Fahey guilty?

Both - he was in truth the "inside man" whose tips led to the robbery of the paydirt shipment intercepted at Rondout, and at the same time the defense team for the Newton gang successfully engineered his prosecution by returning stolen money, pleading guilty and then testifying against Fahey (and crime boss Murray). Dramatic license seems implied, but if you look at the Chicago papers from the time, the Newtons were media darlings and the reporters loved Jess and his Texas wit. In this regard, the film is quite faithful to the true story.

OTOH, Fahey had little to no money to return and the added ignomy of his trusted position as a postal inspector ( a top federal cop) and so had little option but to try to fight the case. (Glasscock and Willis Newton inflated the story of how much Murray and Fahey's share was, and pocketed the difference. They learned this trick from the bankers they had robbed, who often made insurance claims for more money than was stolen.

Perhaps more significantly, Fahey was tried with Murray, who may or may not have threatened him about "dropping a dime" on him. Like Bo Hopkin's character says, "Someone's gotta pay." They threw the book at him, painting him in court as a corrupt lawman. Fahey got a 14 year sentence, as I recall.