2000: Nick and Sharon bought Crimson Lights and Nick legally adopted Cassie. After a health scare, they were relieved to learn that Cassie didn't have tuberculosis. Matt returned, disguised as "Carter," and got a job at the coffeehouse. He joined forces with Nick's old cellmate, Larry Warton, and together they planned to frame Nick for dealing drugs.

2001: One night, Sharon invited "Carter" to her house for dinner, where he slipped a mickey into her margarita and she passed out. He was just about to rape her, but was scared off when he heard Nick arriving. Thanks to the evidence that Matt and Warton had planted, Nick was arrested on drug-dealing charges and thrown in jail. While Nick was imprisoned, Matt lured Sharon to an isolated cabin, but Victor showed up before Matt could harm her. Matt fled and jumped into paramour Tricia's car, but she crashed the vehicle, sending them to the hospital. Tricia and Warton co-operated with the authorities, and Nick was freed. A dying Matt told Nick that he had raped Sharon the night of the dinner party. Then, he yanked out his ventilator tube and placed it in Nick's hand. Matt died, and Nick was thrown into jail for murder. However, Warton convinced the authorities that Matt had framed Nick by committing suicide, and the Newman heir was released. Then, Sharon found out that she was pregnant. Fearing that what Matt claimed was true, Nick demanded a paternity test and upset Sharon by saying he didn't want the baby if it weren't his. After an argument, Sharon fell and lost the baby. She had the test done, which confirmed that the baby was Nick's. Sharon blamed her husband for their loss.

2002: Nick moved out, and Cassie blamed her mother. Nick hired Diego at the ranch. After Nick's reconciliation attempts failed, Grace returned to town. Believing that Nick and Grace had resumed their affair, Sharon bedded Diego. When Nick proved that he wasn't interested in Grace, a guilty Sharon made up with him. Nick's sister, Victoria, grew suspicious of Sharon and Diego's relationship, so Diego romanced her to keep the secret. Diego and Vikki fell in love, and Sharon grew jealous. She broke down and confessed all to her husband. Furious, Nick punched out Diego, then had revenge sex with Grace. He moved out and refused to reconcile.

2003: Nick decided to give his marriage another chance, but caught Sharon and Victor in a kiss. He struck his father, and a distraught Sharon left town. While she was away, Cassie fell into a frozen pond and nearly died. Alone, Nick nursed Cassie back to health, but refused to forgive his father. Sharon returned, and she and Nick tentatively tried to rebuild their union. Nick continued to punish his father, however, reporting him to the authorities for shady business practices. Meanwhile, Cameron Kirsten came to town, supposedly to do business with Newman Enterprises. His real motivation was to get closer to Sharon, whom he had slept with (and beaten) while Sharon and Nick were separated. Cameron attempted to blackmail Sharon, saying he would keep their relationship quiet from her family as long as she agreed to his sexual demands. Pushed to the breaking point by this abusive man, Sharon hit him over the head with a champagne bottle on New Year's Eve and killed him.