GAINESVILLE, Ga. — An Army wife accused of setting her apartment on fire botched an attempt to collect on her husband's $400,000 insurance policy when he survived and her two children died instead, a federal prosecutor said.

Billi Jo Smallwood, 35, was denied bond at a Friday hearing, where she appeared on federal charges of damaging government property by fire.

"She set fire to her own home in hopes of killing her husband and wound up killing her kids," Assistant U.S. Attorney Stephanie Gabay-Smith said.

The May 2007 fire at the Fort Campbell Army post on the Tennessee-Kentucky border killed 9-year-old Sam Fagan and 2-year-old Rebekah Smallwood.

Smallwood's husband, Spc. Wayne Smallwood, crawled out a second-level window and suffered a leg injury when he jumped. Their toddler daughter, Nevaeh, was uninjured.

U.S. Magistrate Susan Cole said she denied bond mostly because Smallwood was a flight risk.

"At this point, the evidence appears strong against Mrs. Smallwood," the judge said. "It's a heinous crime that's alleged."

Matthew Cummings, a special agent with the U.S. Army Criminal Investigations Division, testified that investigators found gasoline was poured onto the floor in the living room of the Smallwood apartment.

He said Billi Jo Smallwood suffered second- and third-degree burns, but they were consistent with someone who set a fire. He said doors in the home had been locked from the inside and smoke detectors had been removed.

Cummings said the husband had a $400,000 life insurance policy and the investigation showed the couple's relationship was "rocky" and she was "concerned with his abuse of alcohol and drugs."

Just before the fire, the couple had returned from a trip to Georgia and had only $17, the agent said. She was angry that her husband had gone out earlier in the evening to a VFW club bar.