We flashback to 1990 SBPD. Herb Wilkins, the Chief of Police at the time, is giving then detective, Henry Spencer, a lecture on his mistake on a case. Herb ends up firing Henry off the case and replaces him with SBPD's star detective team, Peters and Boone.
Shawn and Gus show up at a crime scene at a swanky mansion where a young bachelor, Lance, just fell to his death. Lassie doesn't believe it was murder, but Shawn thinks otherwise. He notices that Lance's ankles and arms were not broken, causing him to believe that he didn't try to brace his fall and was therefore dead before his body touched ground.
We open with Young Shawn, Young Gus and their super nerdy friend Dennis making a visit to SBPD to see Henry. They tell him they saw a weather balloon that could pass as a UFO. Henry does not believe them.
A car is pulled out of the river with a dead woman inside. Lassiter and Juliet are investigating the crime scene. Shortly after, Shawn and Gus arrive on the scene. Shawn looks more closely in the car and determines that the dead woman wasn't in the car alone, and therefore hypothesizes that she was murdered.
Gus tells Shawn he has to get to tap class. Lassiter overhears and inquires about it. At the tap class, Gus is surprised to see Lassiter show up. Lassiter insists Gus let him take the class with him as a means to follow through on his therapist's orders to try something new.
Shawn and Gus are in the middle of arguing over who will fire their freshly hired office assistant, Ken. Shawn and Gus thought they would have a heavier caseload ever since Henry was hired back at SBPD, but sadly, that didn't end up being true, so as a result Ken had to go.
During a parade in Santa Barbara's Chinatown, an important man named Mr. Arthur Chiang is being interviewed by the media when suddenly, a lone ninja dressed all in black somersaults into the festivities unnoticed. He then sneaks up behind Chiang's daughter and before everyone knows it, she's gone.
In a flashback to 1991, we meet Henry's old partner, Lou Gamble, whom Shawn convinces to tell the story of the missing girl named Veronica Towne the SBPD is investigating. She was last seen by the place she used to work, a lounge called The Blue Derby. She was wearing a red dress and a gold necklace with her initials on it. They think her killer is her boss at The Blue Derby, Jordon Beaumont.
A local news report is shown profiling a Santa Barbara man, Thane, who was just released from prison after his lawyer from The Innocence Project discovered he was wrongfully convicted of robbing a restaurant he worked at. Thane is very outspoken about this injustice and as a result, is very weary of police and the legal system as a whole. Instead of going to the SBPD, Thane asks Shawn and Gus to help get his restitution settlement.
A mortician, GRACE LARSEN, whom we learn was a classmate and former lover of Woody's, has informed the SBPD that she believes Woody made a mistake on an autopsy. The file on the deceased, BOB WHITE, tells us that Bob's ear was severed off cleanly with an instrument and not what was originally reported by Woody, that it was slashed by a tire in the bus accident that killed him. So as a result of this news, Bob's death could have been murder and not an accident. Woody's job is in trouble, and Chief Vick orders Shawn and Gus to help reinvestigate Bob's death and help clear Woody's name.
We open at a benefit for a Santa Barbara community outreach program that helps at-risk youths get out of gangs. The honoree is the charity's founder, Deacon Jones. Also there is his Financial Director, Tina, a former gang member and alum of the program, who is in charge of the festivities as well as handling all donations and pledges.
We come up on Melinda, the "bachelorette" on a reality TV show called "Paths of Love", handing out "heart necklaces" to her remaining eligible bachelors. Just as she is about to hand a necklace to Todd, signaling his chance to stay on the show, we learn that Todd has gone missing in a car crash.