|Spoiler Warning: Plot and/or ending details are in the text which follows.|
After unveiling her identity, she confiscates Elizabeta's cocaine, and can no longer be dated. She is a smoker and may have a criminal past, as hinted by the boss at U.L. Paper. If one pays attention, Karen has several conflicts in her story. On the mission First Date, she claims to be new in the city, yet knows where the Bowling alley is and knows that the Carnival would not pass safety standards. If one chooses to do Bleed Out before First Date, she immediately suspects him being involved in criminal affairs, despite the fact she shouldn't have had any previous indications. She claims to work with Mallorie, but there is no indication that Mallorie has any job other than the Cab Office.
It is unknown when Michelle got assigned Niko's case. There is evidence that it is from the start of the game, as she is already lying to Niko, however at this point, there isn't much reason for the government to be watching Niko. There is also the possibility that she is assigned to Niko's case later on, as she seems to have fallen for Niko before she got assigned to him. When she confiscates the cocaine she says: "Don't make this harder than it already is". Her lying could be explained in this situation, as she may lie to the whole world, and not just the people she's watching. Although if that were true, there would have been no reason to use a false name.