"Something Smells Here"
Teddy wakes Margaret, alerting her to a fire in their greenhouse. Owen makes the rounds, ensuring that nothing's out of sorts. Teddy tells Margaret and Owen that he saw the fire start while he was looking for the "Gypsy man" that he saw earlier in the day. Margaret wonders if the man Teddy saw was Gyp Rosetti, but Owen assures her that Nucky's business with Gyp is "well concluded."
In Tabor Heights, Mickey and Eli meet with Sheriff Ramsey, who makes light of Gyp's ambush, insisting he was told it was only going to be a robbery. The sheriff defends his actions saying he "had to play nice, or end up a rib roast like Sickles." Regardless, Gyp has disappeared from Tabor Heights.
In DC, Harry Daugherty, Jess Smith, and Gaston Means attend a Boy Scout breakfast. While a scout master gives a speech extolling scout values, Smith has a public breakdown about his own moral state.
After he and George Remus are stood up when trying to pay their usual government protection money to Gaston Means in New York City, Nucky heads to DC to confront Daugherty. When Nucky discovers Remus beat him there, already in a private meeting with Daugherty and Smith, Daugherty implies that he will indict Nucky, and not Remus, because Remus is the only person who paid Jess Smith directly. Nucky tells Daugherty, "If you bring me down, you're coming with me. Lock, stock, and whiskey barrel." On his way back to New York, Nucky is arrested and put in jail for possessing liquor by two men working for Harry Daugherty.
Old Habits Die Hard
Cornelia Predock shows up at the Thompson residence with Teddy in tow and tells Margaret that she found him in her garage with kerosene and matches. Though Teddy insists that he didn't start a fire in the greenhouse, Margaret believes he is lying and spanks him.
At the American Legion, Harrow watches an older, cantankerous man, Paul Sagorsky, get pummeled at a fight night match. Harrow tends to a very drunk Sagorsky until his daughter, Julia, arrives to take him home. After they drive away, Harrow realizes that Sagorsky left his coat behind. A Croix de Guerre medal falls out of the pocket.
Nucky appears in court for violating the Volstead Act with Esther Randolph prosecuting. She tries to take advantage of the opportunity to indict Nucky on his previous crimes, but the judge ignores her and lets Nucky go with a $5 fine.
At the Artemis Club, Luciano tries to convince one of the girls to sell heroin, but Gillian catches them and fires her. Later that evening, Gillian walks the boardwalk where she meets a young man, Roger McAllister, who bears a striking resemblance to Jimmy. Roger takes her to his boarding house and they have sex. Afterwards, Gillian asks if she can call him James.
"What Is Important?"
Nucky convinces Esther to join him for a bite to eat where he suggests they have a common enemy in her boss, Harry Daugherty, and proposes a plan to take him down: To indict George Remus because of his connection to Jess Smith. Though Esther tells him it's impossible, Nucky suggests he can get the case sanctioned by a higher authority, freeing him and making Esther's career.
Harrow goes to Julia Sargorsky's to return her father's coat and the medal. Julia tells him that the medal belonged to her brother Fred who died right before the Armistice - a fact her father cannot forgive. Julia learns that Harrow has a sister, and tells him that she's lucky to have him back.
Owen informs Margaret that the vagrant who lit the greenhouse fire has been caught and "taken care of." Nucky calls Margaret from DC to check in, and she tells him they need to have a conversation about their relationship: "Things just can't go on being every which way, can they?" Nucky lies and tells her that his train's being called. After hanging up on Nucky, she dismisses the bodyguard, Gareth, telling him the threat's over.
Billie Kent returns home to find Nucky waiting for her. The phone rings and Nucky gruffly tells the caller she's not in, only to discover Gaston Means on the other end. Means offers to set Nucky and Esther up with an individual who could solve their mutual problem with the Attorney General - for a $40,000 matchmaking fee. Nucky promises him a suite at the Ritz the following night.
Getting ready for bed, Margaret hears noises coming from the greenhouse. She goes out to investigate with a loaded shotgun and finds Owen, keeping watch. Margaret asks if there was really a vagrant, and Owen tells her he "smelt real enough." Guilty, she reveals to Owen that she thought Teddy did it, and punished him: "I've done what I thought was best, and wound up here. How did that happen?" Owen wishes her good night but Margaret stops him. She leads him into the greenhouse where they make love.