Factual error: Under US law neither Peter Lowenstein nor Oscar Grace would be allowed any level of participation in the investigation, arrest and prosecution of Ned Racine. Both have a highly visible social relationship with him, which disqualifies them from having anything to do with a criminal case against him. In fact as soon as he became a suspect in Edmund Walker's murder they would both be officially 'warned off' - told not to contact him again for any reason.
Factual error: Regardless of how bad an attorney he is, Ned Racine must surely know that his acquittal for murder is a shoe-in. It's very doubtful that the prosecution would have even held out for remand in his case, and in fact they probably would not have even charged him in the first place. The fact that his fingerprints are on Edmund Walker's glasses is irrelevant. He and Racine were seen in public together, notably in the restaurant, and he freely admits to being in Walker's house. He could have handled Walker's glasses on any one of these occasions. The conversation Racine has with Ted about building the firebomb cannot be used in court, as Ted fires Racine as his lawyer at his second meeting; everything from the first is covered by attorney-client privilege. Maddy obviously isn't around to give evidence, and the yearbook entry Racine finds throws suspicion on her (and away from Racine) immediately. There are no witnesses and no forensic evidence, in fact there is nothing to support the prosecution case except a vague suspicion based upon his having had an affair with the widow-to-be. No court in the US would entertain the case for a minute.
Factual error: When Lowenstein meets Racine on the pier he proceeds to commit a series of appalling breaches of legal regulations, if not the law itself. He tells Racine - a man he acknowledges as a suspect in the murder case he is discussing - about the progress the investigating police are making, the nature and direction of their enquiries, the names of people they are questioning, and the vital importance of a missing piece of evidence. There is nothing in Lowenstein's character that would suggest that he is so unbelievably stupid to do something like this! He would be fired for divulging such sensitive information, and he is handing Racine a Get Out Of Jail Free Card - if the judge didn't dismiss the charges against him, he'd be obliged to declare a mistrial.
Plot hole: Considering the incredibly elaborate plans Maddy makes to have her husband murdered after forging a will she knows is invalid so he dies intestate and she - as his widow - gets his entire fortune, you'd think she would have worked out one little fact - Edmund Walker does not die intestate. It is established in the film that the dud will supposedly written by Ned Racine replaces a previous, valid will which bequeaths half his fortune to his niece Heather. When the new will is declared invalid under Florida law the previous will takes precedence and Heather and Maddy split the fortune. In no way will Maddy get the lot.
Continuity mistake: When Ned and Maddy are discussing the whereabouts of her dead husband's glasses, the ceiling fan keeps changing speeds.
Answer: Matty had Teddy tell her how to rig the bomb with a timer. She activated the bomb, escaped in a boat on the water, leaving Ned holding the bag. But, with a good lawyer, he would have easily beat the case. Unfortunately, he confesses to his cop friend, Oscar, in the jailhouse (which might be inadmissible).