How could you get it "wrong?" The game kicks you in the face with a boot with Richard's name on it, picks you up and Hako-kens you with a battle cry of "RICHARD GRAAAAAY!"
Yes, Gray is the master. He fell in the goooooo in the army base and started going insane, after which he moved on down to the Cathedral to enslave the vault hidden there.
Sadly, you can't play on after finishing the game. You could kill the master before you kill the loutenant in Mariposa, and then go talk to Harold. Still don't think you could tell him about Richard though.