Todd is arrested. Blair tries to contact Evangeline with no success. Todd vows to ruin Kevin. Kelly is nervous that Todd will tell Kevin that Ace is not his child but Todd tells Kelly he does not intend to use Ace to against Kevin. Todd is released from jail with bail provided by Blair. Blair confronts Todd. Todd admits to Blair that he did pay someone to lie about Nora but he did not steal papers from B.E. Kevin drops by Todd's penthouse. Blair answers the door while Todd is in the background putting on his shirt. It is obvious Kevin interrupted something.
Kelly agrees to give Paul money. Kelly lies to John about Paul's whereabouts in Puerto Rico. Natalie pulls a gun on Paul after overhearing his conversation with Kelly when he denies having any involvement with Kathryn's death. He tells her he found out about Kathryn after they hit the road. Natalie decides to stay because she feels she has nothing to go home to. Kelly tells John she doesn't believe Paul killed Kathryn. Kelly gives up Paul's real hideout in Puerto Rico. She hopes she hasn't made a mistake. Natalie and Paul's passionate moment is interrupted by the police.
Rex seduces Lindsay into helping him with his debts. Daniel kisses Nora. Lindsay warns Daniel about Nora. Daniel is getting serious about Nora.
Riley kisses Jen to avoid her from seeing Rex and Lindsay making out. Riley and Jen find a gun. The gun is military issued. John suspects the gun belongs to Paul. The gun is the same that killed Kathryn. Riley cautions Rex about his public display of affection with Lindsay. Jen asks Riley why he kissed her. Riley tells her it was an impulse. Jen, Marcie and Riley get an invitation for a special project.
Margaret and Nora discuss their case against Todd. Margaret is obviously scorned and wants revenge. Blair confronts Kevin about his vendetta against Todd. Todd calls Margaret to meet him at Rodi's. Blair figures out that Kevin wants to punish Todd because Kelly confided in Todd. Blair ends her professional and personal relationship with Kevin. Todd suspects that Margaret set him up by planting the B.E. files in his office. Nora is hesitant about putting Margaret on the stand. Todd and Blair are happy. Todd tells Nora that he will plead guilty for setting her up because he doesn't want to ruin the second chance he has with Blair. Margaret shows up at Todd's penthouse to tell Blair that she and Todd were lovers.
Marcie has Michael review the revised copy of her novel. Michael tells Marcie about a strange illness in the hospital. Marcie gets nervous because that's how Al died.
Antonio wants to find Manuel's money in order to find his killer. Antonio takes interest in Adriana's necklace. Adriana tells him it was a gift from Manuel to Carlotta. Antonio asks to borrow it under the guise of getting one made for Jamie. Antonio brings his findings of numbers and letters on the bracelet and the necklace to John's attention. Antonio shows Carlotta the bracelet and the necklace. He asks her to tell him everything. She tells him that Manny gave her three pieces of jewelry and a map to the fortune but she destroyed the map. Carlotta wants nothing to do with Manny's dirty money. Antonio asks about the third piece of jewelry. Carlotta tells him she gave the broach to Dorian.
Kelly defends Paul's innocence. Natalie hides Paul from the police. Paul and Natalie agree to meet each other in a week. Paul gives Natalie the coordinates to the treasure just in case he doesn't come back. The police take Natalie back to Llanview. Natalie is brought to John. John doesn't recognize the new Natalie who lies to him. He has her arrested for accesory after the fact. As Natalie is about to go to booking, Paul surrenders himself.
Jen, Riley, Shannon and Marcie commiserate over having to spend their summer in school for failing classes. When they're called into Viki's office, she starts off by mentioning that she's noticed they've all failed in group projects so she has a proposal for them. She's created a work/study program for them; they're to help in rebuilding the community center. All of the students express dismay but gingerly agree to it. All except Shannon who is then informed that it's all or none. If she doesn't join the group, they will all fail.
Todd finds a sullen Blair who explains she's like that due to Margaret's visit. The woman has claimed that she and Todd slept together. Her husband adamantly responds that he only used her to get information and he's insistent that he never slept with her. He's sure that Kevin put her up to everything and Blair expresses her concern over the woman. He also contends that his secret with Kelly has nothing to do with Blair.
A crazed Margaret calls out for Todd.
R.J. runs into Evangeline near the community center; she's not happy when she learns that he's been keeping tabs on her whereabouts. She accuses him of stalking her.
John grills Paul on his activities during the night that Kathryn was murdered. Natalie shows up and provides his alibi; they were together at her place that night. She tells John to get over himself when he begins to lecture her. The results come in and Paul's gun was not used in the murders so he's released. Nat agrees to meet him at Rodi's. Paul stops to write a note to Kevin.
