Shawn and Gus confront Carl and Brittany at the mall, where Carl, dressed as Santa, screams assault and draws attention.  Shawn and Gus are then escorted out by the security guard, but on the way, Shawn sees Santa's Elves inputting their guests' home addresses into a computer in order to mail their pictures.  That night at the Gusters', Shawn succumbs to temptation and leaves his room to find Joy.  But he is nearly caught by Gus and ends up hiding in the basement, where he runs into Bill, who is supposed to be working the night shift.  Bill confesses that he lost his job a month ago but hasn't been able to bring himself to tell his family.  He swears Shawn to secrecy.

The next day, with Shawn and Gus banned from Santa's Village, Joy agrees to go undercover as an elf to try to find out what Carl and Brittany are up to.  They discover that Ted, the security guard, was Carl's reference for the job, and that Carl often asks the kids if they are going to be traveling over the holidays so Santa knows where to bring the presents.  Shawn figures out that Carl and Ted are planning to rob the empty houses on Christmas Eve, which is why Brittany needed Carl out of jail by then.  They call Lassiter and Juliet down to the Village where they find Ted dead in the Nativity scene.  The cops arrest Carl but he insists he could never kill Ted.  They had been partners in long cons for years but violence was never their thing.  He's afraid that whoever killed Ted will be coming for he and Brittany next.  He doesn't trust the cops and asks for Shawn and Gus' help.  He tells them both he and Ted owed their bookie Frank ten thousand dollars, which was why they were going to do the robberies.

Shawn and Gus split up to find Frank.  Shawn finds him first but, not only does Frank have an alibi, he also had no motive.  Dead men don't repay debts.  On his way out, Shawn runs into Winnie, who confesses that she had a dream, which led her to bet and then lose all the Christmas money.  She, too, swears Shawn to secrecy.  He agrees, but tells her he feels Bill will not hold it against her for keeping a secret.  The next morning as the family is gathered to open presents, both Winnie and Bill come clean.  The Gusters immediately forgive each other, which inspires Joy to confess her and Shawn's past and their feelings for each other.  This confession does not go as well and soon the whole family turns on each other as Gus kicks Shawn out of the house.  

Shawn heads down to the police station where Juliet has pulled Carl and Ted's court records and discovered that they had a third partner, Moncrief Johnson, who they turned state's evidence against.  It was Johnson who was knocked unconscious in the brawl at the mall, where he was stopped as he attacked Carl the Santa.  Johnson was released from the hospital the same day Ted was killed at the mall.  Shawn realizes he is going after Carl again and races out to warn him as Juliet calls Lassiter.  Johnson arrives at Carl's apartment, and as he approaches “Santa” with a knife, his victim spins around revealing it to be Lassiter dressed in a Santa suit, gun drawn.  With Johnson in jail, Shawn goes back to the Gusters' to apologize.  Already long past their dispute, they forgive Shawn right away and give their blessing for him to join them for Christmas dinner.  After all, he's family, too.  Later, after all of Henry's guests have gone, Shawn arrives to play their traditional Christmas gift exchange guessing game and extends his winning streak once again.

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