Kay had already been banished from the Reno compound when Fredo goes on his little fishing trip.

Connie is delegated to take Anthony off into Reno while Al Neri pulls the hit on Fredo. Michael would never have told Connie he was having Fredo rubbed out; he had to have given her some kind of BS cover story to get Anthony out of there.

As we see in GF III Connie still self-rationalizes it to herself in 1980 that "poor Fredo" had "drowned." Undoubtedly by that time she knows the truth, but nobody who really knew would ever have told her in so many words.

So ... how would Kay, and then Anthony, find out that Michael had ordered the hit on Fredo, at least to the extent they believed it for a fact? Who would have told her?

The only person who knew EXACTLY what had happened to Fredo was Al Neri, and Al never seemed to be the kind of guy who would walk around casually letting Kay in on Michael's darkest secrets.

Kay would have left the Reno compound, flown back to New Hampshire, and then several days later gotten the news, "Fredo was killed in a fishing accident."

She certainly might SUSPECT Michael had something to do with it, but she had no real evidence that he had.

But obviously between 1960 and 1980 there was supposed to be some event in which Kay was told Michael had ordered Fredo's killing, from some source she would have believed would be in a position to know.

(I don't think Tom Hagen knew about the Fredo hit, either, at least not ahead of time. As we saw at the end of GF II, Michael was somewhat suspicious that Tom's loyalty might be wavering. Michael might have had suspicions that Hagen, closer in age to Fredo, might not have gone along with the hit [although Hagen certainly knew what a liability Fredo had become], so my bet is that Michael would not have told him the truth about it and fed him the same cover story he fed Kay. Of course Hagen would be too smart to buy it right off the bat, but Michael would say, 'that's my story and I'm sticking to it,' about the 'drowning' excuse for Fredo's death, and Tom would be smart enough to go along with it at that point.)

In light of all that, I thought it was kind of ridiculous in GF III that Michael didn't try, even lamely, to deny Fredo's murder when Kay accuses him right to his face.

I would think when Kay says, "Tony knows you killed Fredo," Michael would have at least come out with, "come on, that story is 20 years old, it was BS then and it's BS now," if for no other reason to lead Tony and Mary into believing that maybe he hadn't done it.