Lalín claims the Hidden Wire he was carrying hadn't been turned on. Earlier he's seen tapping his chest, but it's unclear if he was switching it on or off. But later, Norwalk tells Carlito that "word on the street is, [Carlito has] been clean". Norwalk has no reason to hide that he sent Lalín with the express purpose of getting intel on whom Carlito's dealing with, since Carlito caught him in the act and everyone knows Norwalk would have heard all of it. So chances are, Lalín really did switch the wire off. Although he might have said "word on the street is" instead of "I heard you tell Lalin" because Gail was in the room and she was a civilian not privy to the investigation. Besides, Norwalk already had trouble with "unfortunate" use of spying methods and he's going to be careful this time around.
Benny Blanco killing Pachanga isn't just a simple You Have Outlived Your Usefulness turn of events, by betraying Carlito he ironically proved himself to be an unfaithful guy, thus Benny is better off without a sneaky bastard like him.
