Everyone is celebrating a high profile murder case Lassiter cracked that is going to be featured on the local news that night. Shawn is annoyed by Lassiter's endless boasting about his victorious take down of Bernie Bethel, a millionaire accused of murdering Sheila Hanson, a woman he was having an affair with at the time of her death. The news report airs, and everyone gathers around to watch. Bernie's brother Daniel is interviewed, saying he is completely shocked and devastated by everything that has happened with his brother. Just as Lassiter's big, on-camera interview is going to air, an update interrupting it flashes across the screen saying that Bernie was found not guilty by reason of insanity. Lassiter is devastated and sees this as a travesty of justice, as Bernie is going to live out the rest of his days in a cushy, country club-type atmosphere as opposed to prison where he belongs.
Shawn makes the claim that Bernie is lying about being insane and that if given the chance to go undercover within Bethel's Psychiatric Hospital, he can get Bernie to come clean about not being insane.
Shawn meets his only contact inside the mental hospital, Dr. Elliot. Gus is there too, buttering up Dr. Elliot, trying to get the hospital to hire his pharmaceutical company. Gus then learns that he is going undercover too... as an orderly. He is, at first, very apathetic about his assignment, until Vivienne shows up, a very attractive patient inside who suffers from multiple personality disorder. The SBPD tells Shawn that he is to contact them through a hidden camera in a plant once he can get Bethel to confess.
Shawn first spots Bernie talking to his brother Daniel. Later, at "group", we meet Nurse McElroy, the rigid head nurse who is looking daggers at Shawn. Shawn approaches Bernie, who he initially perceives to be an OK guy. However, Shawn still doesn't buy his supposed act and goes on to make the claim that Bernie's "fear of mirrors and saxophones" is just a fake symptom he created.
Later that night, Shawn and Gus follow Bernie to the kitchen. Bernie is alone, and doing strange things... things that lead Shawn and Gus to believe that Bernie may not be faking it at all... that he may actually be crazy, or else why would he feel the need to put on the crazy act while he is completely alone?
Shawn now believes that Bernie really is crazy, so he tries to get further proof of it by convincing Bernie to meet him in the room with the camera plant. While there, Shawn tells Bernie that he believes he is actually crazy. He flashes a hand mirror in Bernie's face to get him to go nuts, but Bernie doesn't freak out. He remains calm and even smiles, thus confusing Shawn even more. Why isn't Bernie freaking out? Is he not really insane after all?
At group exercise, Shawn confronts Bernie and tells him that he believes he is a fake. Bernie, now lucid, tells Shawn that he couldn't have strangled Sheila because he has an arthritic condition, and that during the trial, he wasn't lucid and the fact that he had arthritis never got brought up to his lawyer.