Kevin gets an update from Nora while at Rodi's. She surprisingly believes Todd when he says that he didn't steal the papers from Kevin's office since he did plead guilty to bribing Harry McKenzie. Furthermore, Margaret does not appear to be very stable along with the fact that the security cameras don't show anything suspicious. Nora suggests that Kevin get to the bottom of Kelly's alliance with Todd instead. Margaret shows up but Kevin turns down her proposal that they continue to go after Todd. Evangeline confides to Nora over burgers that she's upset with R.J., dealing with a dead body in her office and kissing John. She continues on until a choking Nora brings her back to the subject of John, even after Evangeline tries to change the subject to Nora and Daniel Colson. When John shows up, Nora gives a flimsy excuse and takes off. The pair talk about Kathryn's murder. R.J. sees them deep in conversation. Nat, who is nearby waiting for Paul, looks on jealously. When Paul arrives, she suggests they start over, they make a toast and agree to begin the search for the Santi money. Nat leaves to pack and Paul hands the bartender money so that someone can deliver a note for him.
Kevin returns to the Buchanan mansion, unhappily telling Kelly that everyone is mad at him for going after Todd. When he asks about their connection, she admits that Todd did a favor for her and she owes him. Kevin pleads for the story once again and though a crying Kelly appears on the verge of disclosing it all, they are interrupted by a phone call from Todd. He insists that she get Kevin to drop the charges against him immediately or he'll reveal her secret. The doorbell rings when Kelly leaves the room and a man delivers an envelope addressed to Kevin. The note inside reads, "Do you think you're Ace's father?"
Nat meets up with Viki and admits that she lied previously, that she was really with Paul. Viki is disappointed to learn that they are planning a trip and thinks that Natalie is being impulsive. They begin to argue and it ends with Natalie running off.
Todd assures Blair that he will not let anyone ruin their lives. When the doorbell interrupts their kiss, they hear Margaret yelling that she's there to apologize. She has a "gift" for them; a negligee that she wore during her first time with Todd. He continues to insist that he never slept with Margaret.
The kids arrive at the police station, hoping that John will talk some sense into his cousin. R.J. plants himself at Nora's desk and asks if anything is going on between John and Evangeline. Though Nora denies knowing anything, he notices that Nora is not surprised by his question and figures he has his answer.
Paul is happy with himself as Kevin shows Kelly the note. He thinks that Todd is behind it.
After Rex calls Shannon to the Country Club, the two devise a way to come between Adriana and River. When River goes into a dressing room to change, Shannon follows. After tearing her shirt off, she tries to tempt River, but he rejects her. When she storms out, not wearing a shirt, she and River run into Adriana and Rex. River swears that nothing happened and Adriana believes him, leaving Shannon humiliated. In the cabana, River and Adriana begin to make love.
Asa tries to get Kevin to go after Todd, but he refuses, reminding Asa of Viki's heart condition. Margaret is furious when Blair refuses to believe her claims of sleeping with Todd. While Kevin is confronting Todd at the penthouse, Asa brings in Margaret to help him get back at Todd. Kevin asks Blair to take her job back at Craze, but she refuses. Asa calls Margaret and encourages her to go after Todd.
Carlotta is attacked in Angel Square by a man demanding to know where her bracelet is. She rushes to the police station to tell Antonio. At the station, Antonio is confronted by the bar manager when she realizes that he is a cop. Going to the Hook Up, Antonio tells them that he is Manuel Santi's nephew. John walks into the bar and demands to have Antonio's badge. Sonia is a witness, but isn't convinced that Antonio is for real. To prove himself, she demands he pull a job for the Santi family.
Convinced that the photo of Margaret and Todd in bed together is bogus, Blair confronts Margaret and smacks her! Although the idea of keeping a secret from Jessica doesn't thrill Antonio, John makes him realize that he can't tell her that he's working undercover. With that in mind, he only tells Jessica that John fired him, but doesn't reveal it's all part of an elaborate scheme.
Looking for the truth, Kevin demands Kelly tell him whether or not he's really Ace's father. Devastated by the question, Kelly picks up the baby and moves in with Dorian. Standing alone in his empty house, Kevin fears that Todd is the real dad.
River and Adriana's romantic moment in the cabana is interrupted by David. He freaks when she tells him that she gave the cross to Antonio. Meanwhile, Shannon isn't sure if she wants to go along with Viki's work-study program, but Marcie convinces her otherwise.