her fellow students as being strong willed. One friend recalled how Mahlo had quickly taken up with another friend's boyfriend after the pair had broken up.

While at medical school she married, but the union failed in 1982. She married again three years later, this time to a Gold Coast dentist, and had Anna and Ben, but the marriage lasted only a few years.

In 1991, she began an intense romance with a hospital manager on the Gold Coast, but this ended tragically when he died of cancer. Fleeing bad memories, Mahlo then moved to Orange in central-west NSW to be near her family and to raise her two children while she worked in a senior management role at the local hospital. But in 2005, as her children grew older and she suffered depression from work pressures and a family dispute, she sought a sea change on Queensland's Sunshine Coast and secured a well-paid management job with Queensland Health.

On the laid-back coast, she figured her trouble-prone personal life would turn around, but almost immediately her emotional crisis deepened. In early 2006, Mahlo married for the third time – to American citizen Robert Waggoner, whom she had met during an internet dating phase. The pair had broken up, citing a lack of chemistry, but Mahlo then married Waggoner so he could stay in Australia and remain close to a child whom he'd fathered with another girlfriend.

Waggoner resided in her house for a number of weeks and claimed to have got an earful of her sex life. Bondage was one of the things Mahlo liked, along with being punished and belittled, and she was very insecure, Waggoner would later tell police.

He recalled during the few weeks he spent living in her spare room that Mahlo had entertained several lovers – including a married doctor who visited from NSW, another doctor from the Sunshine Coast and a painter. He also noted that her drinking was so bad that she had to play patience on the computer to stop her hands shaking before she went to work at Nambour Hospital. But he said he never saw any indication that she was likely to suicide and that she was deeply committed to Anna, who was still living with her mother, and Ben.

When told by police that later in 2006 Mahlo had gone on to start a relationship with Hehir, Waggoner seemed surprised; he didn't think Hehir was Karen Mahlo's type at all. Whatever the attraction, Hehir told everybody it was Mahlo who made the first move.

Hehir first met Mahlo in early 2006 when she visited his office seeking financial advice. Hehir presented as a respectable, middle-aged, married father with a successful financial planning business.

He often gave seminars to public servants about salary packaging. Queensland Police have confirmed that Hehir's business organised seminars for police at the Maroochydore Police Station on the Sunshine Coast – although this ceased in 2011.

But his past was not without controversy, with the local press reporting how, in early 1999, he had faced a sexual harassment allegation for allegedly giving a female employee an "intense massage" and trying to grab the breast of another.

The allegations, which Hehir always denied, resulted in an award of compensation to one of the women by the Anti-Discrimination Tribunal, which accepted her harassment claim in 2001. (An appeal to the Queensland Supreme Court in 2002 by Hehir resulted in the compensation being reduced.)

If Mahlo knew about Hehir's background, it didn't seem to matter. Two months after a September 2006 meeting in his office which quickly became intimate, Hehir left his wife and moved in with Mahlo.

Some of Mahlo's friends thought Hehir was a good influence, employing her then-teenage daughter, Anna, in the office of his business, Financial Advisers Australia, negotiating on Mahlo's behalf with her employer and even rushing to save Mahlo after she took a near-fatal overdose of tablets on April 11, 2008.

But in the last few months of Mahlo's life, her relationship with Hehir seemed to have become fraught. Hehir rented a flat several suburbs away from her house. However, he told police and the coroner that he was almost never at the flat and nearly always stayed overnight at Mahlo's house. (Hehir declined to talk to Good Weekend.)

The inquest into Karen Mahlo's death, held last year, raised a number of unanswered questions from the original investigation. A top forensic pathologist, Dr Linda Iles, was called in to review the autopsy report and confirmed "severe force" would have been required for the knife to penetrate Mahlo's sternum.

The injuries to her hand could have been defensive wounds, but they could have just as likely been caused by clumsy handling of the knife in a suicide attempt.

Asked about the USB, Hehir confirmed he had owned a memory stick called "John's USB" but he did not know where it was. He said Karen didn't have a USB but "sometimes" used his USB.

He now admitted that he had gone back into Karen's house and had collected items from her office, including a "heap of paperwork, a steel ruler and maybe a scanner". Queried about whether he took a USB, he said: "If it was there and had my name on it when I was collecting everything else, yes, I certainly would have."

Quizzed as to how the USB came to be used on his work computer at certain times after Mahlo's death, he said it would have been used for presentations.

After three days of hearings, coroner Christine Clements handed down her findings. She rejected Hehir's claims that he was still in a relationship with Mahlo at the time of the death and noted that Mahlo had told her psychiatrist they were no longer living together.

She described Hehir's manner of responding to questions at the inquest relating to Mahlo's computer as "evasive and calculating". "His evidence was totally unconvincing and appeared to be designed simply to support his financial claim against her estate," she stated.

She also said that it had been conclusively proved he had removed a USB stick from Mahlo's computer on the day of her death.

Clements accepted that the presence of three stabs through the same wound and the perforation of the sternum "were features raising concern" but noted they did not exclude self-infliction. A second doctor brought in to review the findings thought the cuts on her hands could be the result of nervous movements of the knife during the stabbing.

The coroner's conclusion was that Mahlo had intended to cause her own death using a knife while affected by alcohol and suffering from long-term depression.

At the inquest, Mahlo's own psychiatrist described her as being at "chronic risk of suicide". He recalled her leaving an appointment in April 2008, asking him whether he thought anyone would care if she killed herself – although he also said that, the day before she died, Mahlo had sounded "positive and cheerful" when she rang his secretary to reschedule an appointment.

The coroner recorded that there had been a significant decline in Mahlo's mental wellbeing in the weeks before her death and that her brother and father were deeply concerned. Clements delivered her findings in no uncertain terms: Karen Mahlo died after stabbing herself in the chest with a knife at a time when she was severely distressed, suffering major depression and at a time when her judgment was affected by alcohol.

The Mahlos were shocked. "At the very least it should have been an open verdict," says Mahlo's brother, Wade. "Given what we now know and what was not looked at during the investigation and the inquest, we want the Queensland government to reopen the case."

A Queensland Police Service spokeswoman says the service does not believe there were any integrity issues or problems with the investigation. Meanwhile, Mahlo's children are refusing to scatter her ashes at the beach as she once requested in her will. "It's just not the right time," says Anna.

